Well, this is interesting news:
California has been Exhibit A for the fiscal upheaval that has rocked states throughout the recession. Year after year, California officials reported bigger and bigger deficits and sought to respond with spending cuts that left the state reeling.
“The deficit is gone,” Mr. Brown proclaimed, standing in front of an array of that-was-then and this-is-now charts that illustrated what he said were dramatic changes in California’s fortunes.
“For the next four years we are talking about a balanced budget,” he said. “We are talking about living within our means. This is new. This is a breakthrough.”
Mr. Brown was not just talking about a balanced budget. He projected that the state would begin posting surpluses starting next year, leading to a projected surplus of $21.5 million by 2014, a dramatic turnaround from the deficit of $26 billion — billion, not million — he faced when he was elected in 2010.
A few important caveats here. The deficit is not gone, it is projected to be gone based on an improving economy and the legislature sticking to the spending cuts. I am dubious that this discipline will be maintained given that Democrats — now with a supermajority — are already talking about restoring some spending and are still backing the $55 billion boondoggle of kinda-high-speed rail. There’s some awfully big assumptions baked into that budget projection. I will give Jerry Brown credit for what has been accomplished. But we were supposed to get big surpluses in the aughts, too.
Krugman pivoted on this to claim that federal budget crisis is also over because an analysis from the CBPP shows that if the economy does well, Congress maintains discipline and we find another $1.4 trillion in deficit reduction, the deficit will not rise as a percentage of GDP for at least a decade (after which, it goes up rapidly). I worry about a man of his age twisting himself into a pretzel through all of those assumptions to reach such an uninspiring conclusion; especially after he vehemently denounced the policies that have made progress on the debt. But then he makes the bizarre statement that, since the deficit problem might possibly maybe be solved with a lot of assumptions and a good economy and a more disciplined Congress, we can now start spending again. So much for the Keynesian business of reigning in spending and paying down debt when the economy is better.
Don’t believe the hype. Believe the numbers when they actually come in. Just this week, our budget deficit has exceeded $1 trillion for the fifth straight year. That is reality. If California’s 2013 budget does indeed come in balanced, that will be reality. All else if conjecture. It is not entirely useless conjecture. but it’s a sign of idiocy to treat it as reality. In the federal case, the budget is “balanced” based on spending cuts that yet to be enacted and economic growth that has yet to happen. Using that as an excuse to reverse the policies that attacked the deficit in the first place is delusional.
(Frankly, I don’t think even Krugman believes his own post. You know that if a Republican used the same CBPP graph to claim we can now cut taxes, Krugman would go ape-shit about how irresponsible they were.)