Monday, January 20, 2014

Burning a Hole In Their Pockets

Remember when you were 7-years old and your grandmother gave you a crisp new $5 bill in your birthday card?  You wanted to run out and immediately spend that five bucks on candy, or baseball cards or comic books.  Perhaps you were like me and you were 7-years old during the Jimmy Carter presidency and you knew that the $5 was going to be quickly devalued by the 10% inflation rate during that era--but most likely, you were just immature and didn't realize that money doesn't have to be spent immediately after you get it.

Well nothing brings out the inner 7-year old in a politician like a projected budget surplus.  Everybody in Madison is talking about how to spend and/or return the $911-Million in higher-than-expected anticipated revenue by 2015.  Republicans are listing all of the taxes they want to cut (or eliminate).  Democrats have a laundry list of welfare programs and union employee groups to whom they want to give the money.  It's like the $911-Million is red hot and threatening to burn holes in everyone's pockets.  But maybe, our lawmakers could show a little maturity and hold off on spending all of that cash at once.

For starters, this is still a PROJECTED budget surplus.  Revenues were higher than anticipated for the first year of the budget cycle--so economists are taking that number and adding the original estimated growth for the second year to come up with the higher number.  But there is no guarantee that will actually happen.  The Fed is talking about scaling back quantatative easing and no longer artificially propping up the economy.   Unemployment remains high--especially among younger workers.  And the second half of 2014 will be handicapped by preparations for implementation of the employer mandate in the Affordable Care Act--which will create a further drag on the economy and business growth.  So to assume that all of that money will actually be there at the end of the next fiscal year is no certain thing.

Our state lawmakers might also want to think back to the early 1980's and the Early 2000's when Wisconsin had similar budget surpluses.  In those times there were tax cuts, spending increases and even refund checks issued from Madison in the belief that the good times were just going to keep on rolling.  It would be just a few years later--in both cases--that the state would be deep in the red, and Legislators were left to look at each other and ask "What just happened here?"   Anyone who thinks revenues can't head in the opposite direction of where they are now is living in total denial.

What will likely hamper the prudent handling of the projected budget surplus the most is that it has popped up during an election year for almost everyone in Madison (surprise!).  What makes for a better TV or radio ad sound bite than "So-and-so returned more than 900-million dollars in tax money to you--the hard-working people of Wisconsin"?  Or "Representative Whats-his-name fought to increase funding for your local schools by 911-million dollars"?  You know, it's not just the third party groups and the political parties that try to buy your vote every couple of years.

So get ready for a bunch of "7-year old" politicians begging to spend their new-found "wealth" this spring--whether they actually have the money--or not.

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