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  • Is New York State on Track to Become Fiscally Conservative? Will Congress Follow Suit?

    New York Governor Andrew Cuomo (D) promised during his campaign that he would balance the Empire State’s budget without increasing taxes or borrowing. Left untouched, the state’s $135 billion budget would otherwise result in $10 billion in deficit spending.

    This week, Cuomo appears to have taken the first step to making good on his promise. He unveiled a budget proposal that would, on paper, reduce New York’s spending by $3.5 billion from what was spent last year. (This is, however, a deceptively high estimate based on accounting gimmicks. The actual reduction in spending would be lower.) The Wall Street Journal reports that “the budget that Mr. Cuomo unveiled this week closes a gaping deficit with major budget reductions, calling for spending cuts in state hiring, education, health care, aid to universities and payments to cities.”

    Cuomo’s plan is to go after an inflated baseline of future spending. Under current law in New York, spending for many programs is on autopilot, so increases go into effect without any action from the state legislature. Rather than making actual cuts to spending, Cuomo has proposed to reduce the rate of growth in spending by increasing the budget based on more reasonable criteria.

    Governor Cuomo points out that both Medicaid and education funding would increase by 13 percent next year due to the spending formulas built into the law. According to The Wall Street Journal, his reform proposals would instead “deflate these baselines with more reasonable and affordable spending projections. For example, his budget would base a spending increase for Medicaid on the rate of medical inflation, which is less than half the 13 percent increase previously assumed in the budget. He would hold education funding to the rate of personal income growth, about half the growth built into the baseline for school budgets.”

    Of course, Cuomo’s proposal is just a first step—more details will be needed to see if he is serious about reform. Whether or not he will stay the course and deliver on the kinds of reform that would put New York on stable footing is yet to be determined. E. J. McMahon writes, “If you’re going to challenge the way the state does business, you need to propose a different way of doing business—which will have implications for aid-dependent entities downstream of Albany, including but not limited to school districts.” The next steps will be difficult, but they are vital to ensuring that New York’s fiscal future is a bright one.

    Finally, Congress should take a cue from Governor Cuomo’s proposal as it seeks to reduce unsustainable levels of spending in Washington. Taking spending increases on federal programs off autopilot would require lawmakers to prioritize spending and make the necessary tradeoffs when they do wish to increase spending in a specific area.

    Posted in Economics [slideshow_deploy]

    3 Responses to Is New York State on Track to Become Fiscally Conservative? Will Congress Follow Suit?

    1. Pingback: » Financial News Update – 02/03/11 NoisyRoom.net: The Progressive Hunter

    2. George Colgrove, VA says:

      If the republicans do not watch it, the democrats will successfully jump off from Cuomo's success – albeit using gimmicks. Moreover, what will the democrats attack – defense. They will not want to touch entitlement. Unless we are willing to cut defense on our own terms, the democrats will on their terms. So far, the republicans have been impotent about cutting spending. They have done nothing more than kindly suggest nickel and dime cuts that amount to practically nothing. They have conceded to the idea that we will go into debt by an additional $1.5 trillion this year. Believe me if the democrats can prove to be better cutters than the republicans, even if it is using gimmicks, then we will see the democrats take the reins once again, but we will also see a gutted DoD (all in the wrong places).

      With 40% of the budget covered by debt, why not start with a 15% across the board (everyone gets hit) cut. We can do that now. Let each office figure out what to cut, who to let go and so on. The legislation does not need to be complex – just say “beginning on April 1st, 2011 each and every program office, agency, department and so on are required to begin cutting 15% of their workforce and operating expenses by implementing a “make-do” mind set, consolidating, removing redundancy, implementing efficiencies, simplifying processes and procedures and eliminating useless procedures, processes and purchases. This task shall be completed by the close of business on September 30th, 2011. By the close of business at the end of each of the six months, 17% of the cuts is required to be implemented.“ That will give the feds far more time than is needed to cut themselves. Congress does not need to show favoritism to any particular program – this would be a blanket cut. This will be a reduction of $575 billion from this year’s budget. We will still be going into debt by $925 billion (about 400 billion less than last year.) This is progress. If the nickel and dime cuts can carve off another $75 billion, so much the better!

      Next year we can carve off the remaining 925 billion with a lot more thought. This should be congress’s only job between April and September.

    3. Corey Latouf says:

      To the person who talked about the Tea Party agenda, as if everybody agreed it was a threat, please consider this viewpoint. And about ten more from different angles.

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