Headlines vs. Reality (Which is Still Very Bad) - Part 2

Our prior post on this topic dealt with the governor's documents that were given to journalists featuring a headline $53 billion "deficit." As we noted, the budget problem is big and painful, but $53 billion is not a good representation of it. The big number was surely meant as a kind of shock and awe treatment. The notion is to scare the legislature sufficiently so that the governor's May Revise (due next Thursday), will be obediently enacted.

It's clear that the headline was a shock. But the legislature has staff who can do the analysis, including the Legislative Analyst's Office (LAO). The LAO has now come out with its own analysis which, not surprisingly, puts the problem in another light. So there was shock, but awe at the legislature is unlikely.

The LAO also makes the obvious point, although with numerical forecasts, that if the recession quickly begins to reverse (what the LAO calls a U pattern), the budget outlook will be better than if we are in for a long-term slog (what the LAO calls an L pattern). The LAO points out that we do have reserves - thanks to Jerry Brown - which can initially cushion the shock (but not indefinitely, once they are gone).

You can find the LAO's analysis at https://lao.ca.gov/Publications/Report/4228.

UPDATE: A modified version of our earlier post is now on the UCLA Anderson Forecast page at:
https://www.anderson.ucla.edu/centers/ucla-anderson-forecast/may-2020-headline-vs-reality
or
https://issuu.com/danieljbmitchell/docs/may_2020_-_headline_vs._reality___ucla_anderson_sc