Government Spending

Austerity Means Never Having to Say You're Broke!


Let's hear it for the states of these United States! Faced with long-term looming, booming structural deficits, they have started spending more, not less. Sez the WSJ:

The total spending of all state budgets for fiscal 2011, which for most states began July 1, rose 5.3% to $645.1 billion from the year before, according to a report from the National Governors Association and the National Association of State Budget Officers to be released Wednesday. This follows two years of lower spending amid a grueling recession.

Tax revenues are up but still below where they were before the recession kicked in. But just like the idiots they were back in the earlier part of the decade (when they jacked spending by 50 percent above the rate of inflation), the states have responded to modest upticks in revenue by spending yet more.

In the current fiscal year, states are collecting more taxes as a result of rising income and sales taxes. They also enacted $6.2 billion in new taxes and fees. In fiscal 2010, states enacted far more new taxes and fees, $23.9 billion.

Unlike the federal government, almost all states are required to balance their budgets. In the 2011 fiscal year states forecast they would use some $43.2 billion in stimulus money to balance their budgets.

Well, the stimulus money is drying up and guess what? Most states are hiding far bigger deficits and debt loads than they're copping to. Sez the New York Times:

The finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.

Analysts fear that at some point — no one knows when — investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country….

Many governments are delaying payments to their pension funds, which will eventually need to be made, along with the high interest — usually around 8 percent — that the funds are expected to earn each year.

New York balanced its budget this year by shortchanging its pension fund. And in New Jersey, Gov. Chris Christie deferred paying the $3.1 billion that was due to the pension funds this year.

It is these growing hidden debts that make many analysts nervous. States and municipalities currently have around $2.8 trillion worth of outstanding bonds, but that number is dwarfed by the debts that many are carrying off their books.

State and local pensions — another form of promised debt, guaranteed in some states by their constitutions — face hidden shortfalls of as much as $3.5 trillion by some calculations. And the health benefits that state and large local governments have promised their retirees going forward could cost more than $530 billion, according to the Government Accountability Office.

As the Times' notes, the worst is yet to come. "States and cities typically face their biggest deficits after recessions officially end, as rainy-day funds are depleted and easy measures are exhausted."

What part of We Are Out of Money don't they understand?

Hat tip: Alan Vanneman.

NEXT: Has Obama Turned it up to 11?

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  1. Look at the bright side, Nick: We are about to be proven right in spades about the unsustainable, all-providing modern superstate. The job for us right-thinking libertarians now is to make damn sure the state-worshiping set isn't able to pin it on "capitalism" or any such nonsense.

    1. Uh, they already pinned it on "capitalism" and "free markets". The reality of whether that is true is irrelevant; they and their sycophants believe it, so it must be true, and they will repeat it until it is in effect true.

      Being honest is no defense against people who are not just willing to lie, but make it the base of their world view.

      1. You say you want a conspiracy? Here's one worth it's weight in fur...

        1. Color you dead.

      2. I'm not sure you can blame the current state shortfall on "the unsustainable, all-providing modern superstate".

        The state budget shortfall crisis is happening because of the slowdown in the economy. Why that happened is irrelevant to how the states react to it.

        And states react to budget crises the way that any political actor tries to deal with any economic problem: take measures to defray the problem and shift as much of the cost to a time horizon beyond the next election.

        This will happen as long as there is politics: there will be economic problems, and political actors will shift the costs in dealing with these problems to a later point in time. Unless you're advocating completely abandoning a state, the best we can do is try and design institutions so that the incentives of political actors make them think about longer time-horizions.

        1. Shorter time horizons?

        2. "I'm not sure you can blame the current state shortfall on "the unsustainable, all-providing modern superstate".

          The state budget shortfall crisis is happening because of the slowdown in the economy. Why that happened is irrelevant to how the states react to it."

          The problem with your analysis, Ben, is this: When times are good, a rational decision maker puts money aside to prepare for emergencies, bad times, etc. The states and their municipalities, in contrast, spent every penny they had, plus more, making promises they could not possibly keep, and set themselves up for disaster once the economy went south. So yes, the states and municipalities can be blamed for the current shortfalls.

        3. They shouldn't have built up so many obligations in the first place.

  2. What part of We Are Out of Money don't they understand?

    It's the "We". Your Jacket can't be cheap. Pony up.

  3. If the Federal Government bails out California again what I will do is buy a game of monopoly and pay my taxes using the play money inside. If that means I spend time in prison so be it. Civil disobedience is the only way we are going to stop this shit. It is clear the DC Mafia doesn't give a damn about elections anymore.

    1. I don't see that happening any time soon, and California's going to be imploding fairly soon. If they had elected Team Red a month ago, you could see the DC contingent shelling out the greenbacks to cover CA's ass a little, but with the sweep of Team Blue, they'll let the state perform its useful function as a bad example.

      1. That could be the best thing for the country in the long run.

    2. I'm famous and made this suggestion 2 years ago. It will never happen. No one will do it. You're probably right, though. The good news is that half the country already acquiesces to a tax payment moratorium.

      Better get the movement going before the 20th season of American Idol starts.

      1. I loved you in The Osterman Weekend!

        1. Poltergeist(s) FTW.

  4. The more you spend, the more you save!

  5. I'm starting to think Alan Vanneman is the Jacket's nom de plume for his bad fiction and movie reviews.

  6. Would you rather live in a country where you pay X for economic loss/damage done by uneducated masses, crime, lack of police, inefficiency, etc...or .5X to educate people to prevent the other .5X worth of damage happening?

    How much is your "freedom" worth in costs to your "private property" (which i thought were synonymous...)?

    I know you'll disagree with the equation...but...if it happens to be true...then what?

  7. lmost all states are required to balance their budgets. In the 2011 fiscal year states fore

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