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Virginia budget faces $2.8 billion shortfall

December 3, 2008

Virginia’s facing a big cash crunch. Gosh, never would’ve seen that coming. At least Virginia’s shortfall is much less than the pits that many other states have been digging for themselves. But still, the growth of Virginia’s government creates budgets that are tight during the best of times, and run deficits in even mildly down economic years. As usual, the best solution in both the long and short runs is for government to take less of our money.

In the short run, a tax cut would increase investment and consumer spending.  And in the long run, it’d lead to smaller government, which would require less ongoing funding. And of course, even though it’s counter intuitive, cutting taxes increases revenues. Don’t believe the International Monetary Fund? Well, try Arthur Laffer (who got it from Keynes).

But whether or not lower taxes incrase government revenues, the truth of the matter is that it’s not the government’s money. It’s the citizen’s money. Citizens spend money on goods and services, leading to OTHER folks having money to spend, and so on. Since Government projects almost never generate revenue, any money that Government takes out of the system is likely to lower the funds available for investment that DOES produce revenue.

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