Study: The Save Obama Bill is Really A Blue State Bailout

So that’s why the president is begging Congress to hurry up and pass this bill…it will shore up his irresponsible, ailing and angry base.

In many blue states, legislators have copied the politicians in Washington by running up state debts to extraordinary levels. Nationwide, state debt is running around $3 trillion. If unfunded pension liabilities are factored in, estimated liabilities leap forward by another $1 trillion to $3 trillion, depending on the optimism of the assumptions made.

The bond market has taken notice. Before the 2008 financial crisis, state sovereign debt was just about the safest place to invest. Because investors did not pay taxes on the interest, states were able to borrow money at rates below those paid for federal securities. With the onset of the financial crisis, not only did borrowing costs rise across the board, but differences in interest rates among states widened dramatically. Bond holders concluded that some states, like Greece, had been extraordinarily profligate and, even worse, lacked the will to rein in their expenditures.

In a new study at Harvard’s Program on Education Policy and Governance, we discovered why the Obama administration is so interested in helping out the states. States with a bluish hue—that is, states with legislatures that are heavily Democratic and have a highly unionized public-sector work force—must pay interest rates that are often an extra half a percentage point higher than states with a reddish coloring.


The study’s authors point out that not only will passing the Save Obama Bill (SOB) cost a great deal of money, it will also endanger our already rickety federalist system by injecting more federal dollars (and power, and strings) into state and local government decisions. If you’ve followed anything Obama has done as president, you know that this is not a bug in the SOB, but a feature.


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