An economist with the Sandlian Center for Entrepreneurial Government at the Kansas Policy Institute is concerned about the level of government spending in light of economic indicators that could point to a recession in the near future.
“The economic siren has flashed red,” said Michael Austin. “The U.S. could see a recession in roughly about two years. Unfortunately, the worst part about it is that state government is overspending, like a drunken sailor and, trust me, I don’t think Kansans are prepared for when that hangover hits.”
The interest rates on short-term bonds are higher than interest rates paid by long-term bonds. This phenomenon has happened before a recession for every recession since 1969.
“This inversion, so to speak, does not in and of itself cause a recession,” said Austin. “It’s just a gauge of sentiment in the economy, just like you talk about where investors are pooling their money.”
Austin believes government needs to start saving for that upcoming rainy day.
“How does a recession affect government budgets?”, Austin asked. “On one side, a recession creates elevated unemployment. It shrinks business activity. That demand for social services grows and that, of course, pushes up government spending. It also has an additional effect, because it’s now sputtering the economy, the amount of tax revenues that can be gained also fall short.”
According to the most recent publicly available information from the Kansas Legislative Research Department, the state government will need $1.4 billion to keep the piggy bank filled according to state
law, which would mean leaving a 7.5 percent ending balance each year.