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12.3.06

Blanco reelection desire may explain reckless budget

As is her wont, Gov. Kathleen Blanco defended her latest unwise increase in budgetary spending by assuming Louisiana’s citizens need to be told how to think and/or are as confused about it all as she is.

As part of her budget which threatens to undo the needed fiscal restraint imposed upon the state by the hurricane disasters of last year, Blanco wants to make new commitments of about $135 million annually for raises in educators’ salaries, as well as increases in other areas. She says she heard of “a lot of excuses about why we should proceed with caution.”

Let me see if I can replicate those “excuses”: six months ago a third of the state’s economic output was severely damaged by the hurricanes that will take years to recover, the state probably lost a tenth of its workforce permanently, it will owe the federal government hundreds of million of dollars in reconstruction bills – and ongoing problems such as coastal restoration and unfunded accrued liabilities in state pension funds continue to exist, right? (And others claim this budget produces shortfalls in other, needed areas.) Even a best-case scenario argues for a standstill budget from late 2005 with no new spending commitments unless with commensurate cuts elsewhere.

Blanco and the state did some hard work (if not optimally so) in getting Louisiana closer to living within its means with cuts late last year, but suddenly now she has decided that resources that had gone to eliminated spending either now can be returned to those purposes or for new ones, like the salary increases. Prudence dictates that no additional spending occurs until the state solidly is back on its feet.

Yet Blanco dismisses this prudent strategy and indicated she seems quite confused, as also has been her trademark, about what she should do in office. “If I am doing what one group said should be done last year, and I am doing it this year, they say ‘Oh my God, we shouldn’t be doing that.’ I am just tired of the confusing messages, signals that they send out,” Blanco has said.

Let me try to put this into terms that render even Blanco’s confusion abated. Assuming she’s talking about the raise, which mainly Republican legislators argued last year should have been granted if commensurate cuts in spending had occurred elsewhere without raising taxes, let’s remember the situation then: Louisiana had a bloated budget and Blanco wanted to hike taxes to take even more money out of the public in order to spend more (on the raises). The disasters then reduced the state’s revenue-generating capacity by at least 5 percent for the foreseeable future. Cuts were made to compensate. But now she wants to hike spending again, saying we don’t need a tax increase to do it for educators’ pay – which is what her opponents last year desired.

Ordinarily, this would have worked because the cuts of last year would represent a reallocation in this year. But these are not ordinary times because the cuts were made not for reallocation purposes, but to offset a permanent, for the time being, loss in revenues. However, Blanco doesn’t see it that way because of a raft of federal funds temporarily coming into the state and additional revenues from unstable revenues sources temporarily producing extra revenues.

The problem is, she is proposing permanent increases in spending, and no amount of chanting “you have to have a little confidence in the economy” is going to assure these temporary sources of funds will translate into long-term economic growth that allows an overnight recovery from the disasters. A fiscally prudent policy-making approach would assume the opposite and, perhaps a few years from now, the state can enjoy any excess fruits of recovery.

Still, Blanco doesn’t seem to get that, and it leads to the question why something so simple appears to elude it her. It may not: the new spending could well be a reelection tactic. In the past, the most reliable way to win elections in this state has been to promise people stuff, regardless of whether the state could afford it. Under heavy pressure with low popularity as 2007 approaches, Blanco might well be drawing on her liberal/populist roots to present this unaffordable pledge as more trinkets to throw out to the crowds to make her more popular. (And the fact she is running radio ads trying to do the impossible by insisting her nearly 10 percent overall budget increase isn’t a return to “big government” using her campaign funds lends credence to this scenario.)

If so, it’s reckless and inexcusable. If not, then she apparently fails to have the acumen to run the state at this time. If she really feels strongly about handing out raises, why not make spending more efficient in areas such as long-term health care and use savings from there? Absent that, either way, her course of action endangers the state’s economic health.

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