Spitzer: Governors Face a "Catastrophe"
Some guy named Eliot Spitzer has a Slate column arguing that it's a terrible time to be a governor: The numbers from the states ...
Some guy named Eliot Spitzer has a Slate column arguing that it's a terrible time to be a governor:The numbers from the states are downright horrifying--and getting worse. The best estimate is that states, nearly all of which are constitutionally obligated to balance their budgets, collectively face deficits of about $350 billion over the next 30 months. That is about 20 percent of total state spending.
Unless the recovery outpaces all predictions, state revenues will continue to be paltry. Fourth quarter '08 numbers showed an inflation-adjusted decline of 5.6 percent from fourth quarter '07. The three major revenue streams for states--personal income tax, corporate income tax, and sales tax--all had declines, and the trend line suggests worse declines to come.
Unlike manufacturers, which can alter marginal costs, states cannot easily cut costs when revenues drop. Indeed, many think that state spending is and should be countercyclical since, in many respects, it becomes more important when the economy dips. So how on earth are governors going to manage this catastrophe?
(Hat tip: Political Wire)
The cynics out there might attribute Spitzer's sentiment to sour grapes (Who wants to be governor anyway? Harrumph!). The case he lays out, however, is quite compelling -- and depressing for anyone who works in state government. So, if it's a very bad time to be a governor right now, will it be a bad time for governors to run for reelection in 2010?
My thinking always has been that a well-timed recession is a great asset for a governor. So long as the downturn abates by the election, governors tend to be better off for having gone through a crisis.
That certainly was the case for the governors who were elected in 2002. They took office when the economy was in somewhat rough shape and when state budgets were deep in the red. As a result, they won credit for fixing the problem, even if they didn't really do anything other than wait for the national economy to recover.
More and more, though, this recession doesn't appear to be well-timed for governors. Or, perhaps more precisely, this recession appears as though it will be big enough and last long enough that the timing can't prevent governors from facing political consequences.
Governors in the class of 2002 had an advantage because in 2003 and 2004 they were able to bring state finances into balance through budget cuts (or, better still, budgetary gimmicks). Generally, they avoided broad-based tax increases.
This recession is bad enough that tax increases or painful, politically risky budget cuts are inevitable in many states. Even if, as economists expect, the recession ends late this year or early next year, unemployment still is likely to be very high in November 2010, when 36 states hold gubernatorial elections. State budget problems could linger for years. As a result, voters may throw the bums out.
If there's any silver lining for governors, it's that the nation's economic problems are so broadly understood that they may be able to make the case that they're doing the best they can under difficult circumstances. Really, does it make sense to blame state government officials for a global economic downturn?
The canary in the coal mine that governors should be watching is New Jersey Gov. Jon Corzine. He's the only governor who is running for reelection in 2009. He's also someone who, thanks to some poor decisions by his predecessors, was put into a fiscal bind earlier than his colleagues in many other states. Thus, Corzine proposed unpopular ideas such as toll increases on the Jersey Turnpike, earning the antipathy of voters.
So, can Corzine persuade the Garden State that he shouldn't take the blame for the economy? Right now, the polls don't look good for him, which should have a lot of other governors around the country worried.
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