We can take some solace in knowing that we’re not the only ones in this boat: New York is looking at a $47 billion deficit over the next 4 years. California is at $11-billion plus for the current year, with even Conan over there calling for a special session of the legislature to raise some taxes. The budget gaps are largely a function of decreased revenues, as the economy tanks. The national unemployment rate is way up, and RI’s unemployment rate is dismal — though we’d be crazy to expect unemployment to fall or level off, just as we’re easing 2,500 state employees out of the workforce.*
When the state slashes spending — especially in the form of salaries of middle-income workers — it also tends to reduce future revenues, as there are fewer sales and less income to tax. That’s an important point, and it isn’t paid enough heed in a budget-writing process that doesn’t do dynamic calculus: We’re chasing a finish line that moves a little further away from us each time we make cuts. That’s not to say every last cut is a bad idea, but we shouldn’t be shocked when the gap doesn’t close.
As a small state, we have very limited agency over regional/national/global economic conditions — we’re really operating on the margins. It’s a further limitation that RI and most states are required to balance their budgets, and so can’t spend more than they have in revenues. (The current projected gap of $350 million or so amounts to around 5% of the state’s over-all budget.)
The feds should be engaging in deep deficit spending — within our borders, and not on armaments — ideally with some amount of money handed over to the states as block grants. It’s really an obvious and intuitive point, and it astonishes me that McCain and the Repubs ran against it — and almost got away with it: People are individually scared to spend their money right now, but if we can make a collective agreement to spend together, through the government, we can right the ship.
A golden moment for the Dems to prove their mettle, after they’ve overseen a failed stimulus package and a failed bailout.
*An aside that’s not entirely germane to what’s right in front of us, but which I’d like to see more info about: When we look at unemployment rates, we need to remember that RI, thankfully, has a really low incarceration rate, by US standards — though it looks like we’re catching up. It seems to me that if we were normal in this regard, we’d have several thousand more people in prison, and several thousand fewer people in the labor pool, and our unemployment rate could be as much as a point lower.
Though under any measurement, we’re certainly worse than most of the rest of the country right now. WIND FARM, PLEASE!!!