Recessions are Budget Busters

It’s been almost three years since the Great Recession officially ended, but the recovery has been slow to materialize. There are still 50,000 people in Maine who want work but can’t find it and thousands more who have some work but want more and can’t find it. Real income growth is anemic, especially for low- and middle-income families who are disproportionately dependent on wages and salaries as opposed to property income. The wealth destruction caused by the housing bubble and subsequent financial crisis and recession is going to take at least several more years to clean up and rebuild.

But you wouldn’t know about any of this based on the anti-welfare rhetoric coming from the LePage Administration, which is using the budget problems caused by the recession to bash effective, important parts of our social safety net. Talking about current and future budget challenges without addressing the recession is honest-but-ignorant at best and cynical at worst.

As MECEP has discussed before, balancing budgets becomes very difficult during and in the aftermath of recessions due to pressure on both the income and expenditure sides of balance sheets. As job losses and the general slowdown in economic activity reduce revenues for state and local governments, they simultaneously increase demand for social support services that state and local governments provide. Newt Gingrich called President Obama the “food stamp president”, but the recent increase in the SNAP  caseload would’ve happened regardless of who’s in the White House. That’s because, by design, SNAP is responsive when it needs to be: in times of high unemployment and economic stagnation.

But we don’t have to go to Washington to find this sort of misleading rhetoric that tries to connect current budget problems to the use of social safety net programs. Here is a quote from Governor LePage in an article about the state’s supplemental budget in today’s Bangor Daily News:

I have major concerns about the overspending in the General Assistance welfare program. Spending in this welfare program has grown from nearly $7 million in 2008 to a projected $14.3 million in 2013…

The General Assistance program is the last line of defense for Maine families in financial crisis, and we have plenty of them in the wake of the Great Recession. We should expect to see an increase in the use of the General Assistance program because that’s what it’s there for.

Over the long run, our budget problems are all about the cost of health care and an aging demographic, but that is a discussion for another day. Right now, the current budget problems we have at the state level are on the revenue side, and they are due to the recession. They are not due to the social safety net working the way it’s designed to work, during the darkest economic days most of us have ever seen.

Editor’s note: Joel Johnson recently joined MECEP as a Policy Analyst. Since October, 2009, Joel has worked as an economist at the Maine State Planning Office where he served as project leader for a comprehensive annual report to the Legislature on state and local government finances and as the primary staff member for the state’s Consensus Economic Forecasting Commission.