Posts Tagged: deficits


The House of Representatives passed a bill yesterday that re-establishes pay-go rules, reports the Associated Press. For those uninitiated with lawmaker’s periodic zest for pay-go legislation, it means that every tax cut or spending increase must be counter-balanced by an equal spending cut or tax increase. In other words, the idea is to promote a balanced federal budget. But the federal deficit is now $1.8 trillion and even if this pay-go bill becomes law the debt should only get larger in the next few years, according to the Congressional Budget Office. Plus entitlement programs (Social Security, Medicaid, Medicare) and a re-authorization of the George W. Bush tax cuts for the rich are exempt from pay-go.

Pay-go isn’t necessarily ineffectual legislation but it underscores how much easier the federal government has it than state governments. Members of Congress have the luxury of mulling over whether they want to do something about the gap between how much revenue they get and how much they spend. State governments meanwhile must pass a balanced budget each year even during a great recession and extreme revenue shortfalls. California is ripped (and justifiably) for a $27 billion budget deficit. But that’s 1.5 percent of how much the federal debt is.-MB


Joe Matthews made a good point in the Washington Post Outlook section this weekend about California’s projected $42 billion budget deficit over the next two years:

California has one-eighth of the country’s population and represents one-seventh of the economy. But our debt is less than one-hundredth of the federal debt. And we’ve been far more responsible in managing our budget. As a columnist for Bloomberg News recently noted, if California had the same deficit relative to its GDP as the federal government, we would have a shortfall of about $230 billion. The state’s current (and massive) deficit is $24 billion.

Now obviously there are limits to comparing California’s fiscal woes with the federal government: California can’t run up a $700 billion Pentagon budget and invade two Middle Eastern countries. But there is inconsistency in the Obama administration not bailing out California (or as Matthews more modestly proposes, guaranteeing the state’s bonds). The state has been no more irresponsible than bailed-out banks, auto companies or the federal government during the George W. Bush administration. And California’s fiscal health as is important as, for example, Bank of America’s, based on the state’s huge economy as well as state workers and aid recipients.-MB