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State Budget Cuts Sandbag Economy… But SD Has Biggest Reserves!

The Center on Budget and Policy Priorities finds state budget cuts doing unnecessary harm to education, health care, and the economy. (I will be trying to boost my personal economy by seeking trademark on the term "Daugaard recession.") Out of 44 states with data available, 37 are spending less in Fiscal Year 2012 than they did in FY2008.

Plain economics tells you that if government is spending less, the private sector had better be spending more to make up the difference in economic activity. Otherwise, you've got a recession. Just curious: has anyone seen all those budget cuts from Governor Dennis Daugaard causing a resurgence of private investment here in South Dakota? Or are all those "savings" being eaten up as individuals pay higher fees for services like background checks and university tuition?

The CBBP report says South Dakota students can expect to pay $490 more in tuition this year. That's $490 they won't be spending on beer, futons, and other Main Street items.

South Dakota is also keeping more money out of the economy by locking it up in reserves:

High State Budget Reserves FY 2012CBBP finds South Dakota tied with Nebraska for having the highest reserves as a proportion of last year's budget. It will be interesting to see how much that figure changes after we pay bills from the flooding on various golf courses and gated communities along the Missouri River this year....

Governor Daugaard does like to point out that South Dakota's budget woes aren't as bad as they are in places like bad and nasty California. Funny that the governor doesn't remind us of the budget woes in Texas and Louisiana, where their fiscal shortfalls were much larger percentages of their budgets than South Dakota's. I guess Denny's GOP pals Rick Perry and Bobby Jindal must not be as persistent, frugal, and self-reliant as we are.

Update 18:12 CDT: A thoughtful reader quietly advises that CBPP is operated and funded by Voices for Children, which advocates spending more on social programs. They're probably socialists. Paul Krugman, also an advocate of strong social program spending but not a regular Madville Times reader yet, calls the Center's work "absolutely impeccable." Vice President Joe Biden calls CBPP "a big f-ing deal!" No, actually, our man Joe just says CBPP is "the go-to resource for consistently reliable analysis on matters of budgets and fiscal policy at every level of government."


  1. Steve Sibson 2011.08.10


    Your post would be interesting if South Dakota was really spending less than 2008. But South Dakota government is spending way more, and $800 is funded by the national debt.

  2. Troy Jones 2011.08.10

    "Plain Economics" must mean "simplistic economics." The factors for items like consumption vs. investment and money velocity are also major items to consider. The fiscal problems of governments (and the threat of future tax increases) is having a dampening effect on the economy. This is why the entire Obama agenda has actually made things worse contrary to your "simplistic economics (and faulty).

    As I'm sure you are a follower of Keynes, read about his "animal spirits" component which you liberals always ignore. You selectively take from Keynes what serves your political agenda and ignore which doesn't. Not very intellectual.

  3. Jana 2011.08.10


    Wait a minute. Are you saying that Plain economics or Simplistic economics are different than the pablum that the Tea Party and the governor use in saying how a state should manage their budget like a family? You know, that whole kitchen table thing that conservatives use to dumb down the discussion?

    How is this different? Or do you stand by the analogy when it comes from politicians you happen to agree with.

    To see economic theories reduced to bumper stickers and cherry picked for faults and promises is a fools game and insulting. Not very intellectual is right!

    I believe in American Exceptionalism and I think that we can, working with our best minds from across party affiliation to come up with a new economic model that paves our way through this mess. Unfortunately, the disciples of Keynes, Laffer and Norquist will kill any idea of original thought.

    How's that whole Laffer Curve wroking? You knew that he drew much of that theory from 14th century Muslim philosopher Ibn Khaldun. Sharia law is now dictating Republican economic theory...who'd have thunk.

    Just so we have it on the record...Republicans are relying on Muslim interpretation of economic data to direct the American that accurate Troy?

  4. Jana 2011.08.10

    And Troy...had to go back and look as I didn't remember the whole animal spirits thing. Well, it turns out he used it 3 times (fewer times than Michelle Bachmann has taken government handouts by far) and it was largely a term that goes back to Descartes.

    Here's how one academic summed it up in light of your description:

    The concept of “animal spirits” as used by Keynes is not even necessary to the modern subjective expectations theory. So much of the discussion of Keynesian subjective expectations by Austrians descends into waving the concept of “animal spirits” around and complaining about it, when this is nothing but the red herring fallacy, the logical fallacy in which some irrelevant topic is invoked in order to divert attention from the original issue. What is more ridiculous is that most Austrians also adhere to the view that expectations are subjective.

    So Troy, you weren't throwing a red herring around were you?

