Thursday, July 14, 2005

It's instructive to remember how we got here, and what exactly the governors mean when they refer to the 'fiscal crisis' of the past few years. Less than five years ago, states had the largest surpluses on record. But by fiscal 2002, the weak U.S. economy had led to slower tax growth in states, and historic surpluses quickly turned into monumental deficits. Many of these deficits were the largest in state history.

What caused the deficits? Many governors are loathe to admit that the shortfalls would have been much smaller if politicians in state capitals had simply restrained their big-spending tendencies. Instead, they committed their states to an ever-expanding array of spending programs during the 1990s. True, some governors also cut taxes. But, on average, for every three new tax dollars received by the states during the 1990s, only one dollar went to tax cuts. The remaining two went to new spending.

Take Medicaid, the state-run program that pays medical bills for the poor. It's the fastest-growing government program in most states, but not because more people are necessarily in need of it. State governments were expanding the number of people who could enroll in the program. According to the Congressional Budget Office, nonelderly Medicaid enrollment stayed relatively constant throughout the 1980s. But from 1990 to 2002, it more than doubled. State policymakers were practically guaranteeing their states would crash into a sea of red ink once the U.S. economy stalled. Historic increases in the budgets for all sorts of other programs were also a common occurrence during the economic boom of the 1990s.

posted by Shaun Kenney | 7/14/2005 10:04:00 PM | 0 comments

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