RSS Feed MenuAmericans are beginning to understand that their federal government is becoming the global poster child for red ink. Under the Obama budget, the federal government will generate trillions of dollars of deficits over the next ten years and is on track to enter a dangerous spiral of borrowing to pay off previous debt. That may be the good news.
Suddenly, the states – the stalwarts of fiscal probity who must obey balanced budgets – are in terrible shape. (A good summary of the state fiscal situation is from the National Association of State Budget Officers (NASBO); found here.) States are in worse shape than local governments largely because their tax revenue sources – personal income, sales taxes, business taxes – are more cyclically sensitive than the localities.
California, which recently was reduced to issuing IOUs instead of paying its bills, is the poster child for budget problems, but the distress is widespread with significant declines in many states. In general, the duress will be long-lasting, with budget difficulties for years. California will take longer. It has structural difficulties that put it in worse shape. Given the recent failure of the ballot initiatives, it is difficult to see a quick resolution. There are some (including CA budget officials I’ve talked to) that have turned to hoping there will be a bankruptcy-like crisis that will force a broad political reform.
What is the lay of the land? According to the NASBO, nearly 50 percent of the states will see their budget shrink in 2009, with this rising to 75 percent in 2010. The pace of decline, over 2 percent in 2009 rising to 2.5 percent in 2010 would be the “largest declines in the history of the Fiscal Survey, as well as the first time in which state general fund expenditures declined in consecutive years. Prior to 2009, actual state general fund spending had only declined in 1983.”
The cumulative shortfall by 2011 will approach $250 billion, of which states have closed only about 20 percent in 2009. Cutting spending is difficult for states, as they are on the hook for unemployment insurance, Medicaid, and other cyclically-sensitive spending programs. What about the windfall from the “stimulus” bill? While the funds appear generous, they pale in comparison to the cumulative shortfall. More importantly, the stimulus funds largely appear in 2009, while the states expect significant problems in the years to come.
Bottom line, the states have big problems that will not be solved by the feds. The NASBO indicates that 42 states were forced to reduce enacted budgets in 2009 (only 13 states had to do so the year before). Thirty-five states assume negative budget growth for fiscal 2010, up from 30 in 2009.
What does all of this mean? First, and most obvious, this is not good news. States face a serious budget retrenchment – spending has to fall and taxes will rise. The average citizen should not savor the prospect.
Second, the state fiscal situation is another federal budget threat. There will be a long line of governors suggesting – usually in disguised terms – policies that amount to a bailout for their budgetary woes. The key policy question is whether the Obama Administration will hold the line and insist that the inevitable retrenchment begin immediately.
Finally, budgetary distress is tantamount to gubernatorial political woes. In recent weeks Republican governors have suffered self-inflicted wounds from their international travels and missing internal fortitude. Dealing with state budget woes in principled ways – as, for example, Governor Pawlenty did in Minnesota – will distinguish some. On the other side of the ledger, Democratic governors will face the temptation to raise taxes in a recession. How will they respond?
Suddenly, just when you thought the Obama Administration had monopolized drama, the states are getting interesting.
midcon // Jul 13, 2009 at 7:35 am
California suffers from a unique affliction of a non-performing legislature. Their inability to do nearly anything is legend and has essentially been replaced with legislating by proposition. From the infamous Prop 13 to ending bilingual education (overturning the 1967 law – signed by Governor Ronald Reagan of all people), California’s more “progressive” actions have been accomplished by direct referendum. Those of you who have lived in California know well the page count of the ballot which exceeds that of most states combined (60-70 pages of small type). In a democracy where voters are knowledgeable regardling the issues this direct democracy truly does represent the will of the people and difficult decision can be made by an informed electorate. But when the attention span of the typical voter is so short that they tune out the political commercials, it can have a extremely undesirable affect. Most other states are not affected in this manner.
There is a lot to be said for direct democracy. I wish we had it nationally. But direct democracy only works when the electorate is engaged and knowledgeable. Our founding fathers foresaw this in their limitations on who had the right to vote. There intention was for those who were intelligent and educated were the ones who should be participating in the direct democracy. Of course, at the time it was mostly the white, male, landowners that fit the criteria. I believe the criteria was acceptable then and remains acceptable now. Selecting our leadership and passing laws through direct democracy needs to be limited to those who are knowlegeable and understanding of the issues regardless of race, gender, or creed. Otherwise California and the partisan gridlock in Washington is the result.
barker13 // Jul 13, 2009 at 8:38 am
“California suffers from a unique affliction of a non-performing legislature.”
