July 07, 2009
Not Your Father's Recession
Tom Suhadolnik
With $700 billion in TARP, $700 billion in Stimulus and a $1.5 trillion ($1500 billion) federal budget deficit it's easy to get numb to big numbers. So when I hear of a $53.7 California budget deficit I yawn. And Vermont's measly $278 million deficit is akin to a yelping car alarm. I probably heard it somewhere but my subconscious refused to waste a single neuron imprinting it.
Frankly, almost all reports I have seen on the state budget crisis pretty much follow this formula: (1) There is a multibillion dollar deficit in some state; (2) Republicans in the legislature refuse to raise taxes; (3) Democrats refuse to cut spending; (4) the Governor from either party threatens to close the schools, release the prisoners and starve the poor. Blah Blah Blah.
Today ABC managed to get my attention by adding a tiny but significant piece of context to the story. By simply reporting the size of the budget and the budget deficits they have managed to convey the magnitude of the crisis in practical terms.
California: $53.7 billion shortfall or 58 percent of its budget
Arizona: $4 billion shortfall or 41 percent of its budget
Nevada: $1.2 billion or 38 percent of its budget
Illinois: $9.2 billion or 33 percent of its budget
New York: $17.9 billion or 32 percent of its budget
Alaska: $1.35 billion shortfall or 30 percent of its budget
New Jersey: $8.8 billion or 30 percent of its budget
Oregon: $4.2 billion or 29 percent of its budget
Vermont: $278 million or 25 percent of its budget
Washington: $3.6 billion or 23 percent of its budget
Connecticut: $4.1 billion or 23 percent of its budget
As ABC also noted these deficits are almost exclusively caused by massive revenue drops in these states. Tax revenue has simply dried up. In some cases the revenue drops are the largest in history (including the Great Depression).
Federal revenue, both on budget and off budget, is down 18 percent this fiscal year as compared to the same period last fiscal year. In April, the month where personal income tax revenue flows into federal coffers, tax revenue dropped a massive 34 percent from $404 billion in 2008 to $266 in 2009. This is the largest drop reported in the Monthly Treasury Statements since their inception in 1980.
With these historic revenue drops triggering state budget crises one thing is clear: This is not your father's recession.
