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By Anonymous Mike, pseudonymously.

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Saturday, November 15, 2008
Mayor with Hands Out

It started with the financial industry, continued through the auto industry, and now it looks like state and local politicians want some federal monetary love.

Now I'm a resident of both Phoenix and Arizona so perhaps I should just avert my gaze as my mayor and governor are out trying to get money out of Washington. Well, outside of any feelings of shame over handouts, I'm also a federal taxpayer; let's hear it for James Madison and shared sovereignty.

A quick point to be paid here...

The argument against the financial and auto industry bailouts is that they leave the existing management and shareholders in place; the same clowns who got a number of these firms in trouble will receive the federal money and continue to operate these companies. Focusing on the auto industry, the problem is compounded because the fundamentals of the Big 3 are left unchanged by the bailout and it's likely that after the auto makers burn through the money they will be back on the edge of the abyss; afterall if they went Chapter 11 at least they would have a chance to reorganize.

So why is it any different than with the states and cities?

States like California and New York, and I'll assume the cities as well, spent the recent gushers of tax revenue like drunken sailors. Both Phoenix and Arizona dramatically increased spending in the years leading up to the current fiscal crisis. In fact as evidenced that the growth in tax revenue far exceeded the growth in personal income, that revenue gusher was probably based on one-time money. However my state and city government spent the money like it would keep on like that forever, which was a bad decision, and now they want help.

Sounds alot like the auto and financial industry.

Where the states and cities differ is that not only do they have the power to cut their spending, but also to raise revenue through taxes. Both are politicaly painful and will probably mean the political kiss of death for more than one politician, but both haven't really been tried on a level necessary to meet the crisis on hand and since when should federal dollars be used to keep local politicians afloat?

The other issue is that any city and state bailout, just like the one proposed for the auto industry, leaves the same people and the same basic fiscal structure in place that got these governments in trouble in the first place. At least when a country has to go to the IMF for a bailout, there are "austerity" measures which are imposed.

So what will the feds ask in return for the bailout or is it considered rude to even ask?