CommonWealth Magazine, December 2021
After two years of unexpected soaring tax revenues, economists are predicting continued growth next year. But they caution that there are a lot of uncertain factors that could constrain growth, from inflation to supply chain issues to continuing labor shortages.
“None of us really know with any certainty where the economy will be a year from now,” admitted UMass Dartmouth public policy professor Michael Goodman, the co-editor of the economic journal MassBenchmarks, at a legislative hearing on Tuesday, even as he counseled cautious optimism. “There are major wildcards related to the pandemic, inflation, supply chain, and labor supply.”
From an economic perspective, the past two years have been buffered by predictions of catastrophe that did not pan out. While people lost jobs en masse and businesses shut down during the early days of the pandemic in 2020, the economy overall was saved by a massive influx of federal stimulus money to individuals, businesses, and government. State tax revenues soared, in large part due to federal largesse and a strong stock market. Spending has been constrained by supply more than demand, as many people saved money during lockdowns only to be confronted with supply chain issues when they tried to spend it. Businesses today are struggling to find workers, not the other way around.
At a consensus revenue hearing held by the House and Senate Ways and Means Committees on Tuesday, the first step in the fiscal 2023 budget process, economists predicted a continued rise in tax revenues next year – but a more modest one than the state saw this year. They all tempered their predictions by noting that there are many unknowns, including the trajectory of the pandemic.