The downturn in the housing market and the credit crunch instigated by poor lending practices have warned of a recession for months now. Some market analysts are now predicting a decrease in real incomes including UW-Madison’s very own Dr. Don Nichols. Recession means that people’s incomes and national production decrease after taking inflation into account. Government budgets are meant to act as natural economic stimuli in times of recession. Unemployment insurance and welfare payments generally increase during recessions while government tax revenues generally decrease across the board. Basically, we see budget deficits in time of recession so that the economy doesn’t stumble too much.
The fact that Wisconsin doesn’t have a budget as of yet could place the state in even more of a fiscal crunch if a recession does occur and the legislature rushes to pass a budget that is fiscally irresponsible. By not passing a budget, the state continues to spend as usual, but does not take into account higher price levels than years past. This prevents Wisconsin from growing. For example, the UW System will not be able to expand and develop their programs since their budgets remain the same even as costs increase. However, this scenario is probably better than a larger budget that requires higher taxes at a time when tax revenues and consumer incomes could possibly fall. What ensues is a large budget deficit, something most Wisconsinites don’t want to see.
So it is my contention that, in the face of possible recession, it is time for Wisconsin to be especially careful with the passing of a fiscally sound budget. If all this extra time results in a more responsible budget, then so be it.