A Rose by Any Other Name

Member Group : Lincoln Institute

Late last summer the political and financial worlds focused on Capitol Hill as Congress debated increasing the nation’s debt limit. Increasing the debt ceiling had become the latest in a string of fiscal cliff hangers to grip the federal government. Dire predictions of closed government offices, failure to pay Social Security, and carnage on Wall Street flowed on a daily basis until finally Congress relented and agreed to borrow more money.

The debt ceiling high wire act was part of an effort by fiscal conservatives in Congress to reign in out-of-control government spending. In years past, increasing the debt ceiling had become a perfunctory action, almost as routine as pounding the gavel to call the House to order. But the new Republican majority wanted to focus on the skyrocketing debt being foisted on the nation by the Obama Administration and pushed the debt ceiling issue to the brink.

As the Presidential campaign shifts into General Election mode unrestrained federal spending and the size of the national debt are shaping up to be major issues. Polls show many Americans are alarmed at the size of the federal deficit meaning the issue is one that will motivate voters in November.

Meanwhile, back in Penn’s Woods, state government continues to issue new debt with abandon. The escalating indebtedness of state government has occurred with little debate and virtually no media coverage. As a result, according to the Commonwealth Foundation Pennsylvanians now owe $45 billion in state government debt. That debt load is up 90% over just the last nine years.

How can this happen? Pennsylvanians have been lulled to sleep on the debt issue by the fact the state constitution requires the Governor and the General Assembly each year to pass a balanced budget. They have, albeit usually late, done just that. Within each year revenue and spending are balanced. But, it is not unconstitutional to incur debt. And, like the family that doesn’t have enough cash to pay the grocery bill they are charging it to make ends meet.

Of course the bulk of the debt increase incurred during the past nine years happened during the administration of former Governor Ed Rendell and a under a partly Democrat-controlled legislature. But, given their turn at bat Governor Tom Corbett and a Republican dominated General Assembly have failed to reverse course.

Redevelopment Assistance Capital Projects (RACP) authorized under Act 130 of 2011 included a wide range of deficit spending including corporate welfare for firms such as the Franklin Mint and Comcast, tributes to fallen politicians in the form of money for the Arlen Specter Library and the John Murtha Center for Public Policy, and a wide range of government-related projects. Total it up and state government added $1.6 billion in debt in that one act alone.

And, keep in mind none of these figures include such liabilities as unfunded pension obligations, unfunded medical insurance commitments, and unemployment compensation fund deficits.

Over the coming weeks it is likely a second straight no tax hike – balanced – budget will be approved by the legislature and signed into law by Governor Corbett. While holding the line on taxes and restraining spending is highly commendable, and is in fact a tremendous accomplishment, it does not mean Pennsylvania will not deficit spend again this year. In fact, look for the next round of capital spending projects to plunge Pennsylvanians further into debt. Unable to pacify the spending interests with budgeted expenditures, look for legislative leaders to salve wounded parties by granting them capital dollars – dollars which must be paid back by future generations of Pennsylvanians.

Much as the spotlight has been placed on the debt ceiling and skyrocketing debt at the national level, Pennsylvanians should pay more attention to the money borrowed by state government for capital projects, as well as growing unfunded pension and unemployment compensation fund liabilities.

On the surface it may appear as if the state government’s appetite for spending has been reigned in, but in fact it continues to rise unabated just in other ways.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)

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