Tag Archives: John Maynard Keynes

How Disastrous is the NYS Budget? Why Can’t the Governor/Legislature Follow the Federal Model?

If this was a normal year the education community would be focused on the race to the April 1 budget deadline. For months advocates and legislators have been dueling with the governor: Will the Foundation Aid formula be adjusted to benefit the lowest wealth aka, the poorest districts? Will the governor acknowledge the $3 billion plus dollars owed to school districts as a result of the CFE lawsuit decision? How will the differences in proposed school aid (governor: 800M, the Board of Regents 2B) be resolved?

Additionally, non-budgetary items may or may not have been added to the budget by the governor: possibly legalization of marijuana, rolling back bail reforms, easing the voting restrictions, etc.

We’re in a new world.

This year’s budget is unique: the governor will have almost total authority to allocate the budget dollars in slices, “tranches,” monthly or perhaps quarterly; as the year progresses slices of budget dollars may increase or decrease.

As I write, midday on April 1 the governor and the legislative leaders are still entangled in creating a budget.

The impact could be drastic cuts in school funding, perhaps layoffs.

Why can’t the state allocate endless dollars to avert economic calamities as the federal government has done?

Washington can issue as many dollars as they please, through the Federal Reserve they can raise or lower interest rates and increase and decrease the amount of currency in circulation. Federal debts are backed by the “full faith and credit” of the government. In other words the feds can print money and borrow money (selling bonds); there are no constitutional limits on federal debt.

States cannot issue currency and must have a balanced budget; they can only borrow dollars for capital projects.

For centuries governments abided by a “laissez faire” economic policy. Depressions and prosperity, booms and busts, were guided by an “invisible hand,” an almost religious belief in the power of the marketplace.

Adam Smith (1776), wrote,

Every individual necessarily labors to render the annual revenue of the society as great as he can … He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention … By pursuing his own interests, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

 Milton Freedman, a Nobel Prize economist moved the marketplace model to education, schools should compete, the origin of the belief in charter schools and vouchers. Adam Smith lives on in the minds of far right and a few of the wealthiest.

Beginning with FDR’s response to the Great Depression John Maynard Keynes has been the guiding force driving economies.

 Keynesian theory allows for increased government spending during recessionary times, it also calls for government restraint in a rapidly growing economy. This prevents the increase in demand that spurs inflation. It also forces the government to cut deficits and save for the next down cycle in the economy.

 In our neo-Keynesian world even Republicans, well, most Republicans, follow Keynes’ philosophy, as evidenced by the $2 trillion pushed into the economy, cash payments, enhanced unemployment insurance, delayed mortgage payments, small business grants and loans, dollars that will be spent; hopefully, to kick start the faltering economy.

Until the coronavirus pandemic is stabilized the economy is unlikely to resuscitate in the short run and it may continue to deteriorate. Unemployment may reach levels unknown since the Great Depression, airlines grounded, hotels and restaurants empty. Once a treatment and vaccine is created the economy, the world’s economy will be revived; it may take years to return to pre-pandemic levels.

Why does Cuomo have almost total control over the New York State budget?

 The reasons are two-fold, the state constitution and the judiciary.

 The New York State constitution was amended in 1927 giving the governor responsibility for submitting an annual comprehensive and balanced plan of revenues and expenditures, and, prohibits the Legislature from acting on other spending measures before acting on the Executive Budget.

 The legislature may not alter an appropriation bill submitted by the governor except to strike out or reduce items therein, but it may add thereto items of appropriation provided that such additions are stated separately and distinctly from the original items of the bill and refer each to a single object or purpose.

In January the governor submits a budget with a set amount; the legislative can “strike out or reduce items” and can only add items “separately or distinctly” from the governor’s budget.

In the 90’s Assembly speaker Silver challenged the application of the amended section of the constitution; if you want to go into the weeds read a discussion here.

The Court of Appeals, the highest court in the state, in a convoluted decision (Pataki v Silver) denied the appellants and upheld the budgetary power of the governor. In 2005 voters turned down an attempt to amend the constitution and restore equality to the process.

Critics of the executive budget system point to a fundamental imbalance between the governor and the Legislature. They’re right: when it comes to shaping the annual state budget, the executive and legislative branches are not co-equal.  In financial terms, the budget is supposed to be balanced—but the budget-making process decidedly is not.

 The budgets are no longer fought out on the floor of the legislative bodies; they are fought out in the media as advocates appeal to voters. In a normal year lobbyists would be pounding hallways of the Legislative Office Building (LOB), on Tuesdays, hundreds of advocates would flood into to Albany to plead their case to local legislators. E-Mails would fill legislators’ e-files by the hundreds.

The governor would weigh the impact of the opinion of the public, not the views of the legislative bodies. Governor Cuomo became an artist at balancing the needs of communities across the state. In some ways a modern day Machiavellian figure, more feared than loved.

The coronavirus crisis has brought out the best in Cuomo, as Trump spins the crisis, appealing to his tribe, Cuomo has been straightforward, portraying the crisis as a threat to humanity and truly taking charge; his daily briefings are spellbinding, frightening in painting a possible dystopian future and warm in his portrayal of his family.

More on the impact of the budget after final passage.

Signup for the John Hopkins Center for Health Security daily updates here, the best source for expert analysis and facts.

Exercise, meditate, communicate with friends and family (at a distance), the dangers are not only the virus; the dangers are your own mental health.

Listen to Carole King, “You’ve Got a Friend”

https://www.youtube.com/watch?v=qde5NMy7WTU