September 27, 2004
A structural deficit?

Today's Columbus Dispatch reports that Ohio is facing a $5 billion deficit. The reporter writes:

It’s called a structural deficit — the amount of revenue lacking just to fund existing program costs and obligations for another two years.

Hogwash. There is nothing "structural" about Ohio's fiscal mess. Put simply, this state has suffered through a string of governors and legislatures that spend money like drunken sailors on shore leave.

According to the census bureau, Ohio's total general expenditures increased from $24 billion to over $42 billion from 1992 to 2002. That's a rate of growth of 5.8% per year.

Meanwhile personal income grew at an annual rate of 4.19% and inflation plus population growth grew at just 2.82% (population growth was only 0.3% per year).

Had the state budget increased at only the rate of personal income growth--thus assuring that the state would spend a constant share of people's incomes--the budget today would be over $6 billion less. We'd have a surplus today not a deficit.

Had the state budget increased at only the rate of growth of population and inflation--thus assuring the state would spend the same real amount per person--the budget today would be over $11 billion less. We'd be talking about radical tax cuts.

Posted by Robert Lawson at 09:10 AM  ·  TrackBack (31)

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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