Blink: How and Why Mark Dayton lost the Budget Battle

The loser always blinks first in a staring contest. Governor Mark Dayton blinked first.

The late Thursday afternoon announcement that Dayton and the Republican Legislative leadership had reached a tentative budget deal was a near capitulation by the governor. He failed to get his tax increases on the wealthy to fund his spending, instead agreeing to the final Republican offer to fund the budget with more accounting shifts and a borrowing off of the future tobacco settlement funds. Dayton gets to say he got more spending and maybe a bonding bill without social legislation that he opposes. But these victories were insignificant and irrelevant. What does the deal mean for Dayton, the Republicans, Minnesota, and perhaps the Democrats in Minnesota and at the national level?

What Dayton lost: It’s not just the budget battle

The budget battle was a contrast of dueling ideologies and claims to mandates. Dayton ran promising tax increases on the wealthy to fund new spending, erase the deficit, spend $1 billion on a bonding bill to put Minnesotans back to work, and change the direction of the state. The Republicans ran against taxes, new spending, and staying the course. They got more of what they wanted than Dayton.

Dayton consistently blinked. He cut back several times on his idea for tax increases. He kept reducing or hedging his electoral pledge on taxes, at each point further reducing the amount he wanted to tax. He even compromised on taxes, pleading instead for any type of revenue increase. At each juncture the Republicans said no, seeing weakness offers to compromise. In the last few days, despite claims his claims in court that the governor had inherent authority to address the budget shutdown, Dayton was never willing to use this claimed authority. Perhaps Dayton thinks to the general public this final giving in to the Republicans looks like he was the more responsible one willing to compromise in the best interests of the state, to Tony Sutton and the GOP it is a sign of weakness. A sign perhaps that in future negotiations Dayton will similarly give in.

Dayton’s decision to compromise potentially makes him irrelevant in the future. Think about it. Dayton gets a bonding bill. Politically who is helped by the bill? Not Dayton since the bill will long since be forgotten if he runs again in 2014. Instead, the Republicans benefit. They get funding for capital projects back in their districts that will help them with their re-election in 2012. The GOP does not need Dayton for social legislation. Gay marriage is already going to the voters as a constitutional amendment. The same can happen with abortion, stem cell research, and voter ID. The Republicans can end run Dayton at will in the future.

Moreover, Dayton just alienated the DFL and state workers. DFL legislators stood behind Dayton and he abandoned them, giving them little cover for 2012 and with their supporters. Among his base there is anger too that he gave up on them after they all supported him in 2010 and in the shutdown.

A bad deal for Minnesota

The budget deal is bad for Minnesota in many ways. Nothing was done to address the long term structural deficit the state faces; it is more budget gimmicks. It appears K-12 faces more shifts and possibly the borrowing from them never gets repaid. The tobacco settlement money gets raided, diverting it from the stated purpose to address health costs and education surrounding smoking. The borrowing here off the tobacco money means increased debt for the state. Thus, we continue to borrow and shift debt to the future in ways similar to what federal government has done for years. It is no different than paying off one credit card with another. In 2013 Minnesota will be back to the same place it is now. Minnesota is effectively deficit spending but budget tricks and future debt obligations hide that reality.

Perhaps Dayton is counting on 2012 producing DFL victories in the legislature that will change things, but do not bet on that.

But why did Dayton blink first?

The answer is simple: Dayton cared more about the government and Minnesota than did the Republicans. He was afraid of the lasting impact the shutdown would have on the state’ economy and government. Settle before more damage is done. The Republicans were willing to risk more–their negotiating strategy dovetailed with their views on government. So what if government is shutdown or crippled. They wanted to reduce government so hanging tough worked for them. For Dayton and the Democrats, they believe in government and what it does and the idea of supporting government by prolonging a shutdown ultimately proved too much for the governor.

So what does it all mean?

The Minnesota budget impasse and the shutdown was becoming a nationalized political issue much in the same way that the battle over collective bargaining became so in Wisconsin. Do Republicans in Congress read what happened in Minnesota as a sign that if they took hang tough Obama too will blink? Obama too cares more about government that Congressional Republicans. He faces a tough election in 2012 and he has already demonstrated willingness to compromise (the Bush tax cuts) to reach out to moderate or swing voters. Look too to see him blink before or more than the Republicans in Congress.

Afterthought

It was not the closing of many governmental services that drove Minnesotans to anger about the shutdown. The real crisis seemed to be when the racetracks and lottery closed, bars had difficulty getting beer, liquor, and cigarettes, beer distributors could not stock Minnesota shelves, and the baseball fans faced the prospect of baseball without beer. Perhaps life without gambling, booze, and smokes is what brokered the compromise. What would Minnesota be without the them?