Congress is Unlikely to Extend Funds to Ailing States, Good

     Congress is Unlikely to Extend Stimulus Funds to Ailing States that run out this year, Good, that's the way is should be. The States and for that matter any business that finds themselves in the red have every right to fail. Failure is good, Yes I said failure is a good thing because without it we limit our ability to learn from it. There are no shortages of failures in both sectors right now and I honestly believe that with the notion of  "Too large to fail" will in the future promote more entities to in fact fail.

     Why will more failures come about? Simple question but not as easy to answer, one reason IMHO is that if a Company or say a State knows that they have some kind of a safety net in this case the Federal Government it will promote far riskier decisions, or flagrant promises that they know they can't keep ( pensions come to mind ).

     Another problem I see is that States and to a lesser extent large businesses  have made themselves less flexible in how they do their business. Expenses are a large part of what drives an entity being either in the red or the black and they need to be adjusted for the economy they are in. We in a household adjust week to week, when we make less we spend less, and when we make more we usually spend more, the same works for a smaller business. Large Business and States need to adapt better to fit in the environment and while they are larger and therefore move slower the decisions they make need to be the best possible and if they can't, won't or don't make good decisions then they need to fail and let someone else take charge and do it better. Propping up a failed system only invites further bad decision and we all end up paying for it.

Prepology
 

Related articles

• State and Local Government: The Fiscal Crisis - Posner (becker-posner-blog.com)
• "The Deficit" Is The Wrong Yardstick (redstate.com)
• Can we survive without stimulus funds? (philly.com)