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Home Publications Blogs Beat the Press State Budget Deficits Are Due to Plunging Revenue, Not Higher Spending

State Budget Deficits Are Due to Plunging Revenue, Not Higher Spending

Thursday, 05 August 2010 04:59
The Post should have reminded readers of this fact when reporting that: "Republican leaders criticized the package as a giveaway to labor and an undeserved bailout for profligate state governments." The package in question was a bill to provide additional funding for education and health care to states.
Comments (7)Add Comment
written by izzatzo, August 05, 2010 7:00
The paradox of state revenue falling with less spending is easily explained by the Arizona Zero Sum Lunch Theory. Any economist knows there's no free lunch, so while spending less would be expected to result in increased revenue, it can't if someone gets the additional revenue as a free lunch. That's why even less must be spent, to eliminate free lunches in order for the economy to recover.

It has nothing to do with declines in the level of aggregate demand, which is like claiming that reductions in the water level reduces the rate of drowning. The water level is not the problem, the problem is how many free loaders are in the water who are not supposed to be there.

Stupid liberals.
written by frankenduf, August 05, 2010 8:12
"Republican leaders criticized the package as a giveaway to bankers and an undeserved bailout for profligate financial corporations"- oh sorry, i misread it
written by skeptonomist, August 05, 2010 8:21
The revenue of some states fluctuates more than others and constitutionally in good years they may be required to spend more or cut taxes, both bad things in Keynesian economics. So they are being profligate - as a result of conservative balanced-budget clauses in state constitutions. States should be required to pay back any money advanced from the federal government in bad times.
And what of the role of the Medical Money Machine?
written by Nerrie, August 05, 2010 8:51
Health costs may not be the acute cause of the crisis for state and local governments. But they ought to be acknowledged as a chronic cause, especially in the last decade, especially in some states.
written by Ben, August 05, 2010 9:14
Mr. Baker completely ignores the fact that States have been spending way too much. In fact, if you look at the budgets of the North East, they were in record deficit territory at the height of the boom. Just because you didn't increase spending doesn't mean you aren't spending too much to begin with.
written by Jack, August 05, 2010 9:51
What is the source article of the contention that state spending has not continued to rise? We know unemployment compensation is through the roof. Hard to believe that states finally got religion on spending, right?
America the grand!
written by diesel, August 05, 2010 3:06
Across the land public pools shut down and summer parks programs suspended for lack of money to pay high school and college temporary help. Roll on! Let's go bomb Iran and N. Korea out of frustration!

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.