California in Surplus
Guess whose state budget crisis seems to be over?
As best I understand it, what’s going on in CA is a microcosm (a pretty big microcosm, actually — maybe more of a mesocosm or something?) of what’s going on at the national level. A severely depressed economy led to big deficits, because tax receipts are strongly affected by the state of the economy — indeed, are almost certainly much more cyclical than they used to be.
In response to those deficits, there was a lot of spending reduction plus some more modest efforts to increase revenue. And now that we have the beginnings of real recovery, it’s turning out that those efforts were enough to remove much if not all of the “structural”, as opposed to recession-driven, deficit.
As this reality becomes more obvious, the deficit scolds will of course go wild. They have staked their careers on crusading against supposedly intractable deficits, and they have their hearts (and more important, their wallets) set on exploiting the alleged fiscal crisis to dismantle social insurance programs. Good news will be a blow to everything they want, and will be furiously and vigorously denied.
But once again: deficits are receding as an issue before our eyes.
As best I understand it, what’s going on in CA is a microcosm (a pretty big microcosm, actually — maybe more of a mesocosm or something?) of what’s going on at the national level. A severely depressed economy led to big deficits, because tax receipts are strongly affected by the state of the economy — indeed, are almost certainly much more cyclical than they used to be.
In response to those deficits, there was a lot of spending reduction plus some more modest efforts to increase revenue. And now that we have the beginnings of real recovery, it’s turning out that those efforts were enough to remove much if not all of the “structural”, as opposed to recession-driven, deficit.
As this reality becomes more obvious, the deficit scolds will of course go wild. They have staked their careers on crusading against supposedly intractable deficits, and they have their hearts (and more important, their wallets) set on exploiting the alleged fiscal crisis to dismantle social insurance programs. Good news will be a blow to everything they want, and will be furiously and vigorously denied.
But once again: deficits are receding as an issue before our eyes.
Source:
California in Surplus - NYTimes.com
http://krugman.blogs.nytimes.com/2013/01/11/california-in-surplus/?nl=opinion&emc=edit_ty_20130111
