Westover: Stinson Didn't Really Mean That - Skip the Numbers

Category: Economy

by Dave Mindeman

Sometimes the words that come from Craig Westover (from the MN Free Market Institute) are just simply astonishing in their twisted logic.

In his latest bit of astonishing "spin" he focused on the testimony of State Economist Tom Stinson. Here is what what was reported in the Pioneer Press about the testimony:

Indeed, before the Legislative Advisory Commission, state economist Tom Stinson estimated Gov. Tim Pawlenty's spending cuts will cost Minnesota 3,000 to 4,700 jobs. He also modeled the impact of a tax increase on job loss. The Pioneer Press reported "the $1 billion income tax increase that the Democratic-controlled Legislature passed and Pawlenty vetoed in May would have cost the state an estimated 1,000 jobs over the next two years."

Now Westover claims that he talked to Stinson about that testimony...relating Stinson's comments:

Stinson confirmed to me that the coverage of his testimony was "not entirely accurate" and interpretation of his data was somewhat "simplistic."

So, were the quoted numbers wrong?

First, Stinson's research did not analyze the DFL bill vetoed by the governor (as reported and repeated). The vetoed bill included income tax increases and pass-through tax increases on credit card companies and on alcohol products. Stinson was asked to evaluate the governor's unallotments in terms of job loss. A professional, he also modeled a hypothetical $1 billion income tax increase (over two years) because he was "trying to make sure people understood that there are no easy answers."

So, Stinson, did make a comparison of the Government's unallotments vs a "hypothetical" $1 billion tax increase bill. Just not the exact bill that was passed.

Help me out here.... is there some substantial difference in outcomes? A hypothetical $1 billion or an itemized $1 billion is still going to have the same effect. Stinson can't make any guarantees but we have been counting on his estimates and fiscal analysis for years -- and he has proven to be pretty darn accurate.

It appears that Westover simply refuses to accept the numbers. Pawlenty's cuts increase job losses by 3 to 4 fold over a budget balancing tax increase.

And then Westover tries to morph the words of Economist Joseph Stiglitz,...

Progressive think tanks often quote Nobel laureate and Columbia University professor Joseph Stiglitz saying that a reduction in government spending is more harmful to the economy in the short run than an increase in taxes. What they fail to note (but Stiglitz emphasizes) is the balanced-budget trade-off that puts policy-makers in a situation that is ultimately harmful to the economy.

"It is worth emphasizing," Stiglitz writes, "that any state spending reductions or tax increases are counterproductive at this time: they restrain the economy at time when it is already slowing."

What Westover seems to be missing is that Stiglitz is really emphasizing that government spending is the key....Keynesian economics. But when comparing the two options;

Nobel Prize-winning economist Joseph Stiglitz and others have found that tax increases, especially on higher-income earners, are less damaging to the economy than spending cuts.

Pennsylvania is currently debating their state budget and tax increases were pulled off the table there as well. Lawmakers in the Keystone State are getting a similar message:

Keystone Research Center labor economist Mark Price explained that both tax increases and state spending cuts have an impact on the economy, but budget cuts do more harm than raising taxes during a severe recession.

Price also emphasizes the oft repeated economic analysis;

Price said that is because every dollar in state budget cuts reduces a full dollar of economic activity. Individuals, especially higher-income earners, save a portion of their income, so tax increases remove less than a full dollar of economic activity. As a result, tax increases do not hit the economy dollar-for-dollar like budget cuts do.

But Westover continues to avoid the obvious:

So, let's be honest: The debate over tax increases or spending cuts is not about improving the state's economy. The choice is not between "good and bad" or "better and worse"; the choice is between "bad and worse."

I suppose you could define the choices as "Bad" and "Worse" but the real point here is this:

YOU STILL HAVE TO CHOOSE.

In the end, Westover punts on choices. Now, the new talking point is "reform". The correct choice as far as jobs is concerned is no longer a debatable point. So, in Westover's world, you need to talk about something else.

The legislative end game is neither "stupid" DFL tax increases nor "evil" GOP spending cuts (nor some really stupid and evil "bipartisan" combination); the end game is enabling Minnesota to be a competitive player in the global competition for the capital that creates productive jobs in the private sector. To correct that problem requires reform of the tax system and a redefinition of the role of government, and that won't happen if the Legislative Advisory Council stubbornly continues turning data points into talking points, which makes for provocative newspaper headlines but precious little progress.

Unfortunately, the legislative end game does come down to tax increases or spending cuts -- the budget has to be balanced. Reforming the system is just one more way to say -- I refuse to accept the correct answer.

Oh, reforming the tax system is perfectly fine future goal....bring it on. But right now...at this moment... the choices are more finite.

And quite frankly, the Governor's unallotment is the absolute WRONG choice.

The numbers don't lie.


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