The dismal fiscal situation in many states is forcing governors, despite their party affiliation, toward a consensus on what medicine is needed going forward.

The prescription? Slash spending. Avoid tax increases. Tear up regulations that might drive away business and jobs. Shrink government, even if that means tackling the thorny issues of public employees and their pensions.

[A]n examination of more than two dozen opening addresses of incoming governors in recent days shows that [many focused heavily on]worries about jobs, money and budget gaps. Those speeches are the best indication thus far of the intentions of this class of 37 governors — 26 new and the others re-elected.

[T]he financial circumstances leave little room to do nothing, and governors will soon be tested on their words — as early as in the next few weeks, when many of them must propose budgets for next year.

“They have promised their citizens something for nothing,” Mr. Daugaard said of other states during his inauguration in Pierre this month, “and created a society where everyone wants to be carried and no one wants to pull their own weight.”

Governors appeared to be girding residents for a rocky road ahead — a path they seemed to sense residents may not yet grasp.

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Investor’s Business Daily: Departing Senators Larding Up on Pork for the Trip Home

Below is an excerpt; please click here to read the entire article.

Some lawmakers were fired by voters this year while others gave notice, but that hasn’t stopped the departing public servants from charging up a storm on the nation’s credit card.

With Congress angling to finish the lame-duck session this week, a major piece of unfinished business is a $1.27 trillion omnibus appropriations bill. Without the bill or a stopgap measure, the government will shut down after Dec. 18.

That “must-pass” quality has turned the bill into a magnet for earmarks for lawmakers from both parties, including several senators who lost their bids for re-election or are otherwise leaving office. They’re seizing their last chance to send money back home, stuffing the bill with 543 earmarks worth about $882 million.

They’re hardly alone. Their colleagues who are returning next year have larded up the bill as well. But these senators are almost out the door already. Their efforts to spend more while they still can point to the ingrained nature of Washington’s spending culture.

Economist Dan Mitchell writes in the New York Post: DC feeding frenzy

Below is an excerpt; please click here to read the entire article.

This monstrosity contains about 6,500 earmarks — special provisions inserted on behalf of lobbyists to benefit special interests. The lobbyists get big fees, the interest groups get handouts and the politicians get rewarded with contributions from both.

It’s a win-win-win for everyone — except the taxpayers who finance this carousel of corruption.

Defenders of earmarks and other forms of pork-barrel spending argue that this behavior can’t possibly be corrupt because it’s legal. But not everything that’s immoral is illegal and not everything that’s illegal is immoral — and earmarks definitely belong in the first category. Normal people would call it bribery, but it’s business as usual on Capitol Hill.

Equally troubling, earmarks and pork-barrel spending are the gateway drug that turns good legislators into big spenders. The new members may not take office until next month, but most are in Washington, and they’re seeing how this process works. One hopes that they are shocked by this unseemly behavior — but how long will it take before they get jaded and decide to play the game?

The bill’s backers call it “fiscally responsible” because it increases spending by “only” 2 percent compared to last year — but that’s no sign of austerity when spending for these programs jumped by 20 percent in the last two years, as the national debt soared by about $3 trillion in the same period.”

If politicians were serious about fiscal responsibility, they’d impose across-the-board cuts to bring spending back down to 2008 levels — and then cut more from that new baseline.”

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According to Roll Call, the Senate will vote Monday on the package that includes an extension of the 2001 and 2003 tax laws and an extension of long-term unemployment benefits. Politico takes a look at some of the items the Senate has added to the package, which include “a continuation of a federal tax break for mass transit users, an ethanol tax credit and a grant program for renewable energy developers.”

In an internal vote Thursday, members of the House Democratic Caucus voted to oppose the tax package. According to The Hill, House Speaker Nancy Pelosi is still working to get additional changes to the package that will satisfy House Democrats.

Even though he skipped a meeting with members of his Fiscal Commission yesterday, according to The New York Times President Obama is looking at one of their proposals, full-scale tax reform, as a way to cut the deficit. The next likely Speaker of the House, Rep. John Boehner (R-OH), will discuss his plans to tackle the deficit on CBS’s “60 Minutes” this Sunday.

After a White House meeting yesterday, Fiscal Commission Co-Chairs Erskine Bowles and Alan Simpson called on President Obama to present a detailed plan to cut the budget deficit.

According to The Wall Street Journal, businesses still aren’t investing: U.S. corporations were holding $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of the last quarter.

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Today, three liberal groups — Demos, The Economic Policy Institute, and the Century Foundation — will unveil their plan for cutting the deficit. The plan will not call for domestic spending cuts, and according to The New York Times, would “leave the debt at a higher level as a share of the economy than the centrist plans.”

This week Congress will continue to debate whether to extend the 2001 and 2003 tax cuts. According to The Wall Street Journal, a vote could come as early as midweek. One thing yet to be determined: whether to extend the elimination of the estate tax.

