During the unfolding economic crisis, debates about debt have proliferated. That discussion has been underway in Olympia as well and on Wednesday (Nov. 30), the Washington Commission on State Debt will convene to give final consideration to some recommendations on Washington's debt limit.
The Commission's recommendations are aimed a peculiarity in Washington's debt ceiling: the limit is pegged to state revenues averaged over the three preceding budget years. The problem with that forumula is that during a recession revenues start falling off, and that is precisely the time when state government might want to borrow to stimulate the economy with investments in large scale captial projects. Since the borrowing limit is a percentage of average revenue, that limit gets reached a lot faster as revenues drop.
The Commission's rather moderate suggestion is that the state Constitution be amended to "smooth out" the ups and downs created by changes in revenue by using six years of previous revenue rather than the current three and by including state property tax in the calculation. This wouldn't dramatically increase the ablity of the state to borrow, but would make drops in the borrowing liimit less precipitous when revenues take a downturn.
What about the politics of this seemingly minor fix? Well, conservative debt hawks are sure to jump on this as yet another example of big spending liberals trying to cook the books for a spending spree. Sadly, too many voters react to public debt as if it was the same thing as giving a credit limit increase to a teen ager who'd maxed it out buying video games. At the core of the debt debate is really a philosophical and economic one, should government engage in borrowing and spending when people are losing jobs in an economic downturn?
Make no mistake, Debt Commission panelists would say that this isn't a Keynesian revolution. It's simply an adjustment of the limit to allow more flexibility in tough times. But why have debt limits at all, especially arbitrary ones? Doesn't it make more sense to keep our fiscal house in order, get good credit, and then make sensible revenue and spending decsions collaboratively? If the legislature takes the commission up on its recommendations, we'll have a Constutional amendment on the ballot to force that discussion next year.