Diary

The Pangloss Budget

I recall not liking being told to read “Candide” before heading off to college. But over the years, that little exercise has continued to pay dividends.

That’s particularly so where matters like state budgets are concerned. They are political documents and regardless of the amount of “core services” treacle drizzled on top of them, these unwieldy beasts remain statements of will and faction.

But there’s another dimension to them that is just as important: Panglossian optimism.

Take the just-approved state budget. Here’s how the governor views the budget, the holes in which were plugged with (borrowed) federal dollars:

“If anybody wonders whether the stimulus package mattered, 7,100 people are going to have jobs with the state government, continuing to serve others and not be out on the streets in the midst of the worst job market that this nation has seen in the last quarter-century,” said Kaine.

Praise be. The additional debt that will have to be repaid, by someone over a period of years, is of no consequence compared to the government workers who have been spared today. This is an even greater blessing because they “serve others.” The rest of you who serve others outside the garden of government delights…well, your children will be getting the bill. Have a nice day.

The Governor’s reaction pales to the ecstatic outbursts of others, however:

“If you don’t like the stimulus package, vote no,” said Del. Kenneth R. Plum, D-Fairfax, chairman of the House Democratic Caucus. “The stimulus package is our salvation,” he added, referring to the $3.7 billion hole in the budget attributed to the deepening recession.

Salvation comes in many forms, it seems. I never expected it to appear in the guise of an IOU.

But Mr. Plum does have a point — those who disliked the “stimulus” and the burden will inflicts on the future could have voted “no.” Most chose not to.

That’s not to say that the euphoria was unanimous. As Sen. Obenshain, who was among the very few in the Senate who voted “no” notes:

What that means is that we have plugged our budget hole with one-time money without making any adjustments in our long-term spending patterns. Unfortunately we are spending these funds on recurring obligations (like Medicaid) of the Commonwealth rather than one-time expenditures.

But even more disturbing is the rose-colored future:

The second and more troubling problem is that the revenue projections upon which this budget is built require a total disregard of current national economic conditions. In order for the budget to balance, the economy must somehow turn on the proverbial dime and state revenues must begin to grow at an annual rate of 4.5% beginning on July 1 – that would be 120 days from now. Optimism is one thing, but sadly, this is in the realm of fantasy.

It’s a sentiment echoed by Lt. Gov. Bolling:

…I am concerned that this budget is balanced by the inclusion of an overly optimistic revenue projection of 4.5% in the second year of the biennium which begins on July 1, 2009. While I hope that robust economic growth will return this year, the fact is that most economic indicators project continuing economic decline in the short term. If we fail to meet these overly optimistic revenue projections we could face significant budget shortfalls again next year.

By relying on one-time federal funds and overly optimistic revenue projections to balance the budget, we are not addressing the fundamental structural problem in the budget. Simply put, we are spending more money than we are taking in and we cannot continue to do that. Unless we see significant economic growth over the next 18 months, we will once again face massive budget shortfalls when the federal stimulus dollars expire, other one-time budget balancing actions are repealed and revenue projections are adjusted to reflect economic reality.

So there it is. Between now and July 1st, the economy must rise from the doldrums in an unprecedented way in order to meet the Panglossian expectations upon which this budget is built. If they fail to arrive, then we’ll be back where we started…looking to our increasingly impoverished Uncle to borrow even more money to bail us out.

Truly this is the best of all possible worlds.