Arnold Kling  

Painful Budget Cuts in Maryland

Garett the Gracious... Compensating Health Care Provi...

An Editorial in the Washington Post tells the story.

Gov. Martin O'Malley (D) has begun chipping away at the problem, starting with the outlays. Predictably, he is under attack -- from liberals and unions who say the cuts are pitiless and cruel and from Republicans who say they don't go far enough. That's a good sign that the governor is on the right track.

...The original fiscal sin, nearly a decade ago, was to cut taxes when it was clearly irresponsible to do so; that misstep was compounded by massive new spending on education and soaring health costs.

...As the governor has said, higher taxes will have to be a part of the solution. Yet he has wisely started with budget-cutting -- $153 million from the fiscal year that started this month...The $153 million trim represents just 1 percent of the state's general fund spending, but there's no denying that some of it will hurt.

This page links to the appropriations summary for the state of Maryland in FY 1998 and FY 2007, according to which appropriations roughly doubled, from $16 billion to $29 billion. Over this same period, the U.S. economy grew from a GDP of $8.5 trillion to $14 trillion.

If Maryland spending had kept pace with the U.S. economy, it would be at $26.4 billion. This would represent a cut of $2.6 billion, not $153 million. Imagine how painful that would be!

Tax increases, of course, are completely painless.

Which is good, because we are on a path where at the Federal level taxes as a percent of GDP will soon rise to unprecedented levels.

Comments and Sharing

CATEGORIES: Fiscal Policy

COMMENTS (4 to date)
Matt writes:

If we rely on inflation to reduce external debt,then bracket creep speeds up. Plus, the consumer is on to the inflation expectations game. Ultimately, we are not going to be able to cram the highest tax bracket through the middle class.

Bernanke should run up interest rates if he still has the power. This would force the federal legislature to confront the issue earlier.

Gary Rogers writes:

Regression on this data shows it to be a major cause of global warming. Could we convene a conference and mandate budget cuts in the interest of saving the planet?

KipEsquire writes:

State and local government pension funds are, collectively, underfunded by several hundred billion dollars (some estimates are as high as two trillion dollars when benefit obligations are included). The Social Security crisis is laughingly minuscule compared to that.

In 10-20 years, stories like this Maryland situation will seem like the good old days.

8 writes:

Do pensions fall under sovreign immunity?

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