Hey! I resent that, Midcon! On behalf of the Great State of New York… the Empire State… I just wanna say that OUR legislature is just as non-performing as California’s! There!
http://www.thealbanyproject.com/showDiary.do?diaryId=36
(And, heck, Mid… the above referenced study is from 2006 – back before Spitzer’s self-destruction and the current state Senate meltdown. New York claims #2 status to no other state when it comes to dysfunction.)
(*RUEFUL SNORT*)
“But when the attention span of the typical voter…”
Getting serious for a minute, yeah… that’s the rub. Democracy as we know it, as we have it here in the United States, is largely a failed experiment. Most folks may not wanna hear it… (*SHRUG*)… but it’s true. The shear size and scope of government has extended beyond the People’s ability to keep it in check.
“…direct democracy only works when the electorate is engaged and knowledgeable.”
And our electorate ISN’T engaged and knowledgeable.
But beyond your valid insight, Mid, allow me to go further. You keep speaking of “direct” democracy. Well, fine and dandy. But the same applies to representative democracy – the democracy most of us believe we live under. The average citizen has no frigg’n idea what his or her representatives are doing in their names. Oh, perhaps they’ll notice a new law (a new tax, an increased tax, a new “surcharge,” increased “fees,” etc.) AFTER it’s passed; or in some cases if there’s enough media coverage they’ll have an inkling where their representative broadly stands on “issues;” but by and large the citizenry is ignorant.
(*SHRUG*) Again… one doesn’t have to “like” this reality – but one does have to accept it AS the reality.
“Our Founding Fathers foresaw this in their limitations on who had the right to vote.”
Yep. And don’t forget that our Founding Fathers were quite adamant that there should be no income tax!
(Oh, well… so much for the wisdom of the Founding Father, eh?) (*SIGH*)
Oh… but they DID want an armed citizenry… (*SMILE*)
Again… in all seriousness… Midcon is saying what needs to be said.
Folks… not all of you will see Mid’s proposals as any more serious than my fantasy of a military coup… but regardless of what you think of Mid’s ideas or my fantasies…. THE REALITY IS THAT OUR PRESENT FORM OF GOVERNMENT JUST AIN’T WORKING…!!!
BILL
sinz54 // Jul 13, 2009 at 9:12 am
barker13 sez: “THE REALITY IS THAT OUR PRESENT FORM OF GOVERNMENT JUST AIN’T WORKING…!!!”
Really? I think it’s working fine.
If anything, the political process is far more open today than it ever was. Gone are the “smoke-filled rooms” in which politicians huddled in secret to select their party’s nominees. Gone are the poll tax and other forms of voter intimidation. Instead, we have C-SPAN, blogs, YouTube, Twitter, etc., to involve Americans in politics as never before. And as we saw in 2008, the candidates who know how to use these new media will have a big advantage.
And for an electorate you say doesn’t know anything, a larger percentage of Americans have been to college than at any previous point in our history.
It’s the usual cry of the political losers that they lost the election because Americans were just too stupid to comprehend how wonderful the losers’ platform was, or because the Constitution is fundamentally broken in some way. Funny, we never hear those things from the political winners.
In 2004, for example, it was liberals who were claiming that the American electorate was too stupid to understand how much better Kerry was than Bush;
http://www.slate.com/id/2109218/
and that the best thing to do would be for the Blue States to form some kind of “Anschluss” with Canada.
http://en.wikipedia.org/wiki/File:Jesusland_map.svg
I have no fears whatsoever about the future of the American political system. I’m old enough to have participated in those “duck and cover” drills during the height of the Cold War. Back then, we wondered if humanity would have to choose between being Red or being Dead. America proved to the whole world that we didn’t.
So if we could survive that, we could survive anything.
midcon // Jul 13, 2009 at 10:10 am
Well, yeah as I look at what I wrote, I guess that is what I am saying. Our representative form of government is just not hacking it. Our representatives too often represent those who can help them keep their representative status and the people.
Remember the campaign “Vote?” Notice it was just a single word. There was no “Vote Intelligently”, “Learn and Vote”, “Get Smart and then Vote”; it was just “Vote!” (I think there was an exclamation point for emphasis). All that matters is that you pull the lever, punch the hole, mark the block. Heck you do not even need to speak or read English to do it. It didn’t matter who you voted for as long as you voted. So that’s what many people do. They exercise their right as citizens, but fail to exercise their duty as citizens. If you do what you’ve always done, you’ll get what you’ve always got (someone else’s quote not mine) and this is what we got. I would even settle for a citizenship test (mandatory, must pass course in school) not disimiliar to the test naturalized citizens have to take. It would be better than nothing. For the first time in my life my wife and I had a discussion about other countries, wondering if there were a better place for us. It’s not whether there is or is not a better country, it saddens me that we even had the conversation! And it has nothing to do with Obama. It is our legislative branch that has failed us.
