Saturday, January 8, 2011

Texas Hold-Em (Up)

A conservative friend recently touted Texas as a great place to live: low taxes, low unemployment, none of the budget problems facing places like California, on a roll. Sounded good. Until I read this.

These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.

Wait — Texas? Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years...

...The only thing that let Gov. Rick Perry get away, temporarily, with claims of a surplus was the fact that Texas enacts budgets only once every two years, and the last budget was put in place before the depth of the economic downturn was clear. Now the next budget must be passed — and Texas may have a $25 billion hole to fill.

And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere.

How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New York’s, about as bad as California’s, but not quite up to New Jersey levels.

It reminds me of the much touted (by GW Bush) "Texas Miracle" of public education. Amazing test scores, found to be quite literally fraudulent, as it was discovered that the Houston education supe, whom Bush appointed Education Sec, was booting out struggling kids before they had a chance to take the tests.

Frankly, given the dire straits in which my state and most others find themselves, the idea that any state, even the venal Texas, might have found a formula that works was -- swallowing hard -- encouraging. Well, maybe not that. After all, they're leading the nation in politicizing and Jesufying education. Still, any state that can maintain solvency in these times deserves a look.

So much for that.

It's a myth: if tax cuts and spending cuts is all you gots, failure is what you'll get, sooner or later.

Bruce Bartlett, Reagan's economist and a serious guy, says:

The reality is that Social Security, Medicare and Medicaid are where the real money is, and reducing outlays for these programs is very, very hard; not just for political reasons, but because they are highly complex programs and require changes in the law governing eligibility to reduce spending in the long run. Doing so in a way that can’t be gamed by beneficiaries or create massive unfairness is a major challenge.

Congress needs the best possible analysis and research to help it understand the nature of the programs it wants to cut and how to write laws that will achieve its goal. Fortunately, it already has an organization at its disposal called the Congressional Budget Office to do this. Established in 1974, it has 250 of the best budget analysts and economists in Washington and deep institutional knowledge of every facet of government spending. (A parallel organization called the Joint Committee on Taxation does the same thing for tax policy.)

Funny thing, that last paragraph: Rs like the CBO when it says what they want to hear. When not, they do what they always do when facts don't fit their fantasies: they ignore it. (Or lie about it.) Which is exactly why the crap up with which they always come never works. And why they don't care.

Or even notice, evidently.


Anonymous said...

Dr. Sid,
Is your aim to be informative or divisive?

Your example is a good chance to review Texas' budget yourself and present a follow up blog to inform us on WHY there is a budget deficit and HOW it differs from a NY/NJ/Cali budget.

Is it low revenues? unsustainable spending? from what programs? is the spending state specific or federally mandated spending? If Texas is so different from liberal states, then WHY do both places have noteworthy deficits?

I suspect that federally required state contributions to entitlements (like Medicaid) play a large part in the states expenses. Although I am loathe to use an argumentum ad verecundium, your blurb from Mr. Bartlett supports my suspicion about the states main costs.


p.s. The Gubmint (pre-Obamacare implementation) already controls 44% of healthcare spending. In 2009, government healthcare spending went up 9.9% while private healthcare spending decreased 0.2%. This may be a good starting point to look into the source of these large state & federal deficits.

Sid Schwab said...

The problem, PT, is that being informative is being divisive, when the information isn't what some people want to hear. It's like HST once said, about being called "give 'em hell Harry:" I don't give 'em hell, I give them the truth, and they think it's hell.

I assume you didn't read the whole linked column, since it answers much of your questions.

No one denies that health care is a huge part of the problem (though hardly all of it, by a long shot.) You may recall Democrats tried to do something about it. I seem to recall it wasn't long ago, and it was uniformly rejected, before being diluted, by some other party. I believe that same party, if memory serves, is now trying to undo it, at a cost of adding another couple hundred billion to the federal deficit, and with no serious alternatives.

Nor, as usual, was that the point of this post. It was about the fact that simply cutting taxes and so-called "wasteful" spending is not a solution, but it's the only thing Rs will propose. That, and the fact that Rs ignore facts that run counter to their magical narrative.

If that's divisive, it's because it's true; and because the truth is that they continue to cling (as if they were guns and religion) to demonstrably unworkable and unserious solutions.

THAT'S what's divisive: a party that refuses to be truthful, serious, or coöperative.

Sid Schwab said...

PS, PT: I read your linked article, which has nothing to say about solutions. Snark, yes. Suggestions, no.

Nor does it address what may well be the main explanation for the relative changes in spending between government and private entities: poverty is increasing, the number of people without insurance is increasing (and will continue to do so if the Rs have their way), and the population is aging. All of which have nothing to do with efficiencies of one or the other form of paying but have everything to do with the burden shifting to government.

And, since it's true that government agencies control nearly half of all medical spending, how about if we discuss ways of saving without calling it death panels or killing grandma?

Just a suggestion.

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