Monday, July 31, 2017

Lean Times

No less a news outlet than the Washington Times is reporting today that House Speaker Austin Knudsen, whose economic ideology fits that of the Times to a tee, is defending almost $100 million in looming budget cuts because they are “doing what they are supposed to: Reducing the size of state government in lean economic times.”

Well, that’s not really quite right. What those cuts are supposed to do is balance the state’s budget at a time when we are collecting less tax revenue than we expected.  The Montana constitution says that the budget must be balanced, and as long as the Republican majority obstinately refuses to increase any tax at all, the only way to do that during “lean economic times” is to cut spending.*

Of course for the Republicans, if a collateral effect of balancing the budget is to reduce the size of state government, they’re all in. What the hell: in their world, reducing the size of state government is always a good idea, even if it means reducing spending and the provision of vital government services at the moment they’re most needed, i.e. during lean economic times. It’s a notion that flies in the face of the common sense observation that government spending ought to be counter-cyclical; it should grow faster that the economy during downturns, and slower than the economy during booms.

It’s provisions of Senate Bill 261 from the 2017 session that are creating the mess we are currently contending with. In the long run, the bill establishes a reserve fund that will stabilize the budget by allowing a modest decoupling of spending and taxes; when that happens, it will be a good thing. We won’t be forced to reduce  the size of government during lean economic times.

But the way SB 261’s written, spending in the immediate future - over the next biennium  - is very sensitive to the amount of revenue we collected last fiscal year.  I’ll spare you the grizzly details; but suffice it to say that the cuts that are triggered will severely impact agencies serving the elderly and the disabled, the university system, and the schools. That may gratify the Speaker by reducing the size of state government, but it’s really not what we want to be doing.

*During the 2017 session there were bills to increase taxes on tobacco products, alcohol, the profits that corporations doing business in Montana hide in tax havens and very high individual incomes. Needless to say, not one of those bills passed.

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