Minnesota’s unemployment rate skyrocketed from 6.9 percent in December to 7.6 percent in January. This represents the largest growth ever seen in Minnesota’s unemployment rate over a one month period. (Data on monthly unemployment rates extends back to January 1976.) January 2009 marks the first time in the last quarter century that Minnesota’s monthly unemployment rate surpassed seven percent.
Minnesota’s unemployment rate has been significantly below the national average throughout most of recent history. However, over the last two years, Minnesota’s advantage relative to the rest of the U.S. has evaporated. Minnesota’s 7.6 percent January unemployment rate is equal to the national average.
The federal recovery plan recently passed by Congress and signed into law by President Obama is designed to halt or slow the rate of job losses during the remainder of 2009. However, while President Obama is trying to stimulate the economy, Governor Pawlenty appears to be dragging his feet.
Unlike governors in other states-such as Democratic Governor Jim Doyle of Wisconsin and Republican Governor Arnold Schwarzenegger of California-Governor Pawlenty is passionately resisting attempts to deal with Minnesota’s budget problems through a balanced approach of spending cuts and general tax increases. According to Governor Pawlenty’s strict ideological diet, general tax increases are not on the menu, despite the fact that unsustainable tax cuts in the past have contributed to Minnesota’s huge budget deficit.
Not only is Governor Pawlenty refusing to consider a broad-based tax increases, but he wants to further cut business taxes. Tax cuts will expand Minnesota’s budget deficit, making even deeper budget cuts necessary, which will in turn lead to even more job losses in Minnesota as teachers, police, and other public servants are laid off. As Wayne Cox, executive director of Minnesota Citizen’s for Tax Justice recently observed in a Star Tribune editorial, “What Obama giveth, Pawlenty taketh away.”
Under the Governor’s “no new tax” agenda, Minnesota is gradually frittering away its competitive advantage relative to other states. In light of Minnesota’s deteriorating economic performance relative to the rest of the nation as revealed in the January unemployment numbers, state policymakers should rely on a balanced approach to Minnesota’s budget problems that does not emphasis even more spending reductions to the exclusion of tax increases.
Be sure to check out our discussion on this topic going on over at Hindsight.