How about the other side of the coin? What happens when governments fail to spend enough? Arizona is the model Grover Norquist-inspired state, where those in charge of the government strive mightily to lower the tax burden on their citizens. How's that workin' out for them? Not well, actually. Not well at all.
Relative to the size of the Arizona economy, state government general fund revenue has fallen significantly since 1995, likely reaching a historical low in the near term. Expenditures also have declined relative to the size of the economy. Spending increases beyond the needs of a growing state are not a cause of the current deficit or the long-term structural deficit.
Okay, so Arizona must have made spending cuts to match their smaller resource base, right? Wel-l-l-...
These revenue cuts were not matched by spending cuts of a commensurate size because of the increasing population-driven demands for public services and infrastructure, such as education and public safety.
"Could we cut our way out [of our budget crisis] mathematically? Anything is possible, but for practical purposes it can't be done, unless you want to start releasing prisoners, shutting down universities, and eliminating extracurricular activities at schools. We've already has a $2 billion haircut over the past two years. Try another $2 billion and see what the state looks like."
Hardest hit was the Department of Water Resources, whose budget and workforce was slashed by more than half. The statewide planning division, responsible for helping secure future water supplies, was reduced to just two people and funding was eliminated for remote sensors that can alert communities to flood threats.
This is what they call going beyond cutting the fat, this is cutting into the muscle, heck it's cutting into the bone of the state. This is cutting a dire necessity that could very easily end up costing lives. And...
First, unlike much of the private sector, demand does not decline for most public-sector services during a recession. In some government programs, demand rises.
This is an extremely important point. The idea of "everyone tighten your belts" or "do more with less" is just wildly impractical. During a recession, it's time for deficit spending, not for cutting expenditures. The Grover Norquist idea of shrinking government down smaller and smaller is a pleasant fantasy for those who think about government in entirely abstract terms. For those of us who live in the real world, the idea is completely insane.
Update: Further commentary on the cat food commission. Pete Peterson is such a charming fellow [/snark]