I'm an economist in much the same sense that I'm commissioner of the National Football League.
Only with fewer qualifications.
I actually know a little about football (although I failed miserably when I attempted to explain the Cover Two defense to my wife). But when it comes to economics, I remember virtually nothing from the long-ago college course I took in the subject (grade: C minus). Since then, I've been careful not to clog my brain with any information pertaining to why the economy does what it does or what it might do next. To say I'm clueless exaggerates my grasp of the matter.
So, if you compared my qualifications as an economist to those of the learned officials in charge of determining how much revenue the state of Maine will take in each fiscal year, I'd be about average. Maybe a little above.
That's because I understand the only economic principle normal people need to know:
The Law of Low Expectations.
To see how that rule applies to the real world, let's consider the current sorry state of the state's finances. Halfway through this fiscal year, Maine is more than $14 million in the red. Keep in mind that the situation is actually a lot worse than it looks, because that figure only reflects the shortfall in revenue. It's dwarfed by rampant overspending at the Department of Health and Human Services (at least $123 million to date, with a bigger gap predicted for next year) and assorted fiscal errors at other state agencies (a supplemental budget of $50 million or so will be needed to cover those mistakes).
The folks in charge of figuring out how much the state treasury will take in and how much it'll cost to keep the doors open have traditionally relied upon an approach to these tasks that can be summed up in two words: consistently wrong.
In order to make the numbers work, they've underestimated expenses, while overestimating income. In other words, they balance budgets through wishful thinking.
When things inevitably don't work out the way they'd hoped, they shift into a mode of irrational optimism.
"It is not as bad as it first may appear," state Finance Commissioner Sawin Millett told the Capitol News Service in October, after revenue fell almost $13 million below his sunny projections.
Last summer, when the state income tax was exceeding expectations, some legislators wondered how that could be, since the high unemployment rate hadn't budged and the average worker's paycheck had shrunk. Mike Allen of the Maine Revenue Service cheerfully explained that it was probably because rich people were making more.
When the last fiscal year ended with a small surplus, state Senator Richard Rosen, co-chairman of the Appropriations Committee, was quoted by Capitol News as saying, "I think it is encouraging news and that employment is solidifying."
At the same time, Millett actually claimed the revenue forecasters had been "a little too conservative."
If only. As this year's numbers show, the administration of Republican Paul LePage is every bit as incapable of guessing which way the economy is going as that of his predecessor, Democrat John Baldacci. Neither of them ever displayed the courage necessary to make the simple — but politically dangerous — decision to budget according to the Law of Low Expectations.