And yep, NY state ranks right up there with California. I should have given credit where credit was due!
sinz54 // Jul 13, 2009 at 11:12 am
midcon sez: “All that matters is that you pull the lever, punch the hole, mark the block. Heck you do not even need to speak or read English to do it.”
And somehow, that worked very well throughout much of America’s history.
Do you really think all those hunters and trappers and farmers out West had much more than a sixth grade education? How about those sharecroppers in the South?
Do you think all those Italian and Jewish immigrants who lived in slums in New York could speak fluent English? I know for a fact that my grandma couldn’t. She immigrated as a very young girl to America in the first third of the 20th century.
Relax. Without universal college education, America managed to become the world’s greatest superpower. We must have been doing something right.
And we were. Our free enterprise system enabled anyone of talent to rise as far as their talents could take them. That’s what separated the wheat from the chaff, as it were.
sinz54 // Jul 13, 2009 at 11:16 am
One more thing. When Europeans debated the European Constitution, its critics used the U.S. Constitution as an example of how to do a constitution the right way.
http://www.liebreich.com/LDC/HTML/Various/Contrasts/Contrast4.html
barker13 // Jul 13, 2009 at 11:45 am
Re: Midcon // Jul 13, 2009 at 10:10 am –
“Remember the campaign “Vote?” Notice it was just a single word. There was no “Vote Intelligently”, “Learn and Vote”, “Get Smart and then Vote”; it was just “Vote!” (I think there was an exclamation point for emphasis). All that matters is that you pull the lever, punch the hole, mark the block. Heck you do not even need to speak or read English to do it. It didn’t matter who you voted for as long as you voted. So that’s what many people do. They exercise their right as citizens, but fail to exercise their duty as citizens.”
Amen, brother, Midcon… amen.
(Or is it sister Midcon…??? I wish everyone would just use their real frigg’n first names!) (*SMILE*)
“For the first time in my life my wife and I had a discussion about other countries, wondering if there were a better place for us.”
(*SIGH*)
Yep. Us too. (My wife and I that is.) And I’ve been telling my (now) 22 year old daughter that she should be looking into the option of starting a new life overseas – somewhere – too.
This isn’t a frigg’n joke. Those of us “in the know” know exactly how bad things are and can guess how much worse they’re going to get if we stay on this national trajectory; and there’s nothing to convince me – or even give me hope – that we’re gonna get off this suicidal national trajectory.
Writing and debating is “self-therapy” for me. I don’t pop pills. I don’t drink to excess. (Er… well unless it’s appropriate to drink to excess – certain social gatherings… always with a designated driver or place to crash without having to drive available.) What I do is READ… I read a LOT. And this is in addition to a fairly comprehensive academic background in the matters we discuss on blogs such as this.
“It’s not whether there is or is not a better country, it saddens me that we even had the conversation! And it has nothing to do with Obama. It is our legislative branch that has failed us.”
That’s PRECISELY how I feel, Midcon. I HATE that I can’t be the conventional “patriot” I was back in high school or even throughout much of college. I DESPISE the fact that “the system” has so betrayed me that I seriously pray for a military coup even as I know it’s not in the cards anytime soon.
It’s like watching one of my best friends, Phil, continue to smoke a couple packs of Marlboro a day knowing he’s slowly KILLING himself. This is how I look upon my country. We’re destroying ourselves. And there’s NOTHING I can do about it other than harp – just as I harp on my buddy to throw those damned cigarettes away and point to not one, but TWO of my brothers-in-laws fathers who are at this moment both DYING horrible, painful deaths courtesy of smoking related emphysema.
It’s how the “sane” German military professionals must have felt in ‘43. (*SIGH*)
“And yep, NY state ranks right up there with California. I should have given credit where credit was due!”
(*SMILE*) Yeah… thanks.
(*STRAINED SMILE*) (*TEARS WELLING UP*)
BILL
midcon // Jul 13, 2009 at 11:46 am
4 sinz54 // Jul 13, 2009 at 11:12 am
midcon sez: “All that matters is that you pull the lever, punch the hole, mark the block. Heck you do not even need to speak or read English to do it.”
And somehow, that worked very well throughout much of America’s history.
