Bob Collins debunks the notion that families are paragons of budgeting virtue, while governments are drunken sailors. (He’s not the only one).
In fact, Collins shows, families and governments both tend to employ the tactic of “living in a sea of red ink in the long run, with the hope that the money will appear.”
13.9 percent of a family’s income goes toward servicing their credit card debt, according to creditcards.com. And more than 1 out of 10 households have more debt than total income. And that’s just credit card debt.
State and local governments are required to balance their budgets, and borrowing is more limited than with families or the feds. So faced with the choices of cutting programs and/or raising taxes, states choose Door Number Three: Short-term accounting gymnastics and other one-time solutions that amount to nothing more than a “Future Tax,” because the bills eventually will become due, while the punted problems compound.
Minnpost has a good summary how Minnesota has gradually dug itself in a deeper hole since 2001. Last year, Gov. Tim Pawlenty used one-time solutions to close 41 percent of the state’s budget gap. Only oil-rich Alaska did more temporary patching. What’s worse,
Minnesota faces a structural budget imbalance of $5.4 billion, not counting general inflation. In other words, the state has a chronic shortage of funds to meet obligations that have remained in place through several rounds of one-time fixes in which the decision makers have neither raised taxes nor formally cut the programs tied to those obligations.
Jeff Van Wychen at MN2020 puts the consequences for Minnesota in broader perspective, showing how
Minnesota’s state and local government revenues and expenditures have declined significantly in comparison to other states. The corresponding decline in public investment has coincided with a decline in Minnesota’s economic performance and quality of life.
[…]
Of course, correlation does not equal causation. However, competing explanations do not explain the full extent to which Minnesota’s economic performance has deteriorated since 2002. The trends highlighted in this report leave “no new tax” proponents with a difficult question to answer: why did the reduction in the size of government in Minnesota not produce the relative improvement in Minnesota’s economic performance that was predicted? To this point, the economic experiment undertaken by the advocates of “less government” and “no new taxes” has been a failure.
Proponents of sustained public investment have long argued that the failure to maintain critical public investments would lead to deterioration in Minnesota’s economic performance relative to the national average. This is precisely what has occurred.
In light of these realities, most states are being forced to reassess their Future Tax strategies.
For instance, Colorado is now bumping up against the limits of its experiments with tax cuts and spending ceilings. Its practice of handing out business tax credits to spur economic development has resulted in 80 percent of the state being included in some type of special enterprise zone.
Will Minnesota taxpayers finally demand both parties call No Tax a Future Tax? Or, accustomed to betting the farm that tomorrow will be better, will we go out and buy the flat screen today?
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