Posted: 03/04/09 21:50, Edited: 03/04/09 21:51
by Dave Mindeman
During the Minnesota budget debate, Governor Pawlenty has still maintained that he has the right approach to solving this chasm of a deficit. He states unequivocally that increasing taxes will not happen.
But his budget will deepen Minnesota's economic tailspin. It is the wrong policy...it is bad policy...and if the legislature does not alter its trajectory, Minnesota will lag behind the recovery as deeply as it is plunging downward with economic decline.
Here are the problems:
1) No tax increases. As has been stated previously, reductions in state spending in a consumer economy has a more detrimental effect on economic activity than tax increases. Economists may differ somewhat on that point, but at least 2 Nobel laureates have put forth that reasoning and stand by it. Some spending reductions are obviously necessary, but Pawlenty's budget hits the areas that we can least afford to take them. Read on.
2) LGA Cuts Deepen the Problem. The Governor has been an ardent advocate of using his knife on local governments. Despite the protests from cities and counties, Pawlenty continues to balance state budgets on the backs of local officials. But there is an inherent problem with that. The main source of revenue for local governments is property taxes. LGA was constituted by state government to ease that burden. Yet, in a climate where housing and commercial properties are going into record foreclosures and property values are in freefall, Pawlenty wants to take away their lifelines. During his press conference, he was delighted to point out a recent article outlining that many cities have budget reserves that have not been tapped into. Unfortunately, that is a temporary luxury. Home price adjustments (and the resulting reducting in property tax collections) will not hit local governments until the next budget cycle. The losses will be staggering and when coupled with state aid losses..... well,let's just say the end result is unimaginable.
3) Health Care Is A Vital Part of Social Safety Net. Pawlenty has been using his "bully pulpit" to preach to us the sins of the ever increasing Human Services budget. He talks of the double digit increases that are seemingly out of control. Yet, here we are with unemployment moving towards the 8 or 9% level. We have people without jobs and without health care. At a time when it is most needed, state health and human services are the prime object on the Governor's chopping block. We, as a state, have to make a moral decision here.... do we help people in need or do we say, sorry, we can't afford to help you. I don't think Minnesota, if given all the facts, would ever choose the latter.
4) Massive Cuts will Mean More Job Losses. When you talk about cutting state government, you are really talking about cutting government jobs. State services are handled by people and if the state service is eliminated, the job is gone as well. The Governor thinks that a state wage freeze will mitigate those losses. But seriously, let's ask the real question. Should government employees, across the board -- state, county, local, shoulder the burden of state budget cuts so that we can protect 3.8% of Minnesotans making over $200,000 per year from the "burden" of a tax increase?
So there you have the real consequences of the Pawlenty methodology for balancing this budget. It is a prescription for economic disaster. It negates stimulus, it loses more jobs, it will end up raising property taxes (guaranteed), and it will force our poor to forego health care at a time when they are losing their jobs and their homes.
It is unconscienable. It is wrong-headed. And it is unecessary.
Let's set some ground rules for this budget:
1) Make your cuts; but use a scalpel, not a machete; and cut the areas that have the least economic impact. Minimize job loss and minimize pressure on local governments.
2) Now is the time for Tax restructuring. Expand the sales tax to services -- expand to clothing if you must, but only as a last resort. If sales taxes are broadened, you should be able to lower the overall rate... meaning the items that are purchased the most will probably end up with a lower tax rate.
3) Income Tax surcharge for the wealthy. Pawlenty's budget burdens the 96.2% of Minnesotans who have had to weather the burden of the Bush tax policies as well. It is time for the wealthier among us to join in some of the pain. Place a surcharge on income taxes over $200,000. Sunset it if you wish. Make it go away automatically after 5 years..fine. But, this is a crisis for all Minnesota. Everybody has to be part of the solution.
4) Protect Health Care...or Better Yet; Fix It! Businesses and individuals all suffer under health care that has no cost ceiling. It is my own fervent hope that the Federal Government will find a viable system for universal coverage. Single payer would be the best and most cost efficient method...but something needs to be done now. Minnesota could be a leader in this regard...they have been in the past and have the people knowledgable enough to make it happen. This is important! If you want to create a strong and favorable business climate....forget corporate tax cuts --FIX HEALTH CARE!!!
Minnesota continues to give high marks to a Governor who is truly making our economy worse. Oh, we give him a pass because the national economy is such a mess -- but the numbers and statistics give us a much clearer picture. Minnesota's job market has gotten worse faster than the national numbers. Our budget numbers whip saw like an out of control roller coaster and instead of solving a structural budget problem, our Governor finds gimmicks and one time money solutions and accounting sleight of hand. And then he has the nerve to condescend when others suggest alternatives.
Governor Pawlenty's "no new taxes" policy has simply lessened Minnesota's quality of life. It has not even reduced taxes... increased fees and property tax increases have more than wiped out any possible savings the Governor's budget might have constructed.
Somebody has to hold this Governor accountable. He certainly isn't volunteering any responsibility for himself.