The States Are Falling, the States Are Falling!
The press corps plays Chicken Little.
Whenever the economy starts to slide southward, the press starts sprouting horror stories spout about how "tax revenue shortfalls" are starving state governments. Today's (March 31) Washington Post Page One piece—"States Are Hit Hard by Economic Downturn:Many Cutbacks Felt by Most Needy"—repeats so many of the genre's clichés that the writers could have assembled the piece from memory.
True to form, the Post leads its story with how "cuts," "shortfalls," and "slashed" budgets are depriving the needy of health care, requiring layoffs of state employees, and gutting after-school programs. Campgrounds are closing in Michigan, the Post reports. A city in New Jersey can no longer afford Independence Day fireworks. Some states have ended weekend hours at DMV offices.
Untold in the Post story is how the state and local governments have increased their spending every quarter for the last four years, as the above chart, drawn from the Commerce Department's Bureau of Economic Affairs data, shows. The combined state and local number gives a better picture of government spending than the state-government figure alone. The states and localities routinely expanded entitlements, invented new programs, and spread more cash on their mainstays as growing tax revenue flowed in.
Now, as the stumbling economy forces individuals and families to rein in their spending, it's only sensible that the state and local governments should have to tighten their belts. It's called living within your means. But news stories rarely reflect this sentiment.
In the print edition of the Post (but not online), the paper reproduces a chart that it sources to the Center for Budget and Policy Priorities, which it correctly identifies as a liberal think tank. Thechart, derived from this CBPP document, lays out the "budget gaps" projected by 22 states and the District of Columbia for fiscal year 2009 and three more in fiscal year 2010. That means, of course, that 25 states are not yet projecting budget gaps, which is the "half full" view of the glass. One would think that states living within their means would be of interest to Post readers, but we learn little to nothing about their fiscal practices. How many of the states constructed unreasonable or profligate budget projections? The Post doesn't say.
The CBPP release is actually better than the Post on the half-full point, noting that mineral- and energy-rich states are experiencing tax "revenue growth," as are agriculture states harvesting the big-money crops of corn and soybeans. Left unstated by the Post and the CBPP is the fact that some states—such as Utah, North Carolina, and Georgia—generally do a good job of matching tax revenues to expenditures. Others—think California and Illinois—build FUBAR fiscal houses whether the economy is booming or busting. Sounds like a story to me.
State deficit "crises" are usually caused by government officials who fail to match their revenue projections to slow growing revenues. They dither instead of act because they regard shortfalls as a political problem to solve, not a financial one. Businesses executives, on the other hand, can't afford to dither because their company will go bankrupt (something states can't do) or they'll be sacked.
When the states and liberal think tanks dictate the sky-is-falling angle in news stories, the press overstates the harm done by cuts to recipients of government largesse at the expense of the harm done to the average taxpayer who pays for the programs.
Meanwhile, the richer budget story routinely gets missed: Why do some officials spend their states into fiscal hell, and how do others avoid the trip?