The CATO Institute seeks to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets and peace. Toward that goal, the Institute strives to achieve greater involvement of the intelligent, concerned lay public in questions of policy and the proper role of government.
As CATO’s Director of Tax Policy Studies, Chris Edwards is a top expert on federal and state/local tax and budget issues. Edwards has penned a column entitled, "Busting the State Tax-Revenue Boom."
His piece is centered around the fact that when times are good, and state revenues are on the rise, state budgets grow. But then it becomes increasingly difficult for state’s to trim those budgets when the boom times turn to bust.
His article begins:
What will the states do with their overflowing coffers? During the revenue boom of the 1990s, states allowed their budgets to bloat as they expanded programs such as Medicaid to unsustainable levels. When the recession hit in 2001 and revenues stagnated, state officials moaned that they were innocent victims of a fiscal crisis. They responded by hiking taxes and clamoring for more aid from Washington.
Only a few years into the current boom, some states are already making the same mistake of overspending. In California, Gov. Arnold Schwarzenegger has proposed a budget increase for fiscal 2007 of 8.4 percent, which follows a 9.7 percent increase in 2006. This is the same governor who, in 2003, said, "if you spend, spend, spend, then you have tax, tax, tax, but all of a sudden you say, ‘Where are the jobs?’ Gone, gone, gone."
Edwards’ piece goes on at some length, but concludes:
Clearly Edwards counsel to the Governor and legislature would be to use the boom time to pay off our deficit, cut taxes, and establish prudent reserves. It’s not too late to do just that.
To read his entire column, you can click here.