The real measure of this year's state budget is not whether it is on-time, but whether there is a second, devastating budget after the November elections. If Bear Stearns merges, as seems likely, it will take a big chunk of the city and state tax base with it, and that may be just the beginning. My guess is this state faces two years like it hasn't seen since the 1970s, with the only "good news" being that this time most other parts of the country will be faring worse, so there will be nowhere to flee to.
Yesterday Martin Feldstein, the famous Republican economist who is now head of the National Bureau of Economic Research said in a speech, according to Reuters, "the situation is very bad, the situation is getting worse, and the risks are that it could get very bad…There's no doubt that this year and next year are going to be very difficult years." Not the happy talk President Bush wanted to hear. He said the nation faces the worst recession since WWII.
Forget consumer confidence. Americans are not only willing to spend the last dime they have, they are willing to borrow the last dime they don't have. The problem is this has already happened.
As Jane Quinn Bryant, the economic columnist for Newsweek, said on the Newshour "I am looking for, I'm afraid, not a very comfortable time for consumers. I expect that some of them are going to have to start saving more money, which they haven't done in the past because they've always had easy credit, they've always been able to spend, and now they're not going to be able to get as much credit. They're not going to be able to borrow against their homes because of the decline in the equity of their homes….they're facing a retrenchment, because they're spending more on their gas, they're spending more for food, and their incomes are not going up, and they're going to lose some jobs. So we're looking at a classic recession, and consumers are going to have to retrench."
"And, you know, Judy, over the long run — if you look at where America is in the world, relatively speaking, we are getting poorer, because we've been a debtor nation for so long. And the dollar going down means that internationally we are getting to be a poorer country, and we are not doing as well as we did in the past. This is going to be a hard thing for Americans to face."
Right. Now in the face of this, the Assembly budget that calls for more spending with higher tax rates, and the Senate budget that calls for more local government spending without higher tax rates, are unrealistic.
There is no doubt the legislature would like to postpone the pain until after the election, even if that means making the pain worse. Because their MO is to hand out disproportionate benefits through excess spending and tax breaks to powerful interests during good times, and raise taxes and cut services for the rest us during bad times. The powerful interests never give anything real back, and they moan and wail all the same.
And now the legislature has one of them as Governor. Governor Spitzer should have thrown his budget in the trash and started over when I told him to in January. Governor Patterson should do the same right now. Just keep extending the current level of spending until we know what is coming, and tell the recipients of that spending that they may end up with less rather than more.
And what about non-powerful interests? Unfortunately, after elementary school in Catholic School, my oldest child went to a public high school, and my youngest decided to follow to that same high school next fall. I tried to explain what might happen, but it didn’t change anyone’s mind. Schools in the rest of the state which have hired and hired and therefore get more money every year, as those additional employees represent “facts on the ground” it seems. The pensions for city school teachers have just been enhanced at enormous expense. All this takes priority over the very first dime being spent in the city's schools.
So I told them to expect the elimination of all extra-curricular activities and teams, the elimination of services such as counseling and guidance, and the elimination of electives. This, I said, they would have to deal with.
Moving on to worse scenarios, in spring 2009 or 2010, expect the school system to simply shut down a month or two early, as happened in Oregon earlier in the decade (the employees would get unemployment and health insurance, the retired everything, the children nothing). They would just learn less that year, perhaps not taking or not doing well on tests such as the APs, SAT IIs, and Regents.
These conditions, in fact, are similar to what my spouse faced in the 1970s in the Levittown schools, so she figures worst case the kids can buck it up and survive.
When I asked the principal of their high school how he planned to handle budget cuts, he said he wouldn't speculate but in the worst case the required courses would “have to be” taken because the children "have to graduate." But I could imagine a scenario in which there are not enough places in required courses to go around, and some children are frozen out of them, and do not graduate. Remember, this is a city where only half of the kids graduate in four years.
This is what will happen instead of tax increases? No, this is what could happen in addition to tax increases, assuming no sacrifice imposed on the lobbying groups who contribute the most the state legislature (although they will claim they have been “cut” because their spending is made to increase somewhat less) and a deep recession, both of which seem likely. And not just in the schools. Past decisions which the state legislature will not unmake, and will ensure will not be unmade by others, ensure this.
Those who have read my posts know that I don't exaggerate and am often right, but early, because I can’t believe that things go on as long as the do. Let’s just hope the same isn’t true of the recession. And let’s hope that people do not accept that what is coming is “due to circumstances beyond our control” recession or no. Those who matter get their money off the top, before the budget is even really discussed. Let's hope the Governor doesn't rush to enact a budget that takes even more off the top for the powers that be before the tough decisions are even put on the table. May I remind him that this is what sank David Dinkins?
Governor Spitzer had already lost my confidence, before news of his personal scandal had broken. Governor Patterson, this is not the time to be “nice” and “cooperative” to those who happen to be around you. It is time to be fair and responsible. Because the alternative is being even more unfair and irresonsible for everyone else.