Mississippi Governor Haley Barbour was recently interviewed by the conservative Washington Times and stated his opinion on a variety of current events. Barbour's name has been floated as a potential 2012 Republican Presidential nominee and he appeals strongly to the party's conservative base. The most interesting portion of the interview focuses on federal government spending versus state government spending. Barbour's reply also reveals how quickly we have forgotten the problems of our past. Those who advance a states' rights agenda and hold up the Tenth Amendment as justification often forget the massive problems this country faced when we focused more on individual states at the expense of Washington, DC. While placing more control in a centralized system of government has created some problems, they are nothing compared to way it was when the reverse was true.
Noting that employment and state revenue "typically continue to decline 18 months after a recession ends," Mr. Barbour said states that have already pared their budgets to the bone have nowhere else to cut with more hard times on the horizon. The big bill that Mr. Obama's health care overhaul may present to the states would only add to the burden, he argued.
"There's nothing about this that is particularly encouraging for state financing, which is why we don't want the federal government to stick us with a huge unfunded mandate for health care reform," he said. "Most states can't pay for it but one way, which is raising taxes. We ain't got any money. We don't get to print it like the federales do."
This is true, to an extent. States do not currently have the ability to print money but at several times during our nation's past they did. A particularly pertinent instance that comes to mind during the Civil War. Every state in the Confederacy, plus many of those with allegiance to the Union printed its own currency. The list of those who printed state-backed paper money included the Arizona Territory, Delaware, the Indian Territory (later to become Oklahoma), Kentucky, Maryland, Missouri, and West Virginia. Each of these lost its value precipitously as the war went on and undermined economic stability in the process because their true worth was so frequently in flux. It was often impossible to pronounce with any modicum of confidence what any state's real monetary value was at any one point in time.
A century or so before that, each American colony printed its own currency, which was often supplanted in trade by the money of other countries. The British pound, for example, was often much sounder than the scrip printed by individual colonial governments. During the Revolutionary War, a specifically separate continental currency, meant to cover the sum of the debts of the thirteen colonies fighting the British was printed by the Continental Congress. Devastating inflation and wholesale deprecation of currency transpired when the legal tender printed by every state, plus the Continental currency, plus the currency of other countries wrecked havoc with the fragile American economy and tentative banking system.
New issues were made at various times until the close of 1779, when the aggregate amount was $242,000,000. Then the bills had so much depreciated that $100 in specie would purchase $2,600 in paper currency. By the end of 1781, $100 in specie would purchase $16,800 in paper. Laws, penalties, entreaties, could not sustain its credit. It had performed a great work in enabling the colonists, with no tax revenue during the first three years of the war, to fight and baffle one of the most powerful nations in Europe. The total loss to the people, by depreciation and failure of redemption, of $200,000,000, operated as a tax, for that depreciation was gradual.
This is what created the establishment of the U.S. dollar in 1793 as part of the Constitution that still governs our land.
Continental currency was denominated in dollars from 1/6 of a dollar to $80, including many odd denominations in between, while Colonial currency was denominated in pounds, shillings, and pence, as well as in dollars. With no solid backing and being easily counterfeited, the continentals quickly lost their value, giving rise to the phrase "not worth a continental".
The painful experience of the runaway inflation and collapse of the Continental dollar prompted the delegates to the Constitutional Convention to include the gold and silver clause into the United States Constitution so that the individual states could not issue bills of credit.
Raising taxes in a red state is about as popular as calling for an end to the death penalty. The very threat, whether real or imaginary, that one's opponent would dare to increase taxation if elected has felled Democratic party challenger after challenger in the South. It hasn't just stopped at the South, too. I recall Walter Mondale's infamous assertion in his speech accepting the 1984 Democratic Nomination for President. Mondale stated that his Republican opponent, Ronald Reagan, would raise taxes while simultaneously claiming that he would not, but that he, Mondale, would, in fact, raise taxes but was at least honest enough to tell the American people up front. This strategy backfired royally then and the political conventional wisdom of today would indicate the same approach would be political suicide even now. But what Barbour notably does not mention are the ways by which conservative states like his raise revenue by other methods besides direct taxation. In the Governor's home state of Mississippi, for example, dockside casino gambling is legal in the three Gulf Coast counties of the state, particularly on riverboats. Though the practice doesn't raise tax dollars directly, legalized gambling does draw customers into Mississippi in the form of residents of adjacent states who are legally prohibited from the practice in their own place of residence. With increased tourism comes a corresponding increase in sales tax revenue when an influx of visitors frequent local businesses.
Every southern state with the exception of Alabama and Arkansas have some degree of legalized gambling outside of Native American-run operations. Most, however, resort to lotteries rather than casino gambling. To assuage concerns by more conservative Bible Belt residents, these lotteries were often set forth for a vote on the premise that much of the revenue collected would be allocated to fund public education, both for K-12 and Higher Ed. Georgia's lottery system as set up by then-Governor Zell Miller was marketed as a way for deserving, high-achieving high school students to receive full, or at least partial scholarships for in-state colleges and universities. The results of this program have been mixed, at best, as have the implied positive gains of many lottery-based programs. Wikipedia's entry on state-run lotteries concludes,
Presently, many lotteries in the US donate large portions of their proceeds to the public education system. However, these funds frequently replace instead of supplement conventional funding, resulting in no additional money for education.
For example, much of the stimulus money has been used for the same purpose in state, city, and county public education systems. The influx in cash hasn't been earmarked and designated to do what it was supposed to do as envisioned by the authors of the legislation. The intent might have been to expand needed programs or to make public education work more efficiently, but instead the funds are absorbed, used to justify the status quo, and nothing much changes as a result. I'm not sure how anyone can make leaders or the people who follow them do what they ought to do. Aside from establishing an extremely expansive regulatory system that goes well beyond banking, I know that people will always opt for quick-fixes and band-aids when shaking things up enough to make actual reform would more than justify the short-term discomfort with the long-term gain. This is why I am not surprised to see so much conservative push-back against President Obama's proposals. Racism might be a part of it, but much of it is merely that people do not like having to modify their routines and their well-established patterns, even if it would ultimately benefit them in the future. We have grown complacent in our own subjugation and that is the saddest fact of all.