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YOUNG: One recession, two spending stories
States have controlled their spending while Washington hasn’t
Question of the Day
Nothing more clearly demonstrates Washington’s spending problem than the states’ budget surpluses. Despite facing the same economic downturn, the two have weathered it far differently.
The reason is disarmingly simple: States have controlled their spending while Washington has not. Almost five years after the recession ended, Washington continues like it never ceased, while states have matched their budgets to their revenues.
On Jan. 27, The Wall Street Journal reported on the National Association of State Budget Officers’ latest report on general-fund spending (the largest portion of state outlays) and determined: “Growing revenue and mounting surpluses have states putting the recession behind them.”
While true, the reason “growing revenue” is now producing “mounting surpluses” is because states strictly controlled their spending.
The contrast with Washington’s performance could not be starker.
In 2008, the year before the recession fully hit, state general fund spending grew 4.9 percent. When the recession hit in 2009, spending fell 3.8 percent and an additional 5.7 percent in 2010.
Since then, it has grown 3.8 percent in 2011, 3.4 percent in 2012, and 4.3 percent in 2013 — with a further 3.8 percent increase projected this year.
The budget officers’ report shows, as in all recessions, state coffers matched the downturn. Revenue did not surpass 2008 levels until last year, and only increased 5.7 percent then, following just a 0.8 percent increase in 2012.
Yet despite less than robust growth, “states have enacted net tax cuts in two of the last three fiscal years and revenue collections have outpaced projections.”
Washington’s result were almost the exactly opposite.
In 2008, federal spending jumped 9.3 percent. In 2009, when the economy contracted, it spiked 17.9 percent. In 2010, it dropped a scant 1.7 percent.
It then increased 4.2 percent in 2011, before falling slightly again — 1.8 percent in 2012 and 2.4 percent in 2013. The Congressional Budget Office projects it will grow 4.3 percent this year.
As in the states, federal revenue fell with the faltering economy. In 2008, it dropped 1.7 percent and 16.6 percent in 2009. Then it began to grow — 2.7 percent in 2010, 6.5 percent in 2011, and 6.3 percent in 2012.
While states enacted tax cuts, Washington implemented a large tax hike last year — spiking revenue by 13.3 percent. However, even with the rebound and legislated increase, revenue has yet to overtake federal outlays.
The difference between state and federal spending is easily summed up: State spending did not surpass 2008’s pre-recession level until 2013; federal spending has never fallen below its 2008 level — and federal revenue has yet to even match 2008’s spending level.
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By Mark Davis
The nation founders, the Lone Star State thrives
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