On Thursday, Gov. Pat McCrory’s press office sent out a copy of a Forbes Magazine article to brag about McCrory’s rating in the libertarian Cato Institute’s “Fiscal Report Card” (McCrory and Kansas Gov. Sam Brownback got ‘A’s). Well, now things aren’t looking so good and if State Budget Director Lee Roberts hasn’t decided on his Halloween costume, he might think about a bear suit – as in Bad News Bear.
The September General Fund Monthly Report was released by the State Controller on Thursday and the trend lines all point to a budget shortfall. During the three previous fiscal years including the last two that saw significant revenue red ink, the trend at least was matching general expectations – revenues were at least 25 percent of total budgeted. For the current fiscal year, revenues are a 23.6 percent – short of the one-quarter mark. That might not seem like much, but, do the math, and it means that when legislators open the 2015 session, they’ll be talking about a potential $1.2 billion hole the budget.
The tax reforms enacted two years ago – cutting corporate taxes and increasing sales taxes on movies and minor league baseball tickets – that were supposed to score new jobs and economic expansion like touchdowns being scored on the UNC defense aren’t showing any evidence of materializing. Individual income tax collections are $144 million behind last year, corporate income taxes are $93 million in the red. Sales and use taxes (which were supposed to go a long way to make up the loss in income taxes)with a more energetic economy combined with various hikes and additions that where part of the reform package, are just $53.8 million ahead – not close to the combined $237.3 million income tax collections drop.
The total revenue shortfall for September is $121.5 million, compared with the same month a year ago. And the shortfall for the quarter, compared with the same three months last year, is $321.5 million. It will take a HUGE holiday shopping season and an amazing windfall at tax-time next spring to fill that hold. At a time when job growth is stagnant and worker salary increases are miniscule – even getting lucky enough to break even will make it difficult fulfill the promise of continued pay improvement for teachers, more money for schools and universities as well as funding private school vouchers, cleaning coal ash ponds, drilling exploratory gas and oil wells and more.
Wow, Paleo Tek, I think you hit the nail directly on the head…. you need to spread that message far and wide. Not that anybody who SHOULD listen, will. The insane asylums are filled with people who think they are perfectly fine. Our state legislature is filled with people who think they are perfectly RIGHT. I fear for the future of this state, and wish I had a way out of here right now.
The Cato Institute staff are so far in their own echo chamber that they are not only blind and deaf to politico-economic realities, but they also cannot (will not?) grasp basic ledger accounting.
That report (http://www.cato.org/publications/white-paper/fiscal-policy-report-card-americas-governors-2014) uses the parameter of “governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.” Of course, McCrory and Brownback got an “A”!
But Cato turns a blind eye to that other basic key factor of budgeting—a little thing called “income,” or, if we need to explain it to them, “revenues.” They actually made this idiotic statement in their report: “With the economy currently growing, governors and legislatures are having few problems balancing their budgets in the short run…” So they ignore the $400M deficit that had to be closed this last NC session (which made the teacher raise so difficult for the gov and Tillis to bankroll).
But when they actually talk about any budget issues down the road for their ‘A” governors, they totally disregard falling state revenues, and rather see the culprits as Medicare expansion of the ACA (no surprise there. And don’t they know that NC and KS did not expand Medicare?), state pension fund obligations, and states not cutting business taxes enough .
And, of course, there’s no room in this Cato propaganda piece to mention how Brownback re-election prospects are dicey at best because Kansans have not seen any economic revival, but rather have noticed a fast growing state deficit, and how NC’s 2015 deficit is looking like it will be worse than in 2014.
But maybe it’s me who mistaken and ignoring reality? Maybe I just too easily forget that revenue shortfalls, in the skewed world of trickle-down economics, Tea Party ideology, and the ALEC agenda, are worthy goals and planned outcomes—so as to more easily justify starvation of government programs, cuts to social support programs for the disadvantaged, and cessation of making long-term public investments in matters such as education, transportation and environmental stewardship.
And the chickens come home to roost. A strange, zealous faith in extreme Supply Side Economics has become the new Republican orthodoxy. Educated politicians who know better are afraid to challenge the fervent belief of the Tea Party that the Laffer Curve Fairy will visit and bring Good Things to everyone, if only we just Make Things Easier For the Rich. Never mind that we’re well outside the range where the Laffer Curve might apply. Never mind that this whole approach is pretty thoroughly discredited by the numbers. Never mind that the austerity approach has probably slowed economic recovery from the last Republican economic disaster, or that inequality is rising sharply because these misguided policies. Let’s have another round of tax cuts for the rich, because it solves everything.
To the Tea Partiers who believe we should have less government and more wealth concentrated in the hands of the rich, I have three words: globalization, financialization, and China.
Globalization means that capital is no longer tied to a locale. If rich folks think they can get better returns by investing in Vietnam or Mexico, they will. So putting more wealth in the hands of those who see better returns across the border just leads to capital flight.
Financialization means that lots of capital will be attracted to financial speculation, rather than building infrastructure that creates jobs. If you can make more money trimming money off stock price fluctuations in high frequency trading instead of building things and hiring people, why bother creating jobs?
China means that there is a large industrial power that has passed us economically in manufacturing. They invest for the long term, and expecting the Invisible Hand of The Market to let the US stay ahead of the massive investments they’re making is just touchingly naive.
So Trillion Dollar Tillis is selling snake oil. I remember when Republicans understood economic policy, and thought it was important. Now they’ve become more like a cult. Throw these incompetent jerks out.
Paleo Tek- could I post your comments on my facebook page with proper credit? I’d love for people to see your response. It’s so logical. Brutal, but logical.