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Budget Shortfalls Plague Nation : ‘No New Taxes’ in Conflict With the Real World

From coast to coast this week, smiles froze on the faces of politicians promising “no new taxes.” From coast to coast, the chill arose because forecasts designed to make getting through a year--especially an election year--without new taxes seem like a piece of cake are now revealed as a piece of work.

From coast to coast this week, smiles froze on the faces of politicians promising “no new taxes.” From coast to coast, the chill arose because rosy forecasts designed to make getting through a year--especially an election year--without new taxes seem like a piece of cake are now revealed as a piece of work.

Just over a week ago, Gov. George Deukmejian was still resisting even a mention of tax increases because “that’s not going to solve the problem.” Now, facing a $3.6-billion deficit in the new budget that takes effect July 1, Deukmejian must do something he has avoided as energetically as tax increases: look squarely at the problem he says they won’t solve.

In Washington, the picture is just as grim, on a grander scale. The new federal budget could be so deep in the red that it may not be able to meet the legally mandated formula for cutting the deficit.

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Deukmejian has been content for nearly eight years to make ends meet on whatever income came the state’s way. That was possible largely because his definition of “making ends meet” bears little resemblance to what actually happens in an average California household.

To the 160,000 children who will enter public schools this year, making ends meet means decent classrooms, books and more teachers. To accident victims, it means a trauma center close enough for a fighting chance to live. Making ends meet means something very different to women who are poor and pregnant, to commuters, to the homeless, to businesses that worry whether the state can create an educated work force on its present school budgets.

Deukmejian is not alone among political leaders in trying to cram the real world into a framework of political dogma.

David Stockman, President Reagan’s first budget director, eventually fessed up to the fact that when the boss promises tax cuts, the technicians will bend the facts as far as necessary to get them for him. Technicians have been doing the same thing since President Bush promised he would not raise taxes. But in building budgets, facts can bend only so far before they break, as can the steel used to build bridges.

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Bush’s new budget snapped in so many places that nobody in Washington knows for certain whether next year’s federal deficit will be more than $200 billion or only something over $100 billion.

Among the facts that Bush’s budget technicians bent to justify their rejection of tax increases was the way interest rates would behave for the rest of this year. They forecast an absurd 5.6% level, partly to shave their estimates of what the federal government would have to pay to service its debt.

Deukmejian’s technicians chose a forecast of personal income well above the consensus forecast by other economists just to show the governor’s budget nicely in balance. Those tax revenues will not come within $1 billion of the forecast.

Both the President and the governor have called summit meetings to find a way out of the mess. The first step will be to scrape away the political dogma from the statistics so that they can build budgets that match the real world they are supposed to reflect.

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BUDGET SHORTFALL

In January, Gov. George Deukmejian released the $53.7-billion California state budget.

Estimated shortfall in January: $1.7 billion

Current estimated shortfall: $3.6 billion

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Source: California Department of Finance


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