The Peril of the Federal Billions

by John McClaughry

On January 5 Gov. Phil Scott delivered an upbeat State of the State message. He declared that though Vermont has many unmet needs  –  especially a “desperate need for more people and workers” – “anything is possible”.

John McClaughry

Why is anything possible? “Thanks to the work of our Congressional Delegation – especially Senator Leahy – we’ve received billions in federal aid. And with that aid, we came together to fund significant needs… We have passed historic investments in housing, broadband, climate change, water  and sewer, and economic recovery – dedicating over $600 million to transform communities, large and  small, across the state.” 

Even after all that, Vermont state government is still awash in almost uncountable millions of Federal money. The big questions in the State House should be 1) how much money do we have to spend? 2) can we apply those billions of Federal dollars to our priorities or only to Washington’s?  And 3) What will we do when the flood of funds from Washington ends?

For years Vermont budgeteers of both parties have recognized that a sudden influx of one-time money can be perilous: using the money to launch or expand programs that Vermonters will soon have to pay for out of their own pockets.

 In his address Governor Scott recited a long list of things we need to spend more money on. In addition to more workforce training and (yet again) paying desirable people to move to Vermont, he listed the chronic problems of unaffordable housing, homelessness, inadequate child care, substance addiction, mental health, overworked health care providers, and public safety.

All of these will causes have advocates who will clamor for more funding year after year. Governors and legislatures hardly ever have the courage to end programs. Even level funding is rare.

This year a huge new claimant is loose in the spending competition: The December report of the legislatively created Vermont Climate Council calls for dozens of new uses for billions of budget dollars, called “investments”, to step up the battle against climate change. The short term goal is to reduce CO2 emissions by three million metric tons of CO2 equivalent in just eight years.

 Some of this hoped-for emissions reduction will come from regulatory actions that legislators, happily for them, don’t have to vote on. But most of it will have to come from spending – subsidizing 165,000 new electric vehicles especially for lower income people who can’t afford them, driving up heating oil, propane  and natural gas prices to entice homeowners to switch to 110,000 subsidized electric heat pumps, and weatherizing 90,000 more homes (at little or no cost to the homeowners).

When the Council released its Climate Action Plan, the Scott administration issued a statement that its lack of detail makes it impossible to calculate its costs. “We cannot support proposals which impose a fiscal commitment beyond the means of most Vermonters.”

The climate advocates who control the legislature won’t settle for this. They already suffered a huge setback when their preferred source of continuing revenues – the Transportation and Climate Initiative’s motor fuel taxes – sank out of sight in the other 11 states supposedly ready to enter it.

They’ll press for the Council’s “Clean Heat Standard” to make fossil fuel heating customers pay for home and business electrification, and a revived “feebate” plan like that proposed by VPIRG in 2009. The “feebate”, now rechristened “vehicle efficiency price adjustment ,” would tax low-mpg internal combustion vehicles to subsidize pricey electric and other fuel-efficient vehicles.

Significantly, in his address listing so many pressing needs for more money, Gov. Scott pointedly did not endorse any new spending for the Climate Action Plan. In fact, he only used the word “climate” in four places, all in connection with past accomplishments, workforce training needs, future business opportunities, and “climate resilience”.

The hard fact is that the Federal government, whose debt is now equal to the entire U.S. GDP, cannot go on much longer running up hundreds of billions of dollars of debt each year to shower money upon the states. If a state spends its Federal windfall money on ongoing programs including supposed remedies for climate change, sooner or later it will have to cut back those programs it unwisely expanded, or start paying the increased costs from its own resources – most likely by jacking up taxes on its own voters.

That will defeat the governor’s hope for attracting more and better business opportunities, that will likely appear in states with less, not more, taxes and regulations.

John McClaughry is vice president of the Ethan Allen Institute (      

4 replies »

  1. Re: “No-one – except John McClaughry – is asking what we will do when the flood of federal money ends.”

    There’s no need to ask we will do. It’s obvious. We’ll go bankrupt.

  2. John,

    Career bureaucrats and allied politicians dug their way to the vault decades ago
    They are addicted to federal money, and do not want the vault moved, or curtailed in any way.

    They will fight tooth and nail to keep it that way.

    The BBB bill is just the latest “PROMISED-LAND/NIRVANA vault, which seems out of reach, because national hero Manchin said no, enough is enough.

    His poll numbers are near an all time high in West Virginia, his home state.


    I am not surprised at the lack of public trust in Washington, DC, and elsewhere. The games of smoke and mirrors played in Washington are off-the-charts outrageous.

    Never, ever, has there been such a level of deceit, as Democrats have inflicted on the US People, since January 2021, using a controversial election in 2020 (see Appendix), to obtain government power, to relentlessly implement:

    – An increased size and intrusiveness of the federal government
    – A major change in US demographics by means of just-walk-in, anybody-is-welcome, open borders
    – Increased Democrat command/control over the federal government and the American people to “Remake America”

    However, Dem/Progs made a major mistake.

    – They intended to use top-down, command/control of the very-inefficient federal government to very-expensively “Remake America”.
    – Their strategy is a highly un-American approach, significantly different from the history of US economic development.
    – They never mentioned the words “private enterprise”.

    In contrast, Trump’s “Make America Great Again” specifically did not rely on government. MAGA relied on:

    – Eliminating business-stifling government rules and regulations
    – Freeing up the creative energies of the American people
    – Putting America and the American people first again, within secure borders

    BBB Intended and Unintended Consequences

    The BBB bill has a dual-purpose, 1) a society-transforming increase in social program spending, and 2) remaking the US energy sector. Democrats aim to use BBB to promote political patronage and transfers of wealth from lower- and middle-income taxpayers in red states, to upper middle-class and wealthy residents in blue states.

    This approach is anything but progressive and likely would be reversed after the next election. See URL

    BBB would:

    1) Increase US energy costs, because of increased, already-generous subsidies (tax credits, rebates, grants) for:

    – Unreliable, weather/wind/sun-dependent, variable/intermittent wind and solar energy, which would end up greatly increasing the costs of dealing with grid instabilities, as has happened in Germany, etc., which has the highest household electric rates in Europe. The increased subsidies largely would benefit wealthy, Democrat, coastal elites.

    – Expensive/unaffordable/less-useful electric vehicles, that are known to surprise by catching fire, 2) perform poorly and have low efficiency in colder climates.

    According to University of Chicago research, most of the $18 billion in federal income tax credits disbursed to date were used for, a) weatherization of U.S. households, b) residential net-metered solar that produces extremely expensive electricity, and c) electric vehicles, including wasteful government experiments with electric school and transit buses.

    2) Provide a tax cut for higher-income households, in mostly high-tax, blue states, by increasing the state and local tax deduction (SALT) from $10,000 to $80,000

  3. Keep the pressure on, John. Great work here.
    Dragging this out any longer will equate to costing us in the trenches more. I am beginning to believe this is what the left-wing crowd really wants to happen.

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