Connecticut budget: Ready to blow spending cap [Waterbury Republican-American]

February 16, 2012

Waterbury Republican-American Editorial

The legislature returned to the Capitol just last week to hear the governor’s annual budget-increase address, and ruling Democrats already are exhibiting all the symptoms of fiscal dermatitis, for them a chronic condition for which frequent scratching provides temporary relief.

In 1992, voters prescribed what they thought was the best salve: a spending cap. But ruling Democrats, often abetted by Republican lawmakers and governors, circumvented the cap numerous times by fabricating fiscal “emergencies.” That allowed them to scratch their spending itch long and hard, which opened gaping wounds from which taxpayers continue to bleed.

Among the many in government with no use for the cap as constituted are Fred Carstensen, chief economist at the University of Connecticut’s Center for Economic Analysis. Hours before Gov. Dannel P. Malloy addressed lawmakers, Mr. Carstensen was on the radio kicking off the government’s latest campaign against the cap. He ticked off what he considers its shortcomings, chiefly its constraints on federal reimbursements for entitlement and social spending.

In 2005, his government-employed minions issued a term paper in which they proposed replacing the cap, which is based on increases in inflation and personal incomes, with one tied to increases in government’s costs. That sounds reasonable until you consider the government’s basket of goods and services includes expenses over which it has a good amount of control, chiefly Medicaid costs, and unionized employees’ wages and benefits. That cap actually would incentivize explosive budget growth to authorize even more spending. And how would ruling Democrats pay for this new spending orgy? By compelling the dwindling ranks of taxpayers “pay their fair share.”

When it comes to soothing spending itches, budget caps are ineffective because government dictates which costs are capped or excluded. So compared with the pre-cap days, the state spends, borrows and runs up unfunded, long-term debts at accelerated rates. In addition, the cap encourages deficit spending by exempting principal and interest payments on the state’s massive debt, an ill Mr. Carstensen would cure simply by paying for continuing costs and capital projects out of grossly inflated budgets.

But adopting the Carstensen crew’s cap would permit spending to increase at roughly twice today’s rate. Yes, it might bring in more federal aid, but reimbursements typically cover a fraction of the real cost. When the feds finally realize they’re too broke to continue funding their share, the entire burden would fall to the state, ushering in a new round of “shared sacrifice.”

Mr. Carstensen’s arguments are instructive because of their laser focus on satisfying the government’s every whim and want instead of taxpayers’ ability to pay. They also reflexively assume more spending would be beneficial, and it would be for him and the rest of the government class. But it would be disastrous for people in the private sector who have taken the full brunt of the recession and the largest tax increase in state history, and stood helplessly by as the Obama administration bailed out unionized government employees.

It must be abundantly clear by now the continuing budget crisis is not rooted in spending too little, but spending too much.

Even after $3.8 billion in new and higher taxes to fund record state spending, the Office of Policy and Management underestimates the budget will shatter the cap by $1.6 billion in the next biennium.

OPM chief Benjamin Barnes claims administration officials “remain committed to reducing expenditures … to remain below the cap.” Until, that is, they can concoct a faux fiscal emergency that allows them to scratch their spending itch with impunity.