Monday, December 6, 2010

State facing structural deficit of $6.2 billion. Time to reduce the size and scope of government.

The state is facing a projected budget deficit of $6.2 billion over the next two years. That's bad enough but an added problem is it's a structural deficit, meaning that even with strong economic growth, we're spending more than we're due to take in via tax receipts.

As Tom Stinson, the state's economist, said in a recent interview with Capitol Report, we're coming out of the worst recession since World War II, plus we're facing an ongoing structural deficit in our state finances.

This was the worst recession since World War II. We’re coming out of it, and everybody would like us to come out of it as quickly as possible, and we are coming out of it, but it’s going to take some time.

The good news, from the Minnesota point of view, is that we seem to be coming out of it faster than the national economy. But, to put it in perspective before we pat ourselves on the back too much, you’ve got to remember that California is part of the U.S. economy and the situation there is much worse than it is in Minnesota, so we better be doing better than the U.S. average....

We have a $6.2 billion structural shortfall. The revenue forecast for 2012-2013 went down by about $900 million [in November] because of some economic changes….

But I think the important thing to know is even if it went up twice - if we gained back that $900 million and then the economy improved enough so that we actually added another $900 million - we’d still have $4.4 billion worth of problem to deal with.

That means on an ongoing basis we're spending more than we have been taking in. The funding shifts and delay of payments used in the past to balance the budget aren't available. That means tough decisions about cutting spending and tax increases will have to be faced now.

I believe government is too big and needs to be cut back rather reverting to raising taxes. That will be very painful for those who have come to expect government to do more and more but in the long run expanding government isn't in the best interest of society or the family. Growing government has meant government taking over more and more family responsibilities which not only costs lots of money but also means people are becoming more dependent on the government for those services.

This dependency on the government hasn't improved the condition of the family, rather it's contributed to its decline. We can see government's ineffectualness by looking to results of anti-poverty programs. Despite spending trillions and trillions of dollars since the 1960s, poverty rates haven't decreased. Instead the health and well-being of the American family has declined dramatically. I believe the government has played a significant, though not the exclusive, role in that decline.

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