While most of the yappers talk about the Federal Government’s unprecedented control of corporations, the long arms of Washington are also extending deeply into state governments.
As you know, state revenues have collapsed (we’re looking at you California), and unlike the federal government, lenders aren’t just willing to throw cash at them (again, California).
That’s where Federal bailout money comes in. According to USA Today, money from the federal government — stimulus money, special grants and normal disbursements — have supplanted taxes as the top source of state revenue.
We expect this will continue for some time, as traditional sources of state revenue won’t reappear for a while.
The question, then, what will be the political ramifications? We’re guessing unprecedented influence on infrastructure, education, tax and environmental policy. If there’s an upside, it’s that NIMBY objections were likely to have been the big impediments to national infrastructure spending. But it’s hard to object when you’re on the government dole to avoid bankruptcy.