Bias Watch: Tennessean Spins the Bond Rating
The Tennessean seeks to maintain the fiction that the bond rating agencies want Tennessee to adopt an income tax to repair the alleged "structural deficit" in the state's tax code, with this editorial today.

Some facts:

1. Tennessee achieved its high bond rating in the 1980s and kept it well into the 1990s despite not having an income tax.

2. As conclusively demonstrated on this web site a few days ago, there is no correlation between a high bond rating and having a state income tax - indeed, many states with income taxes have lower bond ratings, while states without income taxes have the same or better bond ratings.

3. The primary cause of a falling bond rating is the use of one-time money to pay for recurring annual expenses. The new budget doesn't do that. However, the new budget was balanced with a tax increase rather than reducing the rapid growth of spending, hence the bond rating agencies know Tennessee state government still has not developed the fiscal discipline to restrain spending to match revenue growth.

4. When you hear a politician use the phrase "structural deficit," just remember that there is no such thing - deficits are not caused by "structural" defects in the tax code, but by politicians who want to spend more than they have. Tennessee's overspending - and its resulting budget shortfalls and falling bond rating - is the fault of legislators and governors who have repeatedly failed to restrain their spending to live within the constitutional growth limit since 1984. That's the year one Rep. Jim Henry sponsored the first bill to authorize exceeding the cap.

The easiest route to restoring our state's bond rating is to restrain spending to match available revenue. That's it. No new tax or tax increase is needed. As long as the legislature doesn't spend a penny more than the tax code brings in - and as long as governors don't propose budgets that spend a billion more than we have - Tennessee's bond rating will improve.

For more the on the real truth about the state's bond rating, see:
Poof Goes the Structural Deficit - with links to a Memphis weblog's dissection of a Memphis Commercial-Appeal story on the topic.

Also see Bias Watch: AP Misrepresents S&P. The full text of S&P's memo on Tennessee's bond rating - which doesn't mention the income tax, let alone endorse it - is published below this July 19 item.