NO ONE THINKS WE WERE UNDERGOVERNED IN THE '80s:

The Coming Reset in State Government: My fellow governors and I are likely facing a permanent reduction in tax revenues. (Mitch Daniels, 9/04/09, WSJ)

The coming state government reset will be particularly wrenching after the happy binge that preceded this recession. During the last decade, states increased their spending by an average of 6% per year, gusting to 8% during 2007-08. Much of the government institutions built up in those years will now have to be dismantled.

For now, my state's situation is far better than most, but it won't stay that way if we fail to act in Indiana. At present, we are meeting our obligations, without raising taxes, and still have over $1 billion in reserve. But the dominant reality is that even assuming the official revenue projections are accurate (and they have been consistently too rosy for the past two years), the state of Indiana will have fewer dollars to work with in 2011 than it did in 2007. Most other states face similar or worse prospects.

Unfortunately, the slow down will be too brief to result in any permanent reductions in government.

Posted by Orrin Judd at September 4, 2009 2:16 PM