Thursday, February 17, 2011

Detached Reality and Altered States: The GOP Response to the Dayton Budget

"This budget is detached from the reality every other state has recognized," Minnesota House Speaker Kurt Zellers.

That's how Speaker Zellers describes Governor Dayton’s budget, especially the provision calling for new taxes on the wealthy. Similarly, Senator Amy Koch, majority leader of the Senate, calls it a “job killing budget.”

Job killing and detached from reality. This is the core argument of the GOP against the Dayton budget. Yet behind the name calling one looks in desperation for the Republican alternative and it has yet to emerge. Just last week Dayton vetoed the $1 billion in cuts the GOP had already suggested. Yet that $1 billion was more than $5 billion short of what is needed, and the GOP has yet to propose how they plan to find the additional money.

The truth is they do not have a solution. Yes they will rant and rave about tax hurting the state economy (little evidence that is true), that there is waste and fraud (little evidence that is true), and that the budget is a job killer (even less evidence that is true). However, they do not have a solution and are afraid to offer one. Why? Two reasons.

First, education, health, and public safety constitute 70%+ of the state budget. Any solution that seeks to address the deficit without cutting these items will not work. As Willie Sutton said when asked why he robs banks: “That is where the money is.” These items include K-12 and other popular programs for health. Cuts to them will be unpopular and the GOP does not want to be the party proposing them. They want to be a majority party beyond 2012 and if they get tagged as the ones who threw grandma out of the nursing home and took books away from Suzie, they are dead. They are hoping Dayton and the DFL take the lead on these cuts and then the GOP can escape blame. Moreover, the $1 billion cuts they suggested so far? Simply trial balloons on programs such as LGA to see how Dayton would react. So far, none of their proposals inflict clear pain upon voters.

The other reason they cannot swallow taxes? Their core constituency seems dead set against it. Tax opposition is the cornerstone of the GOP and the Tea party. To raise taxes is to violate a core belief no matter the reality. To raise taxes means the GOP is no different than the Democrats. To raise taxes also risks alienating many fiscal conservatives who might go elsewhere or not vote if the GOP supports taxes.

Thus the rock and hard place for the MN GOP: Be responsible, compromise, and accept some tax increases on the wealthy along with some spending cuts and risk alienating their base. Oppose tax increases and cut spending to popular programs and lose your majority in 2012. All Dayton and the DFL need to do is figure out how make this GOP dilemma work to their advantage.

Some will argue the GOP can make all these cuts without tax increases, without hurting the state, while also making additional tax cuts, and in the process grow the economy. Sound familiar? About 30 years ago Reagan said he could cut taxes, increase defense spending, and grow the economy without hurting the poor. John Anderson, in running for president against Reagan, said the only way that could be done was with “smoke and mirrors.” He was right then, and now. David Stockman confirmed that.

The basic GOP message on the economy, taxes, and the budget has been smoke and mirrors for 30 years. It has been about cost shifting, fund raiding, program bleeding, living on past spending approaches. It has been about blaming government waste, immigrants, and lazy welfare cheats as the cause of the financial problems we face. It has been about ignoring how the demand for tax cuts to benefit the wealthy have forced a hemorrhaging of the deficit at the national level. It has been about Pawlenty pushing through a law counting inflation for revenue purposes but not for the purposes of state expenditures.

It has been about simply being dishonest about the reality of the budget crisis we are facing. It is about constantly postponing to the future the problems with the present budget and spending scenario. It is about them saying that we do not have a revenue problem but a spending problem. It is about them clinging to a faulty supply theory of economics that is no more than a gloss for tax the poor and give the rich a free lunch.

Dayton’s budget reflects compromises, yet I do not see the compromise coming from the GOP. I give Dayton a lot of credit. His budget is grounded in reality. He is saying to those who got the feast it is time for them to pay for the meal. It is telling those best positioned to bear the risk and costs to assume their burden. It is telling people that we need to ask the best advantaged to stop being so greedy and recognize they have a community duty to pay their debts and help others.

Conversely, Obama and the national GOP are equally culpable in creating the Washington mess. Together they extended Bush era tax cuts that added nearly $1 trillion to the deficit and now both sides are whining that they need to make cuts. Last December Jesse Jackson got it right when he said the tax cuts then meant the poor would lose this spring. Even Pat Buchanan agreed. Obama admitted this week his budget did little to address the bigger structural problems with the budget. No one will do this until after 2012, if then. They have all created a mess they are unwilling to fix.

And then there is Bachmann. She continues to run across the country demanding fiscal accountability and cuts, yet she has no track record on delivering either. She seems more interested in worrying about whether women breast feed in public. Terrific! She has now cornered the anti-lactation vote.

I grew up in the home town of Rod Serling and the Twilight Zone. I know something about altered states. I wonder in the end, who is really living in a different reality.


  1. What is your take on the Governor's constitutionally dubious idea of taxing people who are residents of other states but spend under six months in Minnesota?

  2. David:

    I need to know more details. The general tax rule is that you have tax obligations in jurisdictions where you make money (as Al Franken learned) and where you have domicile. To determine the latter many factors are used such as where your doctors are, your home, and where you get mail. The issue for Dayton's plan is very fact specific regarding this. I need to see more details.