CBS Blames State Budget Woes on Economy, Ignores Growth of Government

It’s basic economics – when the economy contracts and the flow of money slows, so do tax receipts to local governments, barring maneuvering by the government to impose higher taxes. And that has been a focus of news stories, most notably the state budget woes that have recently hit California [1].

A June 22 “CBS Evening News” segment showed how, during this sluggish economy, the demand for state government social programs, like welfare, have increased across the county, even as cash-strapped states are in fiscal crisis. But the report didn’t point to one of  the biggest reasons for state deficits: irresponsible government growth.

“For the first time in 15 years, welfare numbers are up in at least 26 states,” CBS correspondent Cynthia Bowers said. “In Illinois, it’s 3 percent, but in South Carolina the number is 23 percent, Florida 14 percent and California 10.”

But the same economic conditions that place more people in need of assistance have also hit state coffers, Bowers explained.

“The demand for social services is increasing at a time when states just don’t have the money to meet the need,” Bowers said. “Around the country, state revenues are falling by more than 6 percent and that could add up to more than $180 billion in shortfalls over the next three years.”

This point was reiterated by Raymond Scheppach, head of the National Governors Association, who has been actively championing tax hikes [2] in these beleaguered states.

“We’ve been keeping statistics for over 30 years and this is by far the worst situation that we’ve even seen,” Scheppach said.

On a state-by-state basis, it has caused governments to call for a variety of actions, including tax hikes, cuts in some government services, cuts from the government’s payroll and even the possibility of having to sell state assets.

“Illinois’ governor is rallying the troops, trying to push through a 50-percent income tax hike to close his state’s $12-billion budget gap,” Bowers added. “In the meantime, the state is cutting back on subsidizing funerals for the poor. In California, where the deficit is $24 billion, tens of thousands of jobs are being cut. New Hampshire, $30 million in the hole, wants to sell 27 state parks. And in Hawaii, state workers are being forced to take three days a month off without pay.”

But what Bowers didn’t explain is the $12-billion gap in Illinois has been caused by the rapid expansion of the size of state government. Illinois state government general funds expenditures increased eight of the nine years [3] between 1999 and 2007, and in six of those nine years expenditures grew by 5 percent or more.

One of the other states in Bowers’ report, California, has been a well-documented fiscal train wreck [4], for which the media have blamed voters who rejected an increase in taxes.