How “balanced state budgets” … aren’t balanced.

I’m starting to review the Oregon state budget and realizing how spurious the claim is that balanced budget requirements are why we should not worry much about the state of many state budgets.    Many crises are looming and I’m tired of advocates simply working to protect *their* special interests.   Recipients of public funding should come to the table with more effective use of their tax share or they should be shown the door.

First, most states effectively rename deficits as “shortfalls”, often scrambling to balance things late in a two year budget process.     Far more important however is the fact that about half of the “total revenues”  in Oregon (and I asssume in most other states), comes from the federal government in the form of grants and other federal to state payments.    Now, the federal government *can* run a deficit, and has been choosing to increase that deficit massively since Bill Clinton left office.   Therefore a LOT of the money we spend as a state is in fact “borrowed money”, borrowed at the federal level from … wait for it … our children!     Thanks kids and young folks for funding the reckless spending of the older generations.  Ironically you aren’t participating much in politics and many of you don’t even realize what’s going on right now as we spend and spend … your money.

Caveat:  Most economists agree that the economy is fragile right now and some major spending by government is needed to continue the bailout and stimulus strategies that appear to have worked well.   I’m not disputing that, but I am suggesting that there will be hell to pay if we don’t start managing government spending far more responsibly than we have in some time.    This means cutting both entitlements and defense and – unless very deep cuts are made soon – raising taxes too.    People who think we can balance things without either huge cuts or substantial tax increases are just foolish.  There’s no easy path after decades of reckless spending.

5 thoughts on “How “balanced state budgets” … aren’t balanced.

  1. Substantial tax increases are in order, at Fed and state levels. One doesn’t have to be JM Keynes to understand that the libertarian-supply side school does not work on a macro level. Reagan-era tax slashes may have produced some minor gains–at least for the wealthy, for a few months–but over the long run, the limited tax revenues cannot bankroll the Govt., more or less. As with the present situation–a massive deficit, due mainly to DoD/war–and still low tax rates, historically speaking. And really, Obama has hardly modified BushCo economic policies: he’s a centrist, contrary to the tea-party hype.

  2. Redefining some evil deficit as a more neutral sounding “income shortfall” keeps the voters happy and almost places the blame on some unknown evil force elsewhere. Placing debt and future debt outside the budget is an ancient trick: create a Highway Commission and all road repair charges leave the budget and only the Highway Commissioner’s salary remains in the budget. All those bonds are off the budget too.

    Public spending is like any other pie: if you start serving pieces of pie out to people there are fewer pieces remaining. If you make any adjustments as to who gets what size piece, thats normal politics but none of the news commentators who are so gung ho about war spending ever said “its not war money, its part of our total pie”.

  3. Remember all those signs about 90 percent federal dollars and 10 percent state dollars for a highway project. Libertarians came around and slapped stickers on them “100 percent taxpayer dollars”. You never saw grafitti removed so fast!

  4. Does that imply that anti-taxation libertarians shouldn’t be allowed to drive on tax-funded highways?

    Some libertarian ideas on civil liberties–and the necessity of the US-Con–are valuable. Libertarian economic ideas, however, are not–Vegass is not really a viable social-economic model, FG. The Founders allowed for taxation–estate taxes were in place from the very beginning of the USA. The FF’s wanted to prevent the rise of aristocratic dynasties, IMHE. I doubt they would approve of..Stevie Wynns for that matter.

  5. >There is no easy path after decades of reckless spending.
    There is no easy path after decades of fiscal restraint either.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s