Tax Guru-Ker$tetter Letter
Saturday, July 13, 2002
Emily Sedgwick has a good explanation of why the State governments are faced with unexpected budget shortfalls. As I've explained several times before, State & Federal government budget forecasters are complete idiots who would never succeed in the real business world.
They took a windfall year of tax receipts, when the stock market was going gangbusters and people were reporting huge capital gains and extrapolated that those kinds of gains would continue forever. As I said a few years ago, when I explained why all government budget forecasts are pure garbage, this is the same as someone who happens to win a lottery or a big casino jackpot adjusting his spending patterns under the assumption that he will continue to win the same amounts year in and year out.
Why shouldn't the government accountants assume that tax revenues would be consistently high for as long as could be imagined? Their spiritual leader, Bill Clinton, proclaimed that he had tamed the business cycle, so that markets would always go up and never go down.