Governor Chafee’s budget proposal wouldn’t eliminate the state’s deficits over the next five years, but it would shrink them substantially compared with Governor Carcieri’s policies.

Carcieri’s final budget proposal in February 2010 forecast years of red ink for Rhode Island’s state government, with the expected budget deficit growing from $362 million in 2011-12 to $536 million in 2014-15.

The cost cuts and tax increases Chafee unveiled Tuesday wouldn’t eliminate those long-term deficits, but it would make them much smaller. The administration forecasts deficits of $126 million in 2012-13 and $411.4 million in 2015-16.

Here’s a comparison of Carcieri’s February 2010 deficit forecasts with Chafee’s new ones (the small operating deficit for next year will be offset by a $16 million surplus leftover from this year):

These forecasts are, of course, just that – forecasts. They “reflect policy assumptions as well as economic and demographic forecasts,” as the budget document puts it.

Chafee’s aides say they have more ideas for cutting expenses and raising revenue down the road. “This is the beginning of the attack on the structural deficit,” Administration Department Director Richard Licht told me yesterday. “We have to go further.”

But the easiest way to eliminate the deficit isn’t through tinkering with revenue and expenditures – it’s through healthy economic growth. A growing economy simultaneously boosts tax revenue as employment increases and profits rise while easing demand for social safety-net programs like jobless benefits.

“All of our challenges are made easier by a growing economy,” Chafee said in his speech last night. “If we demonstrate fiscal discipline, our economy will prosper. … I firmly believe that the reason the nation is in its current economic state is that we lost our discipline and let our deficits soar.”