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Crucial state revenue forecast comes next week

Post by Joe Turner on Sep. 8, 2009 at 9:19 am with 2 Comments »
September 28, 2009 1:39 pm

I’m back from a week’s vacation and catching up on my e-mail and practicing with this new blogging software we had installed in my absence. So, bear with me.

I see there was an economic review while I was gone. It’s dated Sept. 4. That’s when the state’s chief economist, Arun Raha, takes a look at Washington’s and the nation’s economies to see how we’re doing. Next week, on Sept. 17, Raha will take a look at how the economy is expected to affect state tax collections.

Raha strikes me as a “the glass is half full AND the glass is half empty” kinda guy. His report goes back and forth. The economy is getting better, but it’s fragile, etc.

Here’s his Sept. 4 report for your reading pleasure.

Leave a comment Comments → 2
  1. InchoateH2O says:

    Not surprising to have an “one the one hand …but on the other hand” report from an economist. However, perhaps the best news is that there didn’t seem to be a lot of surprises, which may mean that the factors in the report were figured in fairly well to the last revenue forecast.

    This kind of analysis tends to show why basing allowable revenue on only population growth and inflation is a problem. (as is done in I 1033) By not factoring changes in personal income you miss two important factors related to state budgets — the increase in demand for state services when personal income declines and the reduction in revenue from sales tax when people reduce their consumption of taxable goods and services.

  2. ambergunn says:

    @InchoateH2O: Assuming that government exists to provide basic services that the private sector cannot, why shouldn’t the cost to provide those basic services be shrinking as a share of personal income? For example, 50 years ago, the average American family spent around 20 percent of their personal income on food. Today, it is closer to ten percent. Incomes have grown and standards of living have increased. Those gains have been captured by families and used to support other lifestyle choices and industries (travel, college, ipods, computers, etc.).

    Why shouldn’t government–as a provider of basic public services–also be shrinking as a share of the economy? Shouldn’t we task government with efficiency and productivity gains as well? By arguing that the growth factor for government should be the growth in personal income, how will efficiency gains ever be achieved? As our incomes grow, why wouldn’t we demand less government, rather than more, since a huge section of government exists today to provide services to low-income individuals? If incomes are growing, shouldn’t the need for government assistance in that regard be shrinking?

    Of course we will demand more roads, infrastructure, protection, etc. (which can be provided by the private sector, even if one argues they must be subsidized by the public), but in general, population + inflation is adequate to provide for these types of needs. Why should we let government off the hook by providing a free pass on growth based on personal income?

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