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Monday, January 10, 2011

The Texas model for fiscal responsibility and Gov, Perry are in deep shit:

Texas has been hailed by conservatives as the model of fiscal restraint. Gov. Rick Perry has spent the past few years lecturing the politicians in Washington how Texas was getting it right, that Texas was the model that the rest of America should follow. Just last week he said that Congress should enact a balanced budget amendment adding, "the hard work that Texas and states like ours have done to make prudent fiscal decisions will be washed away by Washington’s growing avalanche of excess”.

As recently as September he was predicting a relatively benign deficit for 2012/2013 of about $10 billion. In Texas, where the legislature hardly ever shows up to work, uses a two year budget cycle instead of the usual annual budget cycle. His opponent in the recent race for Governor, Mayor Bill White warned that the deficit would be more than double Perry's forecast. Perry naturally shrugged this off.

Turns out White was correct by a long way. Instead of a $10 billion deficit, it's expected to be about $27 billion, putting it the same category as those free spending, overtaxing liberal states like California.

There is already little left to cut in the budget except for education and health. Texas' record in those areas is already pitiful. The state is 4th in spending per capita for education and it also has the highest percentage of people without any medical insurance, public or private.

One aspect of Texas' problems has been largely ignored in the national rush to cut deficits and balance budgets. Revenue from taxes and elsewhere is expected to drop from $87 billion to $72.2 billion or about 18%. That is devastating. Texas is not alone in this, largely a result of the collapse in real estate values. The insanity that reigned on Wall Street is still burrowing deep into virtually every aspect of the economy and the hurt will continue for years.

As Paul Krugman wrote, “Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere.”

Texas has flwon under the radar in all the talk about state budgets. It should be front and foremost if only for Perry's arrogance and stupidity.

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