Mar 292011

I’m having a tough time at present.  Like many of us, particularly self employed, I’m not making as much money as I used to.  So, guess what – I’m cutting back on my expenditures.  More meals at home; and cheaper meals when I still eat out.  I don’t buy as many movies as I used to.  I’ve cut back on my shooting.  And so on.

Chances are, you’re feeling some of the same pressures I am, and chances are, you’re making cut-backs too.

But what of the government?  Well, we’ve all become so used to hearing the phrase ‘trillion dollars’ in the context of our national deficit that it no longer excites all that much (but for a fun thought, if you piled a trillion dollar bills on top of each other, they would circle the world almost three times).  And our national budget is a mess of confusing things such as defense spending; it makes it difficult to pick it apart and gives lots of ambiguity for big-spending politicians to hide behind.

But what about our state budgets?  They’re a lot more simple and straightforward, surely?  What’s been happening there?

I went and did some Googling, and came up with the total annual revenues and expenditures for all 50 states, for the 12 year period 1998 through 2009.

Here’s a simple chart that shows what has been happening :

Although we have had two two year periods with revenues dropping (2001 and 2002, then 2008 and 2009), you’ll see that every year has shown state spending steadily increasing.

Could our economy’s problem be as simple as that?  Our governments – both state and federal (and you may as well toss in city and county, too) are simply spending – well, you can say ‘too much’ or, if you prefer, ‘more than they earn’.

Maybe that is it, in a nutshell – but if that is true, why is it, at least for me in my home area, I get the distinct feeling that I’m getting less rather than more ‘help’ from the government every passing year?  Parks are being closed.  Library hours cut back.  The roads always seem to need repairs.  And so on.  Where is all the money going?

I’ll not answer that last question (but someone should!); let’s just simply look some more at the massive growth in state government expenditures.

Let’s give our state governments as much ‘benefit of the doubt’ as possible.  Maybe we need to adjust for two ‘growth’ factors that could explain some of the increases in their expenditures – the growing population of the country (which rose from 270 million in 1998 to 307 million in 2009), and the annual inflation rate (which has been hovering around 2% during this time period).

If we’re going to adjust, maybe we should also adjust for the overall improvements in efficiency and productivity that have come down the pike over that time period.  Whether it is better computers, more automation in general, improved systems, or whatever else, most industries are getting more results per dollar they spend, particularly on staff.

And don’t forget there isn’t a politician alive or dead who hasn’t promised us he will cut waste and make government more accountable, effective, and efficient.  How do we factor all these promises into the growth in expenditures?

But let’s ignore what should be a several percent annual reduction in expenditures due to efficiencies, and instead just add adjustments for population growth and inflation.

Here’s the chart again with a third line added to show what the growth in expenditures could be allowed to be.

So, no matter how much the politicians regularly promise cut-backs and budget cuts and all the other stuff they like to trot out, look at the gap between the green line and the red line.  Actual expenditures have been growing by almost 6.2% every year, about twice what could be explained by population increases and basic inflation.

Where is the extra 3% a year (in round figures) of government expenditure going?  Are you getting 3% more benefit from your state government each year?

And, to close on the note I opened with, the states revenues plunged from 2007 to 2008 and dropped still further in 2009 to a level little more than half that of 2007.  Meanwhile, expenditures continued to steadily rise like there was no tomorrow and no crisis.

This is sheer unaccountable lunacy.  We’d be homeless on the street if we treated our personal finances that way.  Hmmm – come to think of it – making some politicians homeless and dumping them on the street might be the best thing that could happen to them…


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