If the Congressional Budget Office (CBO) is right, Governor David Paterson’s economic and fiscal projections for New York State are not gloomy enough.  The CBO expects higher unemployment and a somewhat slower recovery than Paterson’s budget has projected over the next few years, which means the revenue estimates in Paterson’s budget are still too high.

For example, Paterson’s Executive Budget forecasts that national Gross Domestic Product (GDP) will increase by 0.8 percent in current-dollar terms next year.  But the CBO’s recently updated economic outlook predicts constant-dollar GDP will shrink by 0.4 percent in 2009.

Congress’ budgeting agency predicts an unemployment rate of 8.3 percent for 2009.  Paterson’s budget predicts national unemployment of 7.6 percent.

On inflation, CBO forecasts the consumer price index will rise by just 0.1 percent, which verges on outright deflation.  Paterson’s budget forecasts a CPI increase of 1.4 percent.  (Inflation of just 0.1 percent would mean that Paterson’s proposed budget—the one Albany interest groups are treating as savage and draconian—actually represents a spending increase even in real terms.)

In the longer term, the CBO forecasts GDP growth of 14.4 percent from 2010 through 2012, while Paterson’s budget predicts economic growth at a slightly stronger 15.2 percent clip for the same period.   Compared to the governor’s budget, the CBO also forecasts somewhat higher unemployment and lower inflation lingering through 2012.

What impact would the CBO’s gloomier forecast have on New York State’s financial plan for fiscal year 2009-10?  Paterson’s Executive Budget provides the answer (on page 159 of the “Economic and Revenue Outlook” volume):

Should GDP growth for 2009 be weaker than projected, small business and farm income and partnership and S corporation income could also be lower than expected. Statistical evidence suggests that a one percentage point reduction in GDP growth translates into a decline in NYSAGI [New York State Adjusted Gross Income] of about $1 billion and a decline in personal income tax liability of about $50 million.

Using that ratio, the CBO forecast would indicate the state’s NYSAGI estimate should be lowered by $1.2 billion, and the tax liability estimate should be reduced $60 million.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

You may also like

It’s Official: New York State’s Second Quarter Economic Crash Was the Worst on Record

Further evidence of the massive damage done to New York’s economy by the coronavirus pandemic shutdown has emerged in the latest gross domestic product (GDP) data from the federal Commerce Department's Bureau of Economic Affairs. Read More

A Federal Emergency Rule Is Inflating New York’s Medicaid Enrollment

Strings attached to federal coronavirus relief funding appear to be inflating New York's Medicaid enrollment – and costs – at a time when the state faces unprecedented deficits. Read More

Sluggish Reopening: NY’s Private Job Count Down 1.1 Million From Pre-Pandemic Level

Six months into the novel coronavirus pandemic, New York State's private-sector employment recovery was the slowest in the 48 contiguous states—and getting slower. Read More

New York State Has Dug Itself Into Its Deepest Hole On Record

"State's Financial Hole Deepens" is the headline on Comptroller Thomas DiNapoli's press release accompanying the August cash flow report. Read More

State’s Per-Recipient Medicaid Spending Rises to 3rd Highest in the U.S.

New York's per-recipient Medicaid spending has soared to the nation's third highest rate, a sign of fiscal trouble for one of the state's most important programs. Read More

NY’s Slow Job Climb Continued in July, But Unemployment Rate Unchanged

As the economy continued its slow post-pandemic reopening, New York State continued to slowly regain jobs—but preliminary data indicate there was no improvement in the state's unemployment rate in July. Read More

New York Medicaid Spending Is Projected to Jump 6% in Fiscal Year 2021 (UPDATED)

Despite a round of cost-cutting this spring, New York's Medicaid spending is on track to jump by 6 percent this year thanks to a massive influx of federal aid. Read More

New York’s Post-Pandemic State Budget Picture Is Looking Worse

Governor Cuomo continues to burn while pols in Washington fiddle around the issue of providing more aid to states and localities in yet another federal stimulus bill. Meanwhile, New York State's plummeting revenues still haven't hit their post-pandemic bottom, according to the First Quarterly Update to the state's FY 2021 Financial Plan. Read More


Sign up to receive updates about Empire Center research, news and events in your email.


Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org


The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.