Follow the money

To pass his tax cut, President Bush had to agree to pay $20 billion in ransom to state governments desperate for cash. The argument at the time, allegedly sincere, was that the money might head off state tax increases that would hurt the U.S. economy.

If only. Now that they have the cash, too many states are taking the money and running at taxpayers anyway. Alabama's Republican Gov. Bob Riley just reached a deal with his state's Democratic legislature for a $1.2 billion tax hike. Pennsylvania's Democratic Gov. Ed Rendell wants to use his state's $900 million bailout share to restore spending cuts from March, but hinted he also wants to go ahead with tax hikes, which include a 34 percent increase in the state income tax.

In Missouri, Republican legislators are trying to use the bailout money to stop Democratic Gov. Bob Holden's plans to raise taxes on smoking, gambling and higher-earning Missourians. In Florida, the problem is the GOP-controlled legislature, which wants to spend the money rather than take Governor Jeb Bush's advice and put the money away to forestall future tax increases.

Meanwhile, some states are using the bailout to get back to spending as usual, parceling out the windfall on anything but vital services. Take Louisiana, where a committee of the state house has released a $16 billion-plus budget that includes $264 million of the bailout. While the committee restored budget cuts, it also included money for such priorities as a rodeo, a hot air balloon championship, the National Baptist Convention, and a tutoring program.

The main reason 46 of the 50 states are in dire fiscal straits is because they spent without restraint during the boom. The aftermath has been painful, but at least it has forced politicians to reconsider their spendthrift ways. It looks as if in too many cases all the federal bailout has done is delay that much-needed rethinking.

-- The Wall Street Journal