Opinion - Top opinion

POSTED: Thursday, Sep. 24, 2009

Only one more budget cut? That sounds like good news

If Washington's economy were a book title, it might be "Been Down So Long It Looks Like Up To Me."

Why else would state forecasters seem so happy - not giddy exactly, but certainly relieved - at a revenue forecast that predicts further erosion in state tax collections and the need for another billion dollars in cuts?

Because it could be worse. Heck, for the last year or more it has been worse.

Revenue and economic forecasts are an expectations game. Things may remain bad, but if they are better than you expected - or no worse than expected - then they are good.

No, really. In any other setting, it would be a downer to tell a bunch of politicians and budget writers that the state budget is now officially in the red and that pretty deep budget cuts are needed. But following quarter after quarter of even-deeper reductions and an inability to see the bottom of the Great Recession, this is a shot in the arm.

Here's the good news from last week's state revenue forecast led by chief economist Arun Raha:

- The state and the nation are out of the recession (though perhaps only economists will notice until at least the middle of next year). "It's still too early to start popping the champagne corks," Raha said.

- Consumer confidence is low, and consumer spending is "bumping along the bottom," but is no longer declining compared to year-ago numbers.

- The state has lost jobs at a 1.4 percent annual rate over the last five months compared to 6.5 percent over the six months before that.

- The state will continue to "shed" jobs, but of the 137,000 jobs Raha expects to be lost during this recession, 130,000 of them have already been lost. (Only 7,000 more to go!)

- The unemployment rate will peak at 9.8 percent next spring, but that's below the 10.5 percent predicted earlier.

- Holiday spending will be up a bit over last year, thanks partly to the fact that sales were so low last year.

- The state budget is now officially in the red, but lawmakers can wait until the regular session in January to patch it up.

Raha is a classic on-the-one-hand/on-the-other-hand economist. Each dose of good news is qualified with some bad. For example, the recession has ended, but there remains a risk of a double-dip recession if state and regional banks are taken down by failures in commercial real estate.

He's also something of a comedian. After predicting that holiday sales would be 2 percent higher this year, he asked state residents for a favor.

"Please consider this," he said. "If you spent $500 last year, 2 percent means spending 10 extra bucks on a gift for the kid across town who is down on his luck. Two good things will come out of this. You'll feel better about yourself and, more crucially, my forecast will turn out to be correct."

A reporter asked if the members of the forecast council - two legislators from each party and two of the governor's cabinet members - were relieved. Rep. Ed Orcutt, R-Kalama, gave the politically correct answer: As long as more people were at risk of losing their jobs, he couldn't feel optimistic.

But Rep. Ross Hunter, D-Medina, took the bait. The economy has hit bottom and is starting to come back. The revenue situation will not get any worse. And a special session to impose emergency cuts won't be needed, giving lawmakers a chance to do a more-thoughtful job in January.

"I'd give a more relieved position," Hunter said, even though more budget cuts are coming.

That's because cutting spending when you can assume it will be the last cut is much better than cutting when you know that you are just getting started.

That's the difference between January 2009 and January 2010.

By the time they get there, it will seem like a lot more than one year has passed.

Peter Callaghan writes for The News Tribune in Tacoma. E-mail him: peter.Callaghan@thenewstribune.com