JOHN HOOD: A Fiscal Reckoning, Without Protests
Now that the various transition ceremonies are over and the cheering, shivering crowds have dispersed, I'd like to ask a potentially impolite question at this point: Where are the protesters?
Here in North Carolina, Gov. Beverly Perdue has announced significant reductions in planned state spending for 2008-09 -- more than $200 million out of Health and Human Services, $156 million out of state funding for public schools, $150 million (6 percent) out of state appropriations to the University of North Carolina system, and as much as a 7 percent reduction in a number of other agencies across state government.
Because the projected state budget gap in 2009-10 is at least as large, many of these budget-savings recommendations are going to remain in place for at least two fiscal years. My guess is that some will persist longer than that.
In the private sector, of course, recessions typically bring far larger adjustments. Some businesses are freezing pay and hiring, laying off workers, even going kaput in some cases. Many North Carolina families find themselves needing to cut back far more than 7 percent of their household budgets to pay the rent and meet other high-priority needs.
But during past budget debates in Raleigh, we've been told that cuts of 4 percent to 7 percent in the state budget would be draconian, that they would be ruinous to the state and result in a massive public outcry and political backlash. Now that the governor has ordered them, however, most people appear to recognize their necessity and expect critical state functions to continue to be performed despite the tighter rein on spending.
I'm not minimizing the costs associated with aligning North Carolina's state budget to fiscal realities. Some people are losing incomes. Others, including vendors and probably some state employees, are losing their jobs altogether. Adjustments will come, but they'll be painful and in some cases lengthy.
Still, reality can't be escaped. Government at all levels -- federal, state, city, and county -- has grown larger and more cumbersome than taxpayers can afford, particularly given that taxpayers aren't getting enough of a bang for each additional buck invested, in areas ranging from education to road paving.
In Washington, a misbegotten experiment with business bailouts and heavy-handed stimulus is driving the federal deficit far north of $1 trillion. The feds will borrow the money in the short run, and likely raise taxes in the long run. The economy will stagger back to growth eventually, but excessive marginal tax rates and other burdens will slow its pace.
In many North Carolina cities and counties, the boom years of the past couple of decades led short-sighted politicians to push localities into services and businesses far from their core missions: entertainment complexes, sports arenas, convention centers, land development, telecom, and heavily subsidized transit routes.
Now, faced with the prospect of unloading some of those poorly performing assets into a weak economy, some will press forward with higher property and sales taxes to cover their losses, all the while blaming national and international actors for their plight and hoping for a federal bailout to kick the can down the road a bit more.
And in Raleigh, the past two decades have brought a 41 percent real increase in the size and cost of state government -- mostly during the 1990s, as Jim Hunt and the General Assembly created massive new programs and fiscal obligations, but maintained and expanded a bit more under Mike Easley.
Some of us warned that there would have to be a fiscal reckoning, that politicians' desire to spend and taxpayers' willingness to pay were out of alignment. Now, at least at the state and local levels where deficit spending for government operations is disallowed, the reckoning has arrived.
I'm not complaining about the lack of protesters, mind you. I'm just surprised, having been assured for years that the kind of budget savings now being proposed -- the kind proposed by the John Locke Foundation for years -- were unthinkable.
John Hood is president of the John Locke Foundation and publisher of CarolinaJournal. com.?
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