AP: States Having Budget Problems, Therefore They're In Recession

Many in the press seem to have difficulty distinguishing between the economy as a whole and individual governments' fiscal situations. Because of that, they seem to be believe that if a state government is having difficulty balancing its budget, there must be a recession in the whole state's economy.

That's what you would think if you read Andrew Welsh-Huggins's Associated Press report on Friday morning:

Many states appear to be in recession

The finances of many states have deteriorated so badly that they appear to be in a recession, regardless of whether that's true for the nation as a whole, a survey of all 50 state fiscal directors concludes.

The situation looks even worse for the fiscal year that begins July 1 in most states.

"Whether or not the national economy is in recession - a subject of ongoing debate - is almost beside the point for some states," said the report to be released Friday by the National Conference of State Legislatures.

..... The situation is grim in Delaware, with a $69 million gap this year, and bleak in California, with a projected $16 billion budget shortfall over the next two years, the report said. Florida does not expect a rapid turnaround in revenue because of the prolonged real estate slump there.

Mr. Huggins needs to learn that economies have recessions; individual state governments don't.

Jim Taranto at the Wall Street Journal's Best of the Web also noted the weakness in Welsh-Huggins's piece:

When a state's budget falls short, that means two things: (1) Legislators are spending too much. (2) Tax revenues are less than expected. To infer a recession from a budget shortfall is to ignore the first part of the equation and, quite possibly, to exaggerate the second. Recession, after all, consists of two quarters of negative economic growth; and growth can still be positive while falling short of budgetary projections. The AP, as usual, is jumping the gun on declaring a recession.

Many states have been overspending like crazy for years, as if the economic expansion that media outlets like AP seem to deny ever took place was going to go on forever. Of course, they never do.

The word "spending," associated with governments spending less, doesn't appear until the first of the three bullet points in the final paragraph of Welsh-Huggins's report.

Cross-posted at BizzyBlog.com.

Economy Budget Recession Wire Services/Media Companies Associated Press