  5. RGoeman 2011.08.10

    The budget wasn't cut. The Governor simply transfered more of the tax burden to segments of our state's population. Meanwhile, we can brag that our State is hoarding taxpayer dollars as excessive reserves which were not touched. Let's see if I can remember a handful of those "cuts" and how they are affecting each of us. Schools were cut resulting in even more local opt outs. The result is higher local property taxes. GFP budget was reduced resulting in higher State Park user fees passed on to taxpayers to make up the difference. Have you purchased license plates lately (after July 1st)? There's another state-created tax increase that comes back to local county governments, but certainly hits families hard. Higher Ed was cut resulting in increased fees and tuition for students which amounts to a segmented tax increase. There is example after example of the State cutting its budget only to have those agencies increase our costs. Can you think of others?

  6. troy jones 2011.08.10

    Lol. That is one assessment and it misses Keynes point. Now if I believed you wanted a discussion, I'd give it to you.

    But you prove my point. Liberals know they have to dismiss or denigrate the concept to justify their political agenda.

    Cory asserted basic Keynesian remedies for stimulating economic growth (and incidentally I think there is great relevance to Keynes). However, he fails to consider this component which Keynes considered critical.

    The reason he it didnt give significant space to animal spirits is it relates to the psychological motives and factors for economic decisions of business decision makers. He was an economist.

    But just because he wasnt a psychologist, anyone who denies the psychology in investment decisions is delusional and is trying to make economics a math exercise which no economist ever asserts. In fact, they consider it an exercise of rationalizing incentive and personal motives which is why economists have as many social science classes as they have math/calculus/stats classes.

    P.S. Your blogger showed his ignorance of Keynes by referencing Descartes. While the phrase is the same, their context and meaning are almost wholly at odds.

    Descartes was talking about something grounded in raw emotion (almost irrational). Keynes recognized as something wholly rational (albiet subjective).

    And the real irony is to listen to liberals use a conservative Austrian argument to dismiss Keynes. LOL

  7. Stan Gibilisco 2011.08.10

    Rainy day fund good. Hurricane fund better. We might need every penny.

  8. caheidelberger Post author | 2011.08.11

    ...or maybe an earthquake fund.

    Troy, back the truck up. Just how do "animal spirits" change the basic math surrounding the budget cuts? If consumers spend less, the economy declines. If government spends less, why doesn't the same happen? And if government spends less in such a way that it shifts more costs to individuals (Rod is totally on target), how does that not result in at least some reduction of consumer spending on other goods and services that might mean stronger GDP? Help me see how "animal spirits," our emotions and trust, affect what still seems like both simple and accurate economics.

    The emotion I see at work in my own home is this: I have to spend $43.25 on a background check that used to be covered by my employer. I'm that much less inclined to take my wife out for dinner, at least until my next paycheck comes.

  9. Linda McIntyre 2011.08.11

    If consumers spend more, they are spending their own money, money they have earned, and it is their own decision to spend more. If they spend more, then more economic growth; if they spend less, then less economic growth.

    If the gov't spends less of OUR money via taxes they have collected from us, then they don't need as much in taxes and leave more in the people's hands to spend or not spend as we see fit.

    The gov't can only spend by taking (or printing money). It doesn't earn its own keep and thus should be very responsible with what it does with OUR money, a fact that most politicians running the govt can't seem to get thru their collective heads!

  10. caheidelberger Post author | 2011.08.11

    But Linda, I couldn't very well choose not to pay for my background check, not without giving up my ability to work. University students can hardly choose not to pay higher tuition, not without giving up the significant utility of a university education. I'm waiting to see how the state budget reductions are resulting in any increased private economic activity or utility.

    The abstract libertarian "we're free to spend more of our money as we see fit" doesn't seem like a measurable advantage or even a unique advantage: after all, you could argue that even under a high-spending government, we are free to pay our taxes or keep that money by moving to Mexico or some other country that might tax us less.

    Our state governments appear to be abdicating their responsibilities to educate, protect, and act as economic stimulus when the private sector falters.

  11. Steve Sibson 2011.08.11

    As RGoeman has correctly pointed out, the South Dakota state government is spending more by adding more taxes on the consumer, so the consumer has less to spend while the government has more to spend. You do not have to be an original thinker do know that economic policy is wrong.


    You want another example, look at Cory's post on his background check.

  12. Troy Jones 2011.08.11

    Why is it a bad thing to take money out of Cory's pocket and require him to certify he is qualified to hold his job (not a sex offender) but it is a good thing to take money from a person we need to hire people and create jobs.

  13. Jana 2011.08.11

    "Job creators" must have been on the meme memo coming out of Roger Ailes office. Speaking of taking money out of people's it OK if as long as we don't call it a tax? What if we were to refer to our college students as "Future wealth and job creators" is it still OK to raise the "Tax" on them? Imagine the howling if an industry sector were going to have fees/taxes raised on them....

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