Chris Edwards has an article in National Review Online on why a bailout of the states is bad policy. Here are his top ten reasons.
1. The federal government is broke.
2. Spending is the problem.
3. A Keynesian stimulus ignores the long run.
4. Rising federal debt is fiscal child abuse.
5. A bailout would flout state fiscal traditions.
6. A bailout may delay state reforms.
7. State infrastructure is adequately funded.
8. State situations vary.
9. Bailouts beget more bailouts.
10. A bailout shifts attention from needed federal reforms.