We've noted previously that the Associated Press seems anxious to proclaim
the
American economy in recession, even though such a conclusion is premature
at
best. Here's the latest example, a dispatch by Andrew Welsh-Huggins:
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...
"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.
By mid-April, 16 states and Puerto Rico were reporting
shortfalls in their current budgets as the revenue those
budgets were built on--typically, taxes--fell short of
estimates. That's double the number of states reporting a
deficit six months ago.
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.
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