Happy Fourth of July!
Quote of the Day
Things are beautiful if you love them.
Jean Anouilh
Minnesota Legislature v. Gov. Dayton:
Shutdown: Thumbs UP!
You could almost see this coming when former US Senator Dayton (D-MN) became the first Democratic governor elected in roughly 2 decades with a narrow 9000 vote victory among over 2 million cast in an election where the GOP also captured legislative control for the first time in decades. Like a number of states, Minnesota budgets on a 2-year cycle. There's a $5B deficit with Dayton wanting $35.7B, roughly an 8% increase in spending, but the GOP wanting $34B in spending, comparable to projected general revenues. The Democrats claim that the 8% increase in spending is solely attributed to baked-in economic-based program costs attributable to a weak economy. The Republicans cut state employment by 15% in the budget they passed, but Dayton vetoed; Dayton is arguing the cuts are too painful for various agencies, state-supported education (universities, etc.), social net programs, etc.
Take a wild guess as to what Dayton wants to do to maintain his budget numbers. I can't figure out the Democrat solution; it makes my head hurt. Could we possibly be seeing the same fight going on at the federal level? It's coming to me...coming to me...coming to me: CLASS WARFARE. Who would have ever guessed? Dayton thinks, like any good elitist progressive, it's only natural that irresponsible state spending should be solely and fully borne by the top 2% of wage earners. Never mind the moral hazard of robbing Peter to pay Paul, those hits to business growth prospects or other unintended consequences (e.g., high earner relocation to more tax-friendly states).
The Republicans have offered some concessions in terms of bartering certain tax cuts, while Dayton has basically been willing to consider only the trimming of his proposed class warfare tax hikes, no concessions on spending cuts. The result is a current shutdown (except for certain politically necessary services like the court system and prison operations). The Republicans have proposed partially funding certain services enjoying bipartisan support, which Dayton has predictably rejected, knowing the funding politically popular spending would undermine whatever leverage he has to impose a class warfare tax hike. He feels that the GOP will pay a heavy political price for not funding that spending and hence they will cave in. This is not bipartisan negotiation in good faith but a form of extortion.
I do not see a good outcome for Dayton and his fellow DFL ideologues on this. The partisan talking point is that the GOP is typecast as the party of the 2%, which Democrats will take anyday, figuring the Bill Gates of the world can and should pay more taxes (which, of course, they already do, even under a flat versus progressive tax rate system). Dayton is like Obama: he doesn't have a legitimate spending cut program; he's simply locking down on unsustainable spending and then demanding more from the most unfairly overtaxed segment of wage earners. It's one thing if we are talking about across-the-board tax increases in conjunction with across-the-board spending decreases. I haven't looked at detailed budget items, but suppose for the sake of argument we are talking Medicaid spending. Clearly changing eligibility criteria (i.e., making program eligibility more selective) will affect program costs.
Kudos to the GOP legislators in the state of Minnesota for holding fast to their election promises to deliver on a more frugal state government and righteously rejecting DFL tax-and-spend as usual policies.
The Debt Ceiling Kerfuffle: Some Thoughts
There is a gimmicky argument being made that suggests that Section 4 of the Fourteenth Amendment provides Obama an end run around Congressional action needed to approve a debt ceiling increase:
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.First of all, US debt is the gold standard, from the early days of the republic when Alexander Hamilton deliberately cultivated our pristine reputation for paying off our debt instruments. Servicing of existing debt has ranged up to nearly $451B in recent years in a government that draws $2.1T or more in annual revenues. There are a variety of other ways to deal with the budget without taking on a net increase in the national debt: we could sell resources, raise a national sales tax, reduce or defer overall spending and non-interest payments, etc. An unlimited national debt ceiling would be problematic in the sense it transfers risk to holders of US securities, which in fact undermines Section 4 in theory. But most importantly, revenue and spending policy is the exclusive privilege of the Congress, not the Executive Branch.
Second, the GOP needs to do a better job of handling political spin. We need to think of things like privatizations of nonessential functionality, globally competitive mineral royalties, asset sales, a consumption tax, etc. But any so-revenue enhancers have to be fair, not in the sense of morally corrupt class warfare policies, but simple and across the board, e.g., a national sales tax. We either get serious about 40% of the budget being unfunded or EVERYBODY has to pay more for whatever spending levels you don't have the political integrity to cut.
Musical Interlude: My Favorite Groups
ELO,"Roll Over Beethoven"
