shape up or....get fatter?!

Turning from the state of Indiana to the national stage, the WSJ editorialists comment on the state of state budgets-- and the relationship to "the stimulus package" (current and future)...

When Detroit's auto makers begged for a federal bailout last month, Congress demanded that their CEOs make changes to their operating model in return for a check from Uncle Sam. If only Congress would demand the same from the state and local politicians now seeking $200 billion from federal taxpayers....

But the states aren't innocent victims. Their revenues have collapsed of late, but the main reason so many states are broke today is because lawmakers thought the days of living well would last forever.

The state spending binge of the last five years has been almost unprecedented in American history....They also loaded up on debt, which doubled to $2.23 trillion in 2008 from $1.14 trillion a decade earlier. This doesn't include nearly $1.5 trillion in unfunded health and pension liabilities....

The states with the biggest deficits tend to be the most profligate....

A federal bailout for these distressed states means redistributing income to these big spenders from the most fiscally responsible states. Federal aid also creates a disconnect between the people who pay for the local services and those who benefit from them....

This creates an incentive for state and local officials to pad their budgets as their lobbyists race to capture as many federal dollars as they can. One especially ill-designed idea from the Obama Administration is to allow the federal government to pay a greater share of state Medicaid costs. So instead of reforming policy to slow the stampeding cost of medical care, states will have an incentive to spend lavishly, because every health-care dollar lures more money from Washington....