Budget Wars brewing in D.C.

Baton Rouge and Washington are starting to resemble each other when it comes to fiscal issues. In Washington, no budget has passed Congress and been signed into law in over three years. The Constitution requires one to pass, but who are the Founding Fathers to question the wisdom of our leaders in Congress? The constant fiscal impasse between the Republicans and the Democrats in D.C. flared again last summer over the debt limit issue. Another “Super Committee” had been appointed that was supposed to come up with a little over a billion dollars in budget reductions and/or tax increases. The committee failed, so an automatic sequester kicked in that will cut $600 billion from defense spending and an equal amount in domestic spending. Now the Republicans are protesting that defense can’t be cut, and the Democrats are saying that tax increases should be levied to prevent reductions in domestic spending. Cuts? There are no “cuts” in Washington. A cut means spending is reduced. Spending is never reduced. The fight is over a very slight reduction in the growth of spending. Meanwhile, annual trillion-dollar deficits put future generations in hock to the Chinese.

Some folks back here on the bayou feel that we are safe from the madness in Washington because our state constitution requires a balanced budget. Unfortunately, we are not protected from fiscal follies because a multitude of games can be played to either subvert the balanced budget requirement or use suspect revenues to do the balancing. At this juncture, our Legislature appears to be attempting to do both.

This column has noted in the past that much of the current fiscal woes arose from the huge spending spree during 2007 and 2008 when unsustainable revenue increases fueled by high oil prices and hurricane recovery spending overflowed into the state treasury. Although there was no way those huge spikes in revenue could be maintained going forward, budgets committing state government to billions of dollars in recurring spending increases were enacted. Then the recession hit, oil prices fell, the bubble burst and our state leaders attempted to avoid the necessity of realigning spending with realistic revenue levels. What should have happened beginning in the fall of 2008 was an instantaneous adherence to a formula that would have reduced spending gradually, using some of the stimulus dollars as a cushion, until the declining spending levels reached the gradual rise in state revenue growth. We will soon find out if our state officials have learned from past mistakes.

The state House of Representatives historically tends to be more conservative than the Senate on fiscal issues. The budget bill came up for a vote on the House floor May 10. It didn’t even make the full debate stage because conservative members invoked a House rule that requires a two-thirds majority to proceed with debate if the Appropriations Bill exceeds a certain limit on non-recurring revenue. The vote was 51 for and 50 against—19 votes short of the 70 needed. The conservatives in the House are rebelling against using hundreds of millions of dollars in non-recurring revenue to pay for recurring expenses. In their minds, the time has finally come to once and for all align the level of expenditures with realistic revenue growth projections.

In both Baton Rouge and Washington, elected officials are grappling with the hard choices that are the result of questionable fiscal decisions of the past. Government actions that promised funding without securing sound revenue sources are coming back to haunt them. The longer responsible fiscal decisions are delayed, the more misery taxpayers and elected officials will have to endure.