USA Today takes a look at the nation’s debt and examines why things are different than in years past. Reporter Richard Wolf writes, “The nation has tackled fiscal challenges before: In 1983, it extended the solvency of Social Security. In 1986, it transformed the tax code. In 1990, 1993 and 1997, it reduced deficits, helping to usher in four years of budget surpluses. What’s different this time: The problem is much worse, and the nation is much more divided.”

In The Washington Post Harvard economist Martin Feldstein lays out a plan for reducing the deficit without raising taxes. Feldstein’s focus is on eliminating “tax expenditures” — tax rebate and credit programs that are not counted as government spending, but do, in fact, act as subsidies to certain groups.

According to The New York Times, Rep. Darrell Issa (R-CA), who will take over the House Oversight Committee in January, said he would use his post to find ways for the federal government to save money.

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No end in sight: The New York Times reports the bailout era isn’t over. The paper has a nice little graph outlining how much each bailout — from housing to autos — will cost the taxpayer. It also reports it’s likely taxpayers will be asked to give an additional $6 billion to $19 billion for Fannie Mae and Freddie Mac, the government-sponsored housing giants.

The Bipartisan Policy Center released its proposals for cutting the deficit. The outline calls for cuts to defense spending, an increase in Social Security taxes, and a new national sales tax. Meanwhile, a member of the Administration’s “Fiscal Commission” wants to cut defense spending and raise corporate income taxes in order to cut the deficit. And some Commission members are asking Senate leadership to guarantee a vote on the Commission’s recommendations.

The Wall Street Journal reports CEOs say uncertainty about Washington policy is still keeping the economy from growing, a theme echoed in our latest video, “Wait & See.”

Lawmakers have delayed a meeting with President Obama on extending the 2001 and 2003 tax cuts that was originally scheduled for tomorrow. (CNN Money looks at how much taxes would increase if the 2001 and 2003 tax cuts would expire.) Meanwhile, the chairmen of the National Association of Manufacturers and of the National Association of Home Builders argue tax increases will hurt small businesses. Speaking of taxes – CNBC reports government employees owe billion in unpaid taxes.

President Obama is interviewing candidates to head the National Economic Council. Yesterday he met with Roger Altman, who served in the Clinton Administration.

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European officials, increasingly concerned that the Continent’s debt crisis will spread, are warning that any new rescue plans may need to cover Portugal as well as Ireland to contain the problem they tried to resolve six months ago.

Any such plan would have to be preceded by a formal request for assistance from each country before it would be put in place. And for months now, Ireland has insisted that it has enough funds to keep it going until spring. Portugal says it, too, needs no help and emphasizes that it is in a stronger position than Ireland.

While some important details are different, the current situation feels eerily similar to what happened months ago in Greece, where the cost of borrowing rose precipitously.

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While Ireland has largely impressed European officials with its commitment to austerity, Portugal has been lagging in this regard, according to European officials. One official in Europe…said that the budget recently presented by the government in Lisbon did not contain the type of far-reaching changes proposed by other countries, like Spain.

“If Ireland were to ask for aid, then you’d have to look at what’s going on in Portugal as well,” the official said, putting forward a view rescuing Ireland alone would not keep speculators from other vulnerable countries.

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In an editorial, the Los Angeles Times asked several economists how to improve the economy. There’s little agreement, but the two we find most interesting discuss uncertainty – something we’ve talked about a lot this year. Mark Zandi of Moody’s Analytics and USC’s Ayse Imrohoroglu rightly say uncertainty about Washington policies is keeping the economy from improving. According to Zandi, “The federal government’s record budget deficits have us rightly spooked.” Imrohoroglu says: “The best way to stimulate the economy is to decrease the uncertainty that government policies have created for businesses.”

The New York Times has a new graphic that allows readers to choose how to reduce the deficit. The Times makes it difficult to balance the budget by spending cuts alone, but there are a lot of options they left out. For example: rescinding unspent stimulus money, eliminating “corporate welfare,” or reforming Freddie Mac and Fannie Mae.

The Washington Post’s Robert Samuelson explores Japan’s history and the lessons it holds for the U.S. economy. Samuelson concludes Japan’s example shows the limited capacity for fiscal stimulus to improve the economy. He concludes it’s the private sector that needs to drive growth: “Neither the White House nor Congress seems to understand that growing regulatory burdens and policy uncertainties undermine business confidence and the willingness to expand. Unless that changes, our mediocre recovery may mimic Japan’s.”

The Wall Street Journal comes to the same conclusion we did in our Tampa Tribune op-ed last week: Republicans have a lot to prove when it comes to cutting spending.

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Leaders of the world’s biggest economies agreed on Friday to curb “persistently large imbalances” in saving and spending but deferred until next year tough decisions on how to identify and fix them.

The agreement, the culmination of a two-day summit meeting of leaders of the Group of 20 industrialized and emerging powers, fell short of initial American demands for numerical targets on trade surpluses and deficits. But it reflected a consensus that longstanding economic patterns — in particular, the United States consuming too much, and China too little — were no longer sustainable.

