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Tax cuts blamed when LA really has spending problem

It’s official: the arbiter of liberalism in the American press, The New York Times, has weighed in on Louisiana’s budget deficits present and forecast, and as usual misses the point in its eagerness to slant the story in favor of big government.

The party line that liberals want to spread about the state’s deficit is that tax reduction, principally the individual income tax cut, is bad even in flush economic times, perhaps explained by irrationality. Appropriately to advance this notion, they trot out one of the most liberal state legislators, head of the Democrat Caucus state Sen. Eric LaFleur, who practices a little psychology in declaring “euphoria” captured the minds of so many greenhorn legislators who “hadn’t been around long enough” to know apparently that tax cuts have consequences by his reckoning. (For his part, LaFleur proved to have a gelatinous spine by voting for the cut, although at least he has done the proper liberal thing by declaring he had “misgivings” about it.)

Of course, this view entirely ignores the statistics and recent history of the state’s fiscal picture. Numbers officially got declared on Friday so they have yet to be posted, but the forecast has the fiscal year 2009-10 revenues numbers for the general fund outside of statutorily-dedicated funds to come in around $8.3 billion (as opposed to the previous that came in a billion bucks higher). Excluding in all cases federal recovery dollars, this can be compared to the numbers of (still-evolving) about $9.65 billion for FY 2008-09 (note that if the 2/10/08 forecast had held a surplus would have been declared instead of the deficit that used the 5/9/2008 forecast), about $9.5 billion in FY 2007-08, $8.2 billion in FY 2006-07, and $7.3 billion in FY 2005-06.

In other words, from FY 2005 to FY 2009 (predicted), state revenues have increased over 13 percent, at a decent annual clip of nearly 3 percent. The increase for 2005-08, pumped up by federal disaster recovery dollars, was 32 percent. By contrast, consumer inflation over the 2005-08 period was only 9 percent (and may not even be that high through 2009 given recently falling prices). Add to this that the state’s population has declined slightly (about 85,000) throughout this period. This shows that state revenues (and therefore, except for an eventual $500 million or so of tax cuts now or about to kick in, spending) rose much faster than existing needs and demands on government. Only unless one thinks (as no doubt The Times, LaFleur, and liberals in general) that government should do more (implying that people should be less responsible for their own affairs), could such an increase in spending from these revenues be justifiable.

Once again, the data are very clear: Louisiana has not had a revenue problem, which has grown at a faster rate than inflation with a stagnant population, but rather has had a spending problem. There is no justification why government must keep doing more just because more money rolls in. With all of the excess revenue coming in, a tax cut was not only appropriate because it allows people to keep more of their money and will set the stage for improved future economic growth, but it was the moral thing to do. Yet the majority of the attention of the article was about the revenue side of the equation, not on spending.

Deficits loom now because spending was not kept under control. If it had been, huge surpluses could have been declared for a couple of years and far-sighted legislators could have in the past (even one this year) voted to increase the maximum size of the Budget Stabilization Fund where this money could have been saved to cushion future deficits. Even better, with spending controlled, the deficits may not have appeared at all, and the excess money could have gone to unfunded accrued liabilities, coastal restoration, improved infrastructure, etc., if not even more tax cuts.

Often, when people advocate reductions in government spending, their ideological opponents ask where cuts should take place. But in this situation of rapid revenue growth above the baseline price and population levels, the more appropriate prior question is first to justify the increased spending beyond what was being done previously, and then what cannot be justified is the candidate for cutting. Trying to deflect attention from this imperative by fixating on revenue-raising measures disingenuously disserves the public.

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