The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)

May 19, 2008

The fix that fixes very little

I’m not ready to call our governor Deficit Dumping Doyle, but qualified praise is due to Gov. James Doyle for doing a better job at addressing the state budget shortfall with his vetoes than the Legislature did in creating the budget repair in the first place.

Doyle cut through veto an additional $201 million of the Legislature’s pathetic $69 million in budget cuts to address the state’s $652 million budget deficit. He also vetoed the accounting trick of delaying $125 million in school aid payments into the next budget cycle, which helps decrease (though not by much) the structural deficit. He also increased reserves from the Legislature-approved $25 million to $100 million, which is more responsible (though not by much).

The “qualified” part comes from Doyle’s grabbing another $101 million from the transportation fund, which increasingly does look like, as someone else first put it, the State Capitol branch of a payday loan store, or, perhaps, the state’s version of the Social Security Trust Fund. He also cut a property tax cut provision for low-income housing, a bad move except that the tax cut provision didn’t belong in the budget repair in the first place; the tax cut should be approved as ordinary legislation, not in the budget. He left in a tax increase on “certain rental and interest payments by businesses to related entities,” which is a bad idea and something that also didn’t belong in the budget repair. Another provision required the state to negotiate smaller salary increases with state employees; he vetoed that on the grounds that current state employee contracts have come in $25 million less than estimated in the current budget.

Doyle also left in another provision he should have vetoed — the requirement that any school district that provides four-year-old kindergarten must offer it to all students in the school district, instead of targeting it to students who need the early help. The jury is out on the effectiveness of four-year-old kindergarten (which my oldest son did at a private preschool and which my youngest son is doing in public school), but if you believe it would help some children, then taxpayer-funded 4K should be offered to those children and not necessarily every child, when it becomes taxpayer-funded daycare. This and the state employee contracts are Doyle’s usual sop to, respectively, the teacher unions and the public employee unions, proving once again that, in politics, you are who your supporters are.

Doyle might be Wisconsin’s original Third Way politician. He has learned from Bill Clinton how to triangulate — to place himself between Republicans and more liberal Democrats — for his own political benefit more than his party’s. As with Clinton, through Doyle’s six years as governor, Democrats have controlled one house of the Legislature only once, the Senate since 2007. Wisconsin also has as many Democratic constitutional officers as before he took office. (In 2006, Republican Treasurer Jack Voight lost to Democrat Dawn Marie Sass, but Democratic Attorney General Peg Lautenschlager was replaced by Republican J.B. Van Hollen.)

Budget-cutting can be simple, depending on your approach, but it is not easy. The estimated budget shortfall totals almost 5 percent of the budget, which one could eliminate by cutting every budget item by the same 5 percent. Remove schools from budget-cutting, though, and everything else must be cut 10 percent. Remove schools and the University of Wisconsin System from cuts, and now everything else must be cut 20 percent. And as Wisconsin Taxpayers Alliance President Todd Berry pointed out, only 17 percent of state spending is for state government. We are paying for spending excesses that go back into the 1980s and 1990s, and of course there remain those who think we’re not spending enough on their pet project or cause.

This budget crisis illustrates the political importance of who is where, and also demonstrates that where politics is concerned, there is no such thing as being too cynical. Governors cannot create legislation, although Doyle, with the most veto power of any American governor, can do the next best thing through his use of the line-item veto. (Wisconsin governors used to have more veto power, but that was taken away through the constitutional amendments ending the “Vanna White” and ”Frankenstein” vetoes.) Doyle wants to enact a new tax on hospitals, believing that somehow the federal government and not those paying for health care will pay for it, but couldn’t get that through the Republican-controlled Assembly. Doyle got a party-line vote (with one exception) in the Senate, but needed to cobble together a majority of, but not all, Republicans and enough Democrats to get Assembly approval.

As German chancellor Otto von Bismarck put it, “Politics is the art of the possible,” so it makes one wonder what kind of state government we’ll have if the Assembly shifts from Republican control to Democratic control with the Senate after Election Day Nov. 4. One also wonders what will happen should Doyle decide not to run for reelection in 2010 and, without the pressures reelection efforts bring, decides to let his inner liberal come out.

Even if this turned out better than it could have, this is far from the preferable way to address state budget issues. Doyle’s vetoes only slightly affected the structural deficit and had no discernible effect on the accrual deficit, which total almost $4 billion. Rep. Dean Kaufert (R–Neenah) and others believe the time has come for a public participation process in which the state’s budget functions are prioritized to allow elected officials, in Kaufert’s words, “to find out which programs are viewed by the public as low priorities or expendable and would help balance the budget in real terms” to avoid making this a yearly occurrence. A smaller scale version of this has been done in Sheboygan County.

Remember what I said that where politics is concerned, there is no such thing as being too cynical? Unfortunately, public participation in any budgeting process, as the Public Policy Forum points out, usually devolves into “significant participation from union members and advocacy groups, but little from regular citizens.” When faced with the question of should taxes be cut or should your favorite government function be maintained, voters more often than not answer yes. At least in this state, too many Republicans are RINOs (“Republicans In Name Only”) or Eisenhower Republicans — they like the same programs Democrats like, but they want to spend a little less on them, and they want people to be taxed a little less. And since the primary motivation of politicians is reelection rather than serving the public, making responsible decisions (the Taxpayer Bill of Rights, for instance) inevitably loses out to pandering to the politicians’ favorite special interest groups (who believe that any dollar cut from their cause will be the end of the world as we know it).

Big decisions will have to be made that will affect a lot of people, and those decisions get increasingly difficult the longer they are put off. Since the biggest expense of state government is personnel costs, real budget cuts must include cutting government jobs, as well as reducing the Rolls–Royce benefit packages government employees get. Government programs are programs, not “investments,” and need to be arranged in order of what is really important and what isn’t, and those that aren’t important need to either be severely cut or eliminated. And government needs to be funded by direct, transparent taxation, not indirect taxation such as business taxes, which, as all of us (but not this misguided writer) know, are not paid by businesses, but are paid by consumers.

What’s the alternative? A longtime elected official I talked to last week says the alternative is to watch, perhaps in the next two decades, Wisconsin turn into “Alabama with high taxes” — a state with crumbling infrastructure but high taxes, a state in which any native with the wherewithal to leave for better climates (whether milder winters or better economic prospects) will leave.

No comments: