The Wrongologist

What’s
Wrong Today:

From the Off
the Charts Blog:

The chart below shows that state revenue losses went deeper and have
lasted longer in the Great Recession than they did during any recent recession:

So, is the long state austerity nightmare over? No, this is the calm
before the storm. Off the Charts reports that much of the recent
revenue gain may be a one-time shift in tax payments: 

• With two months left in the fiscal
  year, the typical state has collected 8.3% more personal income taxes than
  it did in the same period last year. Sales taxes have grown more
  slowly

• 26
  of the 30 states for which data are available experienced double-digit growth
  in income tax collections between April 2012 and April 2013 

• Only a portion of the income tax
  growth reflects the economic recovery. Much of the rest reflects wealthy
  taxpayers shifting income into 2012 that they would have received in 2013
  in anticipation of federal tax rate increases in 2013

The Rockefeller
Institute found multiple indications that taxpayers did exactly that, so these gains are an aberration,
not a sustainable increase.

Even with
this recent growth, The Center on Budget
and Policy Priorities (CBPP, and sponsor of the Off the Charts blog) states
that state tax revenues have not recovered from the Great Recession. They
expect revenues to remain more than 3% below pre-recession levels, after
adjusting for inflation. And because of the one-time nature of much of
the recent revenue growth, states revenue growth is likely to decline in the
future.

Now some the
bad news: Although state revenues are finally near to pre-recession levels, the
needs they must address have greatly expanded:

• Public
  K-12 schools have 775,000 more students in the 2013 school year than in 2007

• Public
  colleges and universities have 3.2 million more students

• Nearly
  9 million more people are eligible for Medicaid

• State
  unemployment levels and poverty rates are much higher than six years ago

So, state revenues haven’t truly recovered
from the recession and they aren’t adequate to address growing state needs.

Here is
another chart from the series that appeared in the Ritholtz blog last week. It
shows State and Local expenditures by Administration. Regan is in purple, Bush
I in orange, Clinton in green, Bush II in coral and Obama in blue. As described
earlier by the Wrongologist here,
each administration is color coded and its record in government spending is
indexed to 100 at the start of the first quarter of their administrations. This
index approach allows us to view the performance of each administration against
itself.

Regan, Bush I, Clinton, Bush II and Obama all
presided during recessions, but only the Obama Administration saw no growth in state and local
expenditures. This graphically shows how
radically different the impact of the current austerity is at the state level.

Republicans are fond of saying that
government should be run like a business. Keeping with their simile, the
government is a “business” with $billions of assets. However, the
government is allowing its critical production infrastructure to collapse
because a few “board members” prefer collapse to accepting debt levels
that are near to the amount of our annual “revenues”.

In corporate life, this would constitute a
breach of fiduciary responsibility.

It would be grounds for removing them
immediately.

That should be our rule with Congress as well.