Why the size of the deficit matters (and doesn’t matter)

Victor Joecks

Couldn’t help but laugh out loud at Jon Ralston’s column yesterday.

Why? Because in between calling NPRI names and pretending the size of the deficit doesn’t matter, he actually made a point NPRI and believers in limited, accountable government, especially in the area of education freedom, have been making for years.

First, let’s back up to the beginning of Ralston’s column and point out why the budget deficit matters (in one sense). He wrote:

When I hear the ongoing, cacophonous debate over the size of the state budget deficit as Session ’11 looms, I can’t help but think of two words:

Who cares?

Size does not matter here. The emphasis by some on a simple math problem – is the deficit closer to $1.1 billion or $3 billion? – is not just unproductive; it’s counterproductive. [Emphasis added]

In an immediate sense, the size of the budget deficit is immensely important. Assembly speaker-to-be John Oceguera has cited the (inflated) size of the budget deficit as prima facie evidence that Nevada needs to raise taxes.

Senate Majority Leader Stephen Horsford has used the size of the deficit to justify his suggestion that Nevada raise taxes by $1.5 billion.

And Ralston himself has previously used the size of Nevada’s budget deficit to claim that Nevada needs taxes to balance the budget.

This is a math problem, folks. For those who hated algebra, prepare to wince: You can change the variables to make the numbers work, but you can’t make both sides balance without a plus sign somewhere. [Emphasis added]

In that same column, Ralston also quotes Guy Hobbs misstating the size of Nevada’s budget deficit.

Essentially, cutting $3 billion from the state budget … you’ve heard this comparison before … if you funded just education alone, you could fund nothing else in the state budget.

That statement isn’t accurate now, nor was it at the time, but you get my point. For months, liberal politicians and advocates of raising taxes used the inflated and inaccurately reported size of Nevada’s budget deficit to intimidate and frighten people into thinking that tax increases were the only option.

Refuting this mistruth was, then, the first step toward stopping tax increases and creating an accurate description of Nevada’s budget situation. Once the situation is described accurately (i.e., based on the correct assumptions), you can make the case for a balanced budget without raising taxes. (And assumptions are so important to get right, because with inaccurate assumptions, it’s possible to “prove” anything.)

But now that the media is reporting accurately on Nevada’s budget deficit, Ralston says, “Who cares?” Now that’s funny.

Especially since, just a few hundred words after posing his rhetorical question, he notes that Sen. Horsford puts the budget deficit at $2.7 billion and then says, “Horsford is right.”

But in a larger sense, Ralston’s correct that the size of the budget deficit is irrelevant, because Nevada should be focusing on outputs (priorities), not inputs. Ralston does acknowledge this, though it gets lost in the shuffle.

What’s great is that believers in limited government have been making this point for years!

What’s the point of education? Not increasing funding levels (which contribute to the size of the deficit). The point is (or should be) student achievement.

And as NPRI has noted numerous times before, nearly tripling inflation-adjusted, per-pupil spending in Nevada over the last 50 years hasn’t increased student achievement. There are, however, numerous educational reforms that either save money or are revenue-neutral and have dramatically increased student achievement elsewhere, especially among minority and low-income students.

The next time you bring these reforms up in conversation and someone objects by saying, “But Nevada’s not spending enough,” remind them of what even Jon Ralston says: “Never has there been a better time to focus on what the state’s priorities should be, how they should be funded and what should be excised.”

Is the priority how much we spend or the results we achieve? For the vast majority of Nevadans (i.e., for most people who aren’t union bosses) student outcomes are a much higher priority than funding levels.

Prioritizing outputs above inputs has many applications – eliminating prevailing-wage laws and reining in out-of-control public employee salaries and pensions are an obvious place to start.

It’s also NPRI’s main objection to Nevada’s current baseline budgeting system, which created the $3 billion shortfall myth in the first place.

Instead of looking at what the state spent in the last biennium and blindly adding roll-up costs, Nevada should institute an outcomes-based budgeting system.

And if you don’t agree, remember that even Jon Ralston believes Nevada’s focus should be on priorities.