A Balanced Budget

Over the next month, you’re going to hear a lot about Wisconsin’s budget. Specifically, you’re going to hear that the budget was balanced, and then you’re going to hear that it wasn’t. You may even hear it from the same person.

Frankly, the deft manipulation of half-truths has been elevated to an art form in politics. Plus it allows us to believe what we want to believe unencumbered by facts. I don’t mean to be snarky when I say this. As a species, we naturally seek affirmation, and it benefits a politician to provide it, whether or not our opinion is, technically speaking, correct.

Besides, emotion is so much easier to manipulate than truth.

Anyway, is the stupid budget balanced or not? Governor Walker says it is, Mayor Barrett, Kathleen Falk, et al. say it isn’t. How is this possible?

The fact is, there are two accounting methods being referenced here: Cash accounting, and an accrual accounting method called Generally Accepted Accounting Principles (GAAP). The difference between the two should not be discussed while operating heavy machinery, but they’re different enough to make a “balanced budget” statement true or false.

According to Wisconsin’s state constitution, every year must contain a Cash balanced budget. By this method, Governor Walker has indeed balanced the budget, and so did Doyle, and McCallum (remember him?), and Thompson…

However, according to GAAP, Walker has not balanced the budget, but, to be fair, neither did Doyle, nor McCallum (he was the one who looked like Adam West), nor Thompson…

According to GAAP there will still be a structural deficit of $3 billion next year, and the year after that. In fact, if our current economic trajectory continues and Governor Walker doesn’t have the tax revenues generated by his 250,000 jobs, it’s possible that the structural deficit could worsen. (Put that on a yard sign!)

But who knows what will happen between now and 2014.

What we do know is that when someone claims to have “balanced the budget” or that “the budget wasn’t balanced,” the claim is baseless without context. They have every right to make it; but it isn’t communicating anything of value or substance if they don’t tell you the accounting method.

This message paid for by a friend of a friend. More of an acquaintance really. It’s complicated.

There is one comment

  1. Nicely done!