Do you really think all those hunters and trappers and farmers out West had much more than a sixth grade education? How about those sharecroppers in the South?
Remember sinz, in the 1850’s only white male property owners could vote and voting was conducted in towns which were the population centers. Hunters, trappers, and even farmers were not the real decision-makers back then. And also, don’t forget that the world was much simpler and much smaller than today. Politics was more local. A global economy did not exist. Sure, our system has enabled us to prosper and be strong. But you cannot just assume that what has worked for the last 250 years will continue to work for the next 250 or even if there is another 250.
I would be curious to know when your grandmother first voted in this country. My ancestors who arrived from Ireland by way of Canada lived in Brooklyn and there are family stories that they were paid for their vote and considering they were very poor, they did what they were paid to do. Perhaps American became great in spite of it’s Constitutution or lack of knowledgeable voters.
Am I trying to make a case for American, an accidental superpower? No of course not, but the cause and effect of yesteryear cannot be construed to be applicable now or in the future because we live in a different world.
midcon // Jul 13, 2009 at 11:48 am
P.S. My first name is Dave, David, or Hey You.
barker13 // Jul 13, 2009 at 11:54 am
Re: Sinz54 // Jul 13, 2009 at 11:12 am –
“And somehow, that worked very well throughout much of America’s history.”
(*ROLLING MY EYES*)
Yeah, Sinz… things “work.” Until they don’t.
How’re those kidneys of yours…??? (No. Not trying to be cruel. I’m trying to make a point.)
Sinz… not to overuse the WW-2 Germany example, but what’a'ya think… ya think in ‘37, ‘38, ‘39, and ‘40 the average German understood that within a few short years their country would be flattened to a pancake – literally?
Sinz… Gibbons called it the DECLINE and fall of Rome for a reason. (*SNORT*)
You claim to be an engineer. I don’t know… the engineers I know are able to connect the dots – surmise from A + B what C is gonna add up to.
“Do you really think all those hunters and trappers and farmers out West…”
Sinz. Check your watch. It’s July 13, 2009.
“Relax.”
* Midcon. THIS is what we’re dealing with. And as I always point out, when you take the American population as a whole… Sinz has gotta be easily within the top 5% of politically aware and knowledgeable Americans.
Frankly… Sinz’s commentary turns my stomach. Literally. I read this coming from him (or her) and I just get an empty, nauseous feeling deep in the pit of my stomach.
Time to take a brake from blogging.
BILL
barker13 // Jul 13, 2009 at 11:56 am
Re: Midcon // Jul 13, 2009 at 11:48 am –
Great! Thanks for sharing, Dave.
Sinz… how’bout you…? Are you “Stephen?” I promise… no one’s gonna steal your identity off of a first name and gender confirmation.
BILL
ottovbvs // Jul 13, 2009 at 12:47 pm
Virtually every state in the Union has huge budget problems because of the collapse in tax receipts(which is not to say they don’t have inflated budgets). I live in the state with historically the highest per capita income in the country and it faces roughly $8 billion of shortfalls over the next couple of years. California has unique problems because of the two thirds rule on passing money bills but even more so from the various disastrous outcomes from citizen democracy. The most notorious of these being Prop 13 which effectively effectively eliminated the reliance on property taxes which are a relatively inelastic source of income and tied them to income taxes which are opposite being heavily dependant on the overall state of the economy. Every time the economy goes in the tank CA has a budget crisis. The Gubernator who was elected in another bit citizen democracy the last time there was a budget crisis (only about a $3 billion shortfall though) has completely failed to deal with the problem. He solved the crisis he was elected to resolve by borrowing! This one seems to be beyond his capacity to fix for which he any case has little talent. It’s probably beyond anyones capacity to fix given the political constraints. Recall election anyone?
ottovbvs // Jul 13, 2009 at 12:54 pm
midcon // Jul 13, 2009 at 11:46 am
” Am I trying to make a case for American, an accidental superpower? No of course not, but the cause and effect of yesteryear cannot be construed to be applicable now or in the future because we live in a different world.”
………….It was a bit of an accident……there were several things that could have derailed it……but then accidents are always cropping up in history………Otherwise you’re entirely correct………Myths from the hunting/fishing/agrarian age are largely irrelevant to the world in which we now operate.
midcon // Jul 13, 2009 at 8:50 pm
Otto,
Yeah you are right there were plenty of “accidents” that led to America’s greatness. It probably would be a great debate over whether America was indeed an accidental superpower, but I did not want to detract from the topic by having someone think I was dissing America the superpower. I have often thought of writing such a book, but then I don’t really know my history all that well.