Unfortunately the federal government has developed apron strings that could hold up the George Washington Bridge. The federal government is always willing to fund things they want you to do (not mentioning that the money comes from the states to begin with) and often expects you pay back the loan or accept unfunded mandates as a result of the money given. The extension of unemployment benefits the federal government offered the states a while back was a classic example of this. States were encouraged to extend unemployment benefits for as much as two years. The federal government would pick up the tab. Unfortunately the money had to be paid back to the federal government. The way to do that was by increasing the unemployment taxes businesses pay. This, of course, cut down on the money businesses had to expand and hire people.
ABC11.com has the story of what has happened in the State of North Carolina:
“Let me give you a little history,” McCrory told a crowd of lawmakers and government higher-ups. “In February 2009, North Carolina started borrowing from the federal government to extend unemployment insurance benefits.”
The governor went on to sum up how the state found itself saddled with nearly $3 billion in debt and why paying it off matters. For starters, because each year the state didn’t pay off the debt, North Carolina businesses would end up paying incrementally more in taxes.
There are two lessons here–first of all,there is no such thing as free money from the government and second of all, when you subsidize a behavior, it increases, when you take away the benefit, it decreases.