October 1st, 2009 :: Permalink
This is unfortunate. There is tremendous frustration in our state and what is an "explainable and understandable" goof only leads to greater loss in morale and trust.
When we were first alerted to the state's impending budget shortfall, officials issued an estimate around $780 million. As time passed and tax revenues continued to fall below projected figures, the state's shortfall estimate increased to more than $880 million. In HA today (10.1.09), discussing the $44 million error, Gordon Y.K. Pang writes, "tacking an additional $44 million to the estimate of the state's already daunting $1 billion shortfall ..." OK, we're now at the billion mark!
Few people have ever worked in public finance; only a small number perform business accounting for that matter. Revenues coming in and expenditures going out are rarely clear cut. Public revenues are generally based on long term forecasting. This is why we're seeing the changing (and increasing) shortfall estimates. Companies might be required to report and submit taxes quarterly. Yet a significant number will be late. Accountants do not know what this "expected" revenue will be, so they guess.
These educated guesses are based on prior history but our current conditions do not follow a historical pattern. The truth is ... I know this will shock many ... but NOBODY knows where we're heading.
Current reports about the state of our economy are highly mixed. We have seen signs of "green shoots" yet much of the data suggests these sprouts of hope are being trampled under by the weight of additional negative information.
As an economist I am deeply concerned about our future. We have been lying to ourselves, both from the right and left, about the status of our economy and position in the world for decades. I have summarized my rationale for this pessimism in other posts on these pages so I will not regurgitate my warnings again here.
Needless to say, I fully expect the State of Hawai'i to blow through their current estimate of $880+ million and exceed even Mr. Pang's daunting figure.
Consumers are scared. Thus they are not buying. Their lack of spending leads companies to lay off workers or delay rehiring. Lack of consumer spending also reduces tax revenues. Higher unemployment requires more government payouts. Decreased tax revenues combined with more demand for government services increases the state shortfall and leads to more cuts in state personnel and programming, which in turn leaves families with less money in their pockets.
It's not simply the cold cash aspect of this process that creates additional challenges. People read the papers or watch TV news. They see large numbers of workers being hit with pay cuts, furloughs and layoffs. This creates added insecurity in ALL families, which as I started this cycle, leads consumers to be more fearful and less willing to participate in the economic recovery.
FDR pleaded with Americans during the Great Depression to not fall prey to this pessimistic cycle. He told our parents and grandparents:
"There is nothing to fear but fear itself ..."
On 9.29.09 I responded to David's "Man Going 'Round" post. I wrote, "The media thrives in this chaotic environment. The adage, 'if it bleeds it leads' allows corporate news to profit from every battle and drop of blood. Our 24/7 news coverage overreports most drama ... "
This $44 million error means nothing - it's a drop in the bucket relative to the billion plus shortfall. And this goof is irrelevant to our future. Yet HA posts it prominently on their home page. The story only creates more negative drama; it frustrates readers and destroys what confidence (if any) they had in their government. This leads to more fear ... and we spiral further down, down, down.
Can I offer any hope? Not really! I wish I could. America is at a crossroads. We cannot continue the ways of our past. We have, individually and as a nation, spent ourselves into massive indebtedness. We are overextended economically, politically and militarily. Our national hubris prevents us from hosting rational discussions over these challenges. Our ideological egos prevent us from having honest conversations about options. We are shouting and screaming AT each other rather than listening and learning FROM each other.
While our brothers and sisters in American Samoa struggle with their current tragedy, possibly we can find hope from their ordeal. In yesterday's HA article, Togiola Tulafono, governor of American Samoa, who was in Honolulu when the tsunami hit, had this to say:
"You know how it is with Samoa - we're big families from one end to the other," he said. "I don't think anyone's going to be spared in this disaster ..."
In Hawai'i or America, we are just big families. We must stand together, combat fear, and recognize that we all must share some pain in this disaster. Personally, I believe all of us, this great state and nation, will be forever stronger from this experience.