The goose and the gander

February 13, 12:17 PMSnohomish County Progressive ExaminerChad Shue

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During the recent gubernatorial contest here in Washington State I was keenly aware that our state was heading into rough economic times. After all, that was the daily message of the Rossi campaign. As readers here know, I was a staunch supporter of Chris Gregoire as she countered Dino’s attack by pointing out that the impending doom and gloom analysis he offered the voter was based on “projections” over the next two years and then only if there were no corrective actions taken. Obviously Governor Gregoire was very good at convincing the voters that she was better equipped to deal with whatever the economic reality turned out to be as she was returned to office by a solid majority.

At the same time we were hearing about looming deficits and rising unemployment here, the presidential campaign was focusing in on the economic disaster President Obama is attempting to deal with today. I remember thinking in November and December that it was too bad that the state didn’t have the advantage of the federal government in that Gregoire and the state legislature were constitutionally required to produce a balanced budget every year while, as of yet, there is no similar restraint placed on their federal counterparts. And, because Rossi had been so effective in forcing a “no new taxes” pledge from Gregoire during the campaign, all we could look forward to locally would be cuts to just about everything. However, a couple of items I have recently read have caused me to re-think the entire “slash and burn” budget being tossed about in Olympia.

Back in early December (apparently flying under the reading public’s radar) a post from Seattle Times political reporter Andrew Garber burst started a slow leak in the myth of the mandated balanced budget. In his post at the Time’s “Politics Northwest” Blog, Garber wrote:

“It's long been accepted gospel by many here: The state must balance its budget and can't borrow money to cover shortfalls like the one lawmakers now face...

...There's no legal barrier that prevents the state from going into deficit spending, according to legislative staff members and the governor's budget office…

…The closest thing Washington has to a balanced-budget requirement is a section in the state Budget and Accounting Act that says the governor must propose a balanced budget. It doesn't say the Legislature or governor must approve one.

Another provision in state law says the state cannot be in the red at the end of the two-year budget cycle. But the same law allows the Legislature to pay off any shortfall over time, Moore said. There's nothing that requires the state to pay it off immediately.”

Now typically this would not be the type of thing I would simply overlook. However, with our legislature almost a full month away from convening and the Obama transition taking up so much of my attention I simply slept right through this incredible revelation. Fortunately there are others in the state who remain more focused than I.

On Wednesday longtime political activist and journalist Sandeep Kaushik; now writing at PubliCola penned an illuminating piece entitled “Thinking Deficit.” In his post, Kaushik talks about Obama’s stimulus package and how he is managing to sell the idea of increased federal debt as a “necessary evil” to even some of the most conservative editorialists and economists. Then he turns his sights on our own state government and wonders if the austerity budget being pushed by the governor’s office won’t simply have the negative effect of neutralizing (if not reversing) some of the otherwise helpful portions of the ARRP.

…So far, so good. But there’s a problem, and it is a big one: At the state level, we are on the brink of adopting fiscal policies that will undercut, and may sink entirely, the pump-priming effort originating in the other Washington.

The governor, egged on by many of the very same editorialists that support the federal stimulus package, is poised to tackle the state’s looming $6 billion (and likely to rise) biennial projected budget deficit solely through brutal spending cuts that in the aggregate amount to a massive anti-stimulus. In other words, what Obama giveth in terms of jump-starting the economy, the state is poised to taketh away…

Citing Garber’s piece on the lack of a constitutional balanced budget mandate, Kaushik wonders why, if it is a reasonable policy for the federal government to borrow on projected returns in order to stimulate an economy on the verge of depression, it is not similarly good policy at the state level.

… An all-cuts budget that slashed $7 billion or even $8 billion in state spending (a new revenue forecast is due in March) is actually the height of fiscal folly. And it is not just counter-productive, it is unnecessary. Think of it this way: If it makes sense for the federal government to run large short-term deficits to stimulate the economy —and it does—why is the same not true for the state of Washington?

The answer is that it is, and there is nothing stopping Washington State from taking a stimulative approach to state budgeting; nothing, that is, except lack of political will. In early December, Andrew Garber of the Seattle Times wrote a story that pointed out that, contrary to the widespread perception in Olympia, there is no requirement that the state budget be balanced.

The governor and the legislature could choose to borrow over the next biennium, to the tune of perhaps $1 billion (there is a constitutional limit to the level of debt the state is allowed). In fact, the state routinely borrows for capital projects, and during the 2003 recession borrowed $450 million from the state’s portion of the tobacco settlement to help cover the resulting budget shortfall. A billion dollars now in spending could make a real difference in keeping our state economy from imploding, but could be repaid relatively easily once the economy recovers (given that state spending in the next biennium is likely to top $40 billion)…”

Now certainly this is not an approach to be taken lightly but where I am left to seriously doubt the wisdom of the “all cuts all the time” approach is at the point where I ask myself, is the fact that there is so much to be cut from education, healthcare, etc. an admission that there was overspending in those areas. If, as I believe, the answer to that question is no then how long will it take us to simply get back to today’s level of investment before we can continue to move forward. Even if we receive the amount of stimulus funding being talked about by Senator Patty Murray we will still be left with some huge holes to fill “somewhere down the road.”

What are the chances that our legislature will take a serious look at this option? According to Kaushik and Garber it doesn’t seem to be very promising. Again from the PubliCola piece:

…But the pleas from economic experts—and Obama’s arguments—appear to be falling on deaf ears in Olympia. There has been almost no public discussion of the potential economic benefit of state deficit spending in the upcoming biennium, apparently because the powers that be appear to have rejected the idea out hand. In Garber’s story, the governor’s budget director, Victor Moore, said flatly that deficit spending “is not good fiscal policy.” Then-state treasurer Mike Murphy also argued that deficit spending over the next biennium is a bad idea, stating that it would amount to “borrowing money to buy groceries and pay the light bill. That’s not good public policy.”

And then there is HB1655, "Requiring a balanced legislative budget"

… That's the title of House Bill 1655 introduced by House Republicans this morning [January 27]. The proposed law would require the state Legislature to have a balanced budget. Or, in other words, to not spend more money than the state takes in.

A lot of lawmakers thought the state already had such a law, but word leaked out last year that the balanced budget requirement is a myth…

… House Minority Leader Richard DeBolt, R-Chehalis, said Republicans introduced the bill because "we didn't want anybody getting any ideas."

Nope, we sure wouldn’t want anyone to get any ideas.

Peace,
Chad Shue