The ghosts of January surpluses past

Just in time for tonight's State of the State address, the Legislative Fiscal Bureau projected what would happen in the next state budget with the new revenue figures that were released last week. And at first glance, it looks like every fiscal issue in this state is taken care of due to these projections.

Table 3 indicates that revenues exceed net appropriations by $145 million. Thus, the structure of the general fund shows a balance of $145 million. The $145 million becomes $1,042 million when the $897 million opening balance is considered. However, Table 3 focuses only on the revenues and net appropriations for the 12-month period (July, 2014, through June, 2015)....

...for 2015-16, the general fund would have $1,111 million to meet commitments under current law, maintain the required statutory balance, and balance the budget for that year. In 2016-17, the balance would be increased by an additional $141 million.

$1.25 billion surplus? We're set! We can follow Governor Walker's plans to add on to the Koo-Koo tax cuts as much as we want, or we can pay for the $1 billion in Transportation needs we haven't funded in the next budget, and not have to sacrifice anything else! No worries!

Or, maybe not. I direct you to the New York Times, article dated January 31, 2001. The headline? "Surplus estimate hits $5.6 trillion."

Despite growing concern about an economic downturn that could put a crimp on tax revenues this year, the Congressional Budget Office informed members of Congress late today that it expects the surplus to swell to $5.610 trillion over the next decade, in line with estimates that have been circulating on Capitol Hill for weeks.

The new projection, which is to be released officially on Wednesday, is $1 trillion higher than the budget office's previous estimate, in July, and about $600 billion more than the Clinton administration's final projection, which was released last month....

Even before the budget office disclosed the new surplus figures, administration officials said that President Bush's plan for a $1.6 trillion tax cut over the next decade and his calls for more spending on the military, health care and education could all be accommodated comfortably without any risk to the government's fiscal health.

''We are seeing a government that is awash in surplus money, even with an economy that is softening from where it used to be,'' Ari Fleischer, the White House spokesman, said.

Sound familiar? And how did that work out for us? Oh yeah, not well. We had record deficits within 8 years of this article.

So what happened to this $5.6 trillion in surpluses? This CBO report released in 2012 lays it out.

In January 2001, CBO’s baseline projections showed a cumulative surplus of $5.6 trillion for the 2002–2011 period. The actual results have differed from those projections because of subsequent policy changes, economic developments that differed from CBO’s forecast, and other factors. As a result, the federal government ran deficits from 2002 through 2011. The cumulative deficit over the 10-year period amounted to $6.1 trillion—a swing of $11.7 trillion from the January 2001 projections.

Oops? And what caused this $11.7 trillion turnaround?

Changes from 2001 CBO predicted budget picture through 2011
Economic weakness/ recession- $3.34 trillion
War, other extra spending- $2.95 trillion
Bush tax cuts- $1.75 trillion
Interest on debt- $1.38 trillion
ARRA stimulus- $514 billion
Other mandatory spending increases- $477 billion
2010 budget deal/ Soc. Security tax cut- $391 billion
Medicare Part D- $272 billion
TARP- $189 billion
2008 stimulus measures- $148 billion
Other reasons- $112 billion

So one economic downturn or one stupid tax or spending decision can send those surpluses spiraling downward really fast. And given that this country has been in an expansion and stock market boom for nearly 5 years, history indicates that a recession will be coming some time in the next 3 1/2 years. So why are basing policy on assumptions that there won't be any type of blip on the state's or country's economy between now and the middle of 2017? This is what makes Walker's apparent plans to blow the projected surplus on tax cuts very foolish and dangerous. It's like the Walker folks have totally ignored the lessons of the 2000s and the Bush Administration.

Oh wait a minute, that's the answer! The Bush era doesn't exist in the right-wing bubble, so to them, Obama and Clinton caused both recessions and the millions of jobs lost from 2001-2003 and 2007-2009, and cutting taxes can magically cause economic growth and larger revenues! Sorry, I forgot.