Roughly speaking, Keynesian economic theory follows the same principles when dealing with governments trying to manage GDP. When times are good governments should save money by running at a surplus. Then, when times are bad they can use the surplus to provide stimulus to the economy, thereby offsetting the negative impact of private sector cutbacks.
This theory ensures a government safety net during hard economic conditions and the sustainability in funding needed for government to provide services when people need them the most. The theory so closely ties to the common practiced used in most households across America it is hard to understand why its application is still up for debate.
My state, Pennsylvania, seems to be at the forefront of ignorance to common sense economic theories. The new Governor, Tom Corbett, has decided the best way to solve our budgetary woes is through huge cuts to government services, the biggest of which is in education. Since taking office at the beginning of the year, Corbett has proposed slashing education funding in the state by billions of dollars, including cutting funds to public schools by over $1 billion, higher education by $644 million, and a 16% cut to adult education programs.
At the same time, Corbett has taken a hands off approach to finding new ways to increase state coffers which could potentially negate the need to cut “extravagances” such as basic education. The primary example of this is his policy on natural gas drilling in the state - which commonly uses a process called “fracking”. The states frackers have received free access to drill on public lands, and their revenues are not taxed by the state. This in itself is unusual, but taking into the account the massive environmental impact fracking has on water tables (it essentially makes water flammable) you have to wonder who did the cost/benefit analysis that justified allowing these companies to run unencumbered from basic taxes on revenue.
Corbett recently announced that he “might” support municipalities to impose fees on frackers, which is a step in the right direction, but still doesn’t help address state budget issues. Corbett, and other governors before him, have stated that they do not want put fees on these drilling companies for fear they will leave the state. Still, shouldn’t everyone have to share the same tax burden, particularly an industry that doesn’t create very many jobs and has a substantial negative impact on the living conditions of people in the area?
I have to wonder where these unsustainable, seat of the pants policies are going to leave our state 10 years down the road. If we keep on the same track, we are going to have a state filled with uneducated mine workers drinking water that you can light a camp fire with, and mining executives building their mansions on whatever usable land is left. That may sound like a stretch, but Pennsylvania made this mistake before, just look at Centralia.