The anti-stimulus. (Competing Interests).

If your organization were forbidden from running a loss in any given fiscal year and revenues came in below budget, you'd face stark choices: cut jobs or investments, or raise prices. The former actions may inhibit future growth, while the latter will surely alienate customers.

That's exactly the Hobson's Choice many U.S. governors face today. Many of those who won elections last November are finding their honeymoons as brief as pop diva Jennifer Lopez's last marriage. The problem: gaping deficits.

In California, Gov. Gray Davis faces a $35 billion deficit--equal to 36 percent of the Golden State's budget--and has proposed draconian spending cuts and tax increases. Gov. John Rowland of Connecticut, faced with a $1.5 billion deficit, has fired state workers and supported raising taxes on millionaires. Gov. George Pataki, who assured New Yorkers that all was well during his campaign last fall, in early January announced that the state has to fill a $10 billion hole next year. The Washington-based Center on Budget and Policy Priorities believes the 50 states collectively must close between $60 and $80 billion in deficits for the 2004 fiscal year, which for most states starts in June 2003.

Washington blows hot these days with blustery debate about stimulus. But other than tax rebates, payroll tax holidays or massive increases in temporary spending--none of which is on the table--there's little the federal government can do to stimulate the economy immediately. A vote on President Bush's latest proposals won't come until spring, and the effects may not trickle down into the economy until next year.

Meanwhile, states and cities are acting in a decidedly anti-stimulative way. Virtually all governors are forbidden by state constitutions from running deficits. That wasn't a problem in the '90s, when a national boom produced a gusher of state revenues, and governors cut taxes and backed new social programs.

But just like executives at telecom companies, governors committed the sin of regarding the banner years of 1999 and 2000 as baselines rather than outliers. So spending continued to grow in Democratic- and Republican-controlled states alike. These actions may have aided governors' reelection bids, but they also set the stage for recurring structural deficits when revenues fell.

Since the downturn began, Congress and the White House have acted in a Keynesian fashion--boosting spending on everything from defense to farm subsidies) while reducing tax rates and sending out rebates. The federal stimulus surely helped stave off a deeper downturn in 2001, and further stimulus--to the extent any arrives in 2003--may enable the economy to grow at a sufficient pace to create jobs.

But governors have been forced to raise taxes and cut spending. In fiscal 2002, the nation's governors dosed a collective $37 billion deficit by raising taxes by $9.1 billion, chopping spending and dipping into reserve funds. As revenues failed to materialize, they slashed another $12.6 billion in spending.

For fiscal 2003, according to the National Conference of State Legislatures, governors initially planned $49.1 billion in deficit-closing measures, including $8.3 billion in higher taxes. But in some cases, they've been forced to undo their own handiwork. And the bloodletting will only intensify.

What's to be done? Well, Washington could help by funneling money to the states. For example, the bipartisan National Governors Association has been urging the Feds to increase their share of Medicaid funding, thus freeing up state funds for other purposes.

Sure, a federal bailout might be seen as rewarding governors for their own exuberant promises and failure to exert fiscal discipline. But this crisis has national implications. State expenditures account for about 5 percent of Gross National Product. And the tax increases and spending cuts governors will soon make could easily cancel out any stimulus provided by Washington.

What's more, Congress and the president are responsible for some of the governors' woes. Unfunded mandates on election reform, education testing and homeland security are placing additional strains on frayed budgets.

So far the governors have received a cold shoulder. The plan Bush proposed in January doesn't include any balm for his former colleagues' wounds. With a former governor in the White House, state governors may have thought they had a friend in the nation's capital. But as Harry Truman put it, "If you want a friend in Washington, get a dog."

Daniel Gross, author of Bull Run: Wall Street, the Democrats and the New Politics of Personal Finance, writes the Moneybox column for Slate.