(Victor Joecks/NPRI) – In last Sunday’s Review-Journal, former U.S. Senate candidate Danny Tarkanian had a piece describing actions he believed Nevada could take to grow its economy. Unfortunately, to set up his piece he bought right into the $3 billion budget-deficit myth.
Nevada is suffering through the worst economic crisis in our state’s history. Where our state leads the nation, we do so in unenviable categories: unemployment, foreclosures and bankruptcies. Our $6.5 billion state budget is projected to have a $3 billion deficit. Yes, you read that right — Nevada can only fund a little over half of its current obligations.
Tarkanian is effectively saying that Nevada is only projected to collect $3.5 billion in the next biennium. And that statement is 100 percent, totally false.
For the current, 2009-11 biennium, Nevada’s general-fund budget is about $6.4 billion. For the next budget cycle, both Andrew Clinger, the governor’s budget director, and Russell Guindon, senior deputy fiscal analyst at the Legislative Counsel Bureau (which is cited in Rory Reid’s budget plan), have confirmed to the Nevada Policy Research Institute that they project Nevada will collect more than $5 billion in taxes — and this assumes that the 2009 legislative session’s temporary tax hikes will expire.
In the real world, $5 billion minus $6.4 billion equals a deficit of $1.4 billion. But government accounting is not quite in the real world.
Instead, government accounting works like this: $5 billion minus ($6.4 billion budget plus a $1.5 billion spending increase) equals a $2.9 billion deficit.
What? You didn’t know Nevada’s projected “$3 billion shortfall” is based on an assumed $1.5 billion — or 23 percent — spending increase over the current biennium? Well, you’re not alone. Few do. And those who do, excluding NPRI, rarely say so publicly.
Tarkanian’s mistake — assuming Nevada is only going to collect $3.5 billion in the next biennium — is easy to make, because Andrew Clinger, Nevada’s budget director, has created that impression through a series of misleading and false statements. And the media — understandable, but incorrectly — has reported that number wide and far.
Although it’s an easy mistake to make, it’s still 100 percent false. It’s also very politically powerful for Nevada’s leftists.
I can’t emphasize enough how important this $3 billion, 50 percent budget myth is to the narrative that Nevada’s leftist legislators are using and will use to justify tax increases in 2011.
It’d be like having a debate over how good of a spouse you are and then discussing this question: “When did you stop beating your husband/wife?”
You can’t win if you answer that question, because the false assumption is built into the question itself.
In a similar way, conservatives/libertarians can’t win a budget/no-new-taxes debate if we’re forced to assume a projected budget deficit that doesn’t exist.
Remember, the $3 billion projected budget deficit is a myth, and before you discuss Nevada’s budget or taxes, that fact needs to be made perfectly clear.