Krugman Gets It Right on Texas Budget Crisis
If you haven’t seen it, New York Times columnist Paul Krugman has a kick-ass column today, “The Texas Omen,” taking down the myth that Texas is doing just fine and dandy under Republican economic ideology. It’s taken a while for the national media to get hip to the massive budgetary crisis here – though the Observer has been hollering from the hills on this topic for months – but we’re glad to see Krugman do it justice. (Hat-tip also to Forrest for the Trees’ friend Joe Weisenthal at Business Insider for taking our advice and writing this post last week.) Here’s Krugman:
Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere.
How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New York’s, about as bad as California’s, but not quite up to New Jersey levels.
The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who haven’t been keeping up with the news). It was the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his “tough conservative decisions.”
Now, Gov. Perry and others are flogging a snark-tastic piece penned by National Review Online writer Kevin Williamson. In attempting to debunk Krugman and “the usual liberal snots,” Williamson pretends to know a lot about Texas but makes some major factual blunders. Here’s a big one:
Texas doesn’t do shortfalls. Texas starts from scratch: Every year is basically Year Zero when it comes to the state budget — there is no assumption that next year’s funding will match or exceed this year’s, and the state’s constitution explicitly forbids any legislature to tie the hands of a subsequent legislature, financially or otherwise.
That’s just wrong and Perry, who’s retweeting this piece, knows it. It is not true that Texas starts from zero every year. Like most states, Texas starts with last year’s budget and works from there. In fact, for this coming budget cycle, Gov. Perry asked state agencies to start from last year’s appropriations and cut 10 percent. The only time in recent memory that the Texas governor has had a “Year-Zero” approach was in 2003. That is the exception, not the rule. It is also totally unexceptional that Texas’ constitution requires a balanced budget. Every state, except Vermont, requires that its budget be balanced.
But where Williamson totally falls flat on his face is where he claims that Texas’ budget shortfall is far less than $25 billion. He writes:
And it may not be all that hard: Pace Krugman et al., Texas’s potential shortfall probably is not $25 billion. The inside guys talk about $11 billion to $15 billion, spread out over a two-year budget. (Texas writes one budget every two years, and has a legislature that meets every two years.) Even the liberal bedwetters over at the Center for Budget and Policy Priorities expect the budget hole to amount to about 10 percent of the whole enchilada, as compared to more than 50 percent in basketcase California.
Wrong, wrong and really wrong.
First, wrong because we don’t know exactly how much our budget shortfall for the coming biennium will be; we’ll find out on Monday when the Texas Comptroller releases the revenue estimates. Nor do we have any idea who these “inside guys” are or where their out-of-the-blue numbers come from. But that’s not the real problem with Williamson’s Pollyannaish predicitons. Citing the “liberal bedwetters” at CBPP, he claims that Texas’ budget shortfall is only “about 10 percent of the whole enchilada.” But the chart that Williamson is relying on is for fiscal year 2010. not the 2011-2012 budget cycle that Krugman’s writing about.
That means Williamson is a day late and billions of dollars short in his analysis—the one Gov. Perry is circulating around the state to “rebut” Krugman. In reality, the budget shortfall is likely to be closer to 25 percent, one-quarter, of Texas’ discretionary budget. Last biennium, the total general revenue budget was $87 billion. Adjusting for increases in the cost of services, mostly medical care, general revenue this time around – that is, assuming the Legislature wants to maintain current levels of service, not exactly a given in this political climate – will probably be around $100 billion, according to Dick Lavine with “liberal-bedwetter” group CPPP. If the shortfall is $25 billion, that means the Legislature will have to eviscerate one-quarter of the discretionary spending, the vast majority of which goes to public schools, higher education and health and human services.
Williamson may not care about the consequences of slicing deep into the bone of the state budget – actually, he seems to salivate at the opportunity – but at least be honest with your numbers. Perry and Williamson are entitled to not care about the suffering their no-taxes-at-any-cost orthodoxy will cause, but they are not entitled to their own facts.