Friday, December 19, 2008

Oil don't float, y'all

An historically downtrodden part of the country on the periphery where the locals speak with a funny accent hit it big while the oil price is high. It looks like the region will bypass the economic downturn because of the insatiable need for their natural resources. Developed by prior administrations, oil project cash underwrite a spending spree. The only discontent is from the quarters who believe that low-ball forecast for the price of oil, $84 a barrel, is too pessimistic.

Taxes are cut and spending goes up as the new administration takes on the happy duty of spending a $1 billion surplus, appropriating millions of dollars for highways, education and health.

Then the price goes into a tailspin and the budget has to tighten.

Sound like NL? It does at first blush but welcome to the state of Louisiana. where the total oil take for the state is a modest 17% of the budget compared to the hefty 31% of the NL provincial budget.

The political repercussions are huge. Governor Bobby Jindal (R) has gone from national hero through his keen and prudent management of the Louisiana public purse to the goat scrambling to make ends meet torpedoing his national ambitions. According to this story:
But while the leading good-government group here, citing that addiction, warned last May against the Legislature’s plan for a $360 million income tax cut, Mr. Jindal called the tax break “terrific news” and happily signed it into law as legislators cheered.

Admonitions on fiscal prudence went unheeded, as they have so often here, and the bill is now due. Earlier this year there was an $865 million surplus; now Louisiana has a $341 million shortfall in its current-year budget, and next year the projected deficit is $2 billion.


Mr. Jindal recently pointed out that his state was the only one in the South to regularly lose more people than it gained.

“Anybody paying attention knew we were laying the groundwork for fiscal problems, as we cut taxes and raised spending,” said James C. Brandt, president of the Public Affairs Research Council in Baton Rouge, an independent group in Baton Rouge. “We hate to say, ‘we told you so.’ But unfortunately, we seem to be going right down that boom-and-bust cycle again.”
Those darned boom-and-bust cycles. They always get in the way of historical greatness.

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