The finance ministers, along with the heads of central banks like the Federal Reserve, are to agree by mid-2011 on “indicative guidelines” for identifying big, persistent imbalances…

The International Monetary Fund will then conduct an analysis of the “root causes” of the imbalances and the damage that they cause, by the next G-20 leaders’ meeting, to be hosted by France late next year. The goal, the leaders said, was to “facilitate timely identification of large imbalances that require preventive and corrective actions to be taken.”

Canada’s prime minister, Stephen Harper, said that currency and trade imbalances were not going to be fixed right away. “It’s fair to say we didn’t resolve those issues here,” he said. “These are not going to be easy issues to resolve but I think we’ve got everyone talking the same language, everyone understanding longer term what has to be done.”

In agreeing to a broad examination of imbalances and their causes, deficit countries like the United States and Britain are opening themselves to criticisms of their debt and deficits. While Mr. Cameron’s Conservative government has pursued a wrenching program of fiscal austerity, Mr. Obama will face a divided Congress locked in bitter disagreement over spending and tax measures.

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The New York Times blogged about the Tax Foundation’s report on the 2011 State Business Tax Climate Index.  Notably, South Dakota offers the friendliest environment, as the state has no corporate or personal income tax.  New York fared worst, as it has “the third worst individual income tax, ninth worst sales tax and worst property tax.”

The Wall Street Journal commented on the looming disaster states are facing in regards to the payment of unemployment benefits. Many states used “stimulus” funds to ensure the payment of unemployment benefits.  But, unemployment has risen and states may have to tap into their state trust funds to ensure benefits are paid out, as the “stimulus” moratorium on interest payments occurs in December.

Yesterday, The Pittsburgh Post-Gazette detailed the troubling financial situation facing the city of Harrisburg.  The city is looking to state Act 47 for help, which would allow the city to increase taxes as a means of revenue, place limits on municipal labor contracts all in order to avoid having to file for chapter 9 municipal bankruptcy.  Harrisburg is not alone in seeking protection under Act 47, 25 other municipalities have already done so. A spokesman for Harrisburg, PA, Major Linda Thompson, Chuck Ardo, articulated the problem clearly, “They needed to address this issue years ago,” he said of the city, “and they didn’t.”

As reported on yesterday by the Associated Press, “bringing home the bacon” or garnering of earmarks for constituents is not being touted during this campaign cycle.  With negative sentiment towards government spending growing, bringing back earmarks is hardly seen as an accomplishment.  Notably from the AP, Earmarks totaled about $16 billion in the 2010 budget year, about one-half of 1 percent of the $3.5 trillion federal budget, according to Taxpayers for Common Sense, a Washington-based watchdog group.

In last Sunday’s editorial in The Cleveland Plain Dealer, the arduous task of cutting the budget after the gubernatorial election is outlined. Ohio’s current two-year budget was financed largely with stimulus dollars, totaling $8.4 billion. Per the Plain Dealer: For the next two years, the governor and the legislature must either scare up $728 from every man, woman and child in Ohio, or hack $8.4 billion from Ohio’s budget. That’s roughly 17 cents of every $1 Ohio spent in general revenues. This fiscal calamity will be placed on the lap of the gubernatorial election winner, who will take on a serious role as a money manager.

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Finally! Candidates for — and even incumbent Members of — Congress are so fired up about getting federal spending under control they’re yelling it from the rooftops!

Oh but wait. When it comes to enumerating how they plan achieve this goal…well, let’s just say few on either side are talking.

Today’s New York Times puts the spotlight squarely on the GOP, highlighting the dearth of specifics in their plans for spending reductions. The following is an excerpt; please click on the link above to read the entire article:

If there is a single message unifying Republican candidates this year, it is a call to grab hold of the federal checkbook, slam it closed and begin to slash spending. To bolster their case that action is needed, Republicans are citing major legislation over the four years that Democrats have controlled Congress, notably the financial system bailout, the economic stimulus and the new health care law.

But while polls show that the Republicans’ message is succeeding politically, Republican candidates and party leaders are offering few specifics about how they would tackle the nation’s $13.7 trillion debt, and budget analysts said the party was glossing over the difficulty of carrying out its ideas….

“It’s very easy in the course of a campaign to run against deficit spending as this abstract monster, but when you are actually in power, you have to propose actual policies and follow through on them and that’s something they are much less willing to do,” said John Irons, an economist at the Economic Policy Institute, a liberal-leaning Washington research group.

“Everyone is saying there’s hard choices, there are tough decisions to be made, but not one is actually telling the voters how they would make those tradeoffs,” Mr. Irons said. “No one is saying, ‘Here’s what I would cut.’

Regardless of the outcomes of the November elections, Americans must hold to his or her word every candidate who promised spending control. From the pitch and pervasiveness of the commitments from both sides, that should mean we’d begin to see real, significant steps to get – and keep – control of reckless overspending from the moment Congress returns. We’ll certainly be watching.

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