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« Trivia Tidbit of the Day: Part 917 -- Low Taxes Attract People, Jobs. | WILLisms.com | Is Hillary Clinton Talking About The Middle East, Or The United States? »

Trivia Tidbit of the Day: Part 918 -- Texas' Budget.

The Texas Model-

Texas Comptroller Susan Combs estimated today that the state's general revenue would be about 72 billion dollars over the next two years. Liberals-- ironically-- are practically giddy right now, because they believe Texas needs to spend a hundred billion over the next two years, and they think the gap proves that Texas is a failure and all of that. Paul Krugman, in particular, has been rubbing his moustache, Snidely Whiplash-style, over the notion that Texas is proving that conservative fiscal policy is a failure. The ultra-liberal CCCP or CPPP or whatever they are called says we need $99 billion over the next two years, therefore there's a 26 point something billion dollar shortfall.

Hold your horses, folks.

As Kevin D. Williamson notes, Texas is not at all broke, and the "shortfall" is just part of what keeps Texas from having actual deficits and debt:

Texas doesn’t do shortfalls. Texas starts from scratch: Every year is basically Year Zero when it comes to the state budget — there is no assumption that next year’s funding will match or exceed this year’s, and the state’s constitution explicitly forbids any legislature to tie the hands of a subsequent legislature, financially or otherwise. When necessary, Texas implements zero-baseline budgets, in order to keep the state living within its means, even if Paul Krugman thinks it beastly.

As I posited earlier today on Twitter:

A good shortfall every now & again is cleansing. Government needs significant downsizing every few years, especially after years of economic boom.


The brilliance of Texas: we actually stop growing our government when revenues stall. And CPPP can't dictate perpetually higher spending.

Texas will have "shortfalls" every now and then, based on official revenue estimates and liberal spending wish list estimates, but we're never going to have actual deficits. Eight years ago, Texas faced a 10+ billion dollar "shortfall," but ended up with a huge surplus and a booming economy thereafter in reality.

Here are a few figures to explain what's going on here:


If you look at just government spending without recognizing that Texas has added millions of people and otherwise boomed over the past decade, it has exploded. If you adjust for population growth plus inflation, it's still grown, but at a much more reasonable pace. This graphic above counts state revenues plus federal revenues. Yes, Texas receives gobs of money from the federal government, but we're still-- ultimately-- a donor state, especially in highway funding. Many of these federal dollars are simply paying for federal mandates and state-administered federal programs, like Medicaid.

Texas government has grown over the years, albeit at a reasonable pace, even when adjusted for economic and human growth in our state.

Shouldn't the goal be, though, to hold government's growth to at or below population plus inflation growth? It's an easy thing to talk about, hypothetically, but even conservative legislatures rarely do it.

In Texas, though, a "shortfall" combined with our Constitutional requirement to balance the budget, means that we can actually make cuts. Real cuts. Because we have to. And that's a good thing. That's how it's designed to work.

So let's look at that 72 billion in context. It's somewhere between what we spent in the 2006-2007 biennium and the 2008-2009 biennium:


It should also be noted that Texas still has a Rainy Day Fund of around $9 billion, but as Williamson notes, we can probably leave it untouched as we trim government:

Texas’s low-B.S. approach has had some salubrious effects, as I’ve documented here and here. It also left Texas with surpluses that allowed the state to put about $10 billion in its rainy-day fund, which could come in handy now that the economy seems to be clouding up a little. Could, but probably won’t: Republicans plan to introduce a budget that comes in within current revenue without touching the rainy-day fund. Get your head around that: There’s a multibillion-dollar pot of cash sitting there in front of politicians who must be just slavering inside at the thought of it, and they aren’t going to touch it — even though they have a pretty good excuse. Imagine a Congress that could do that.

In 141 days, Texas will have made cuts, and I am sure there will be innumerable editorials written about how this is the apocalypse and Texas will fall into the Gulf of Mexico due to these cuts. The children will suffer and the poor will all die of starvation out in the cold. The budget is already to the bone, they will say. Businesses will leave our state and go to California and Michigan. All of that.

But what will happen in reality is that the budget will be trimmed, Texas will have a balanced budget, and the trend line will show that government is still far larger than it was a decade ago, and maybe even a significantly larger than it was a decade ago after adjusting for inflation and population growth.

And the sky will still be in place, unfallen. Texas won't have a deficit. Texas won't borrow its way out of this. Texas will continue attracting businesses and jobs and people faster than any other state. And we'll all live happily ever after.

So take a deep breath. Reach zen, even, if that's your thing. Yes, there is work to be done. Yes, liberals will try to exploit the "deficit" for political gain. You can tune them out without guilt, knowing what you're seeing is not a bug, it's a feature, of the fiscally-responsible, highly successful Texas budget process.

UPDATE: Talmadge Heflin at the Texas Public Policy Foundation says it is simply "false" to say there's a 27 billion dollar shortfall.

ANOTHER UPDATE: More from TPPF on how absurd this "deficit" hysteria really is.


Previous Trivia Tidbit: Low Tax States More Successful, Even In Recession.

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Posted by Will Franklin · 10 January 2011 01:50 PM