Tuesday, March 25, 2014

Potholes in logic

I recently flew home from Washington DC on the same plane as Minnesota Governor Mark Dayton.  I didn't know Dayton suffered from a degenerative condition which not only affects his speech, but also his ability to walk (which is clearly somewhat difficult for him).  I found him to be a genial, gracious and grateful person.  Quite unlike my experiences in talking with Michelle Bachmann or Keith Ellison, or even, Al Franken.  I found Franken to be bright and polite, but distant.  To be clear, I didn't talk about policy with any of these pols, I simply talked about life or made polite conversation.

At the time I talked with Governor Dayton, I wasn't aware the state would like run a large surplus for the upcoming biennium.  Had I known, I might have broken my policy of leaving politics aside (normally) when talking with pols, they get that all day long.  I might have because this situation is the Yin to the whole tax shift onto the middle-class' issue "Yang."  We've shifted, dramatically, the burden to fund the government (as a percentage of taxable income) away from the upper class and business, to the middle-class.  Yes, I know the wealthy pay double what they used to as a figure of total income tax receipts at the federal level, but folks, that's because the wealthy quadrupled their income in that period.  So where they used to pay 40% (or 60) they now pay 20% (or 30).   E.G. 2*.4=8,  8*.2=1.6.   They pay more because they HAVE so much more.  Not hard math here.

Yet, the fundamental question of how to fund government still is the essential one to many Americans.  What is a "fair" amount?  It's not some percentage, because we may chose to fund some new initiative (like say a war in Afghanistan to bring those who attack us to heel).  It's also, imho, not some flat figure for all, because asking a homeless person to fork over $20, let alone 20%, of their income is unconscionable for a civilized nation.  Asking Bernie Madoff to struggle through life on $80m per year rather than $110m, does not violate our sense of moral fairness, nor should it.

So, what is that number?  First, let's be clear about how government works (basic foundational ideas).  Government isn't like a household.  That kind of analogy is poppycock.  Government expenses go down during good economic times, and income goes up (as it should) because more people are working, more sales are being made (so higher tax receipts) and fewer people need help.  A great mistake to make is to assume we only ever need the funds expected/asked for during good economic times.  This is because during normal, and worse yet, bad economic times, receipts are lower and the needs, especially in bad times, are far higher.  We saw this during the financial collapse of 2008-2010.  Not only did the government have to step in to help people who were without food or shelter, it did that which nearly any economist will say is right, it helped stave off depression by keeping jobs going through public expenditure, including debt spending.  So, all things being equal, and admitting that some of any expenditure by a large organization, including one as large as the US (or a state) government, is waste, what is the "right" figure?  I've heard it asked by folks, "The schools should tell us a budget then stick to it, as a figure per student.  If they did that, we'd be ok with the increase they're asking for, but it doesn't ever seem to stop."  In short, figure out your needs (government), for the programs we, as a public, generally feel are necessary.  Tell us that figure, then live within that figure.

And that's the point.  What's that figure?  Well, it seems to me it has to be the number which is sufficient to fund the government during normal economic times.  Meaning, a number which pays for infrastructural investment, covers normal public welfare outlays, covers a peacetime defense budget, and so on.  It does it without gimmicks, it does it without debt.  It means as well that we have to have sufficient tax receipts to cover expenses during normal economic times.  Not a surplus, not a deficit.  Some on the right think the left can't stop spending.  I disagree, but I'd be interested to know if any on the right feel there is funding level which is sufficient?  Is there a time when tax cuts aren't needed, aren't right to engage in?  If we have enough money, and only enough money, to pay our bills under normal circumstances, isn't that the time to stop cutting taxes?  I get many think there are programs to be cut to pay for it, but assume that figure is essentially de minimus, inconsequential, are you done?  I know I'm done spending on new programs unless the public agrees a new program is right to do.  Will you meet that point halfway?

Going further, that means during boom economic times, we should bank some part of that excess for one thing, to pay the debt generated during down economic times, either by having it in the bank or to retire that debt if we don't keep excess on the front end.  In short, our tax burden should not be shrunk during boom times just as it cannot increase during down times.  Rebates, as opposed to cuts, may be possible if a certain amount of "rainy day" funds are banked, but cutting rates during boom times (as Tim Pawlenty AND Jesse Ventura did) is simply a sure way to guarantee you will have deficits when you have bad times because the tax rates won't generate the revenue needed to pay for the increased demands of an ailing public.

And so that brings me to what I'd have talked to Democrat Mark Dayton about.  We, the state of Minnesota, are $2b behind in road maintenance.  We are because we didn't properly fund our infrastructure for more than 20 years.  Road maintenance isn't the only area where we're behind on paying for the complex machinery on which our economic health rests, but it is a visible, obvious manifestation of that chronic underfunding - underfunding made possible by pretending a subsistence level budget was in fact the same as that which was necessary to keep our schools in good order, keep our bridges in good order.  In short, we didn't pay the rate we should have in normal economic times.  We underpaid.  We set our rates too low to pay the bills we incurred as a populace.  We were irresponsible citizens who pretended it was enough and are about to hand to our children a network of power service, sewage, roads, etc.. which is far worse in condition and relative capacity than we were handed by our fathers and mothers.  We've been deadbeats, cheap, and selfish.  Think not, then consider that non-defense related discretionary spending has fallen from the time of Reagan at slightly more than 10% of GDP to about 6%, in short, it was 50% higher under Reagan.

So, we have roads filled with potholes.  Potholes so numerous it's easily the worst in the 28 years I've lived here.  Potholes so numerous that it's hard to drive down a road, ANY road, and not hit a broken section of road, a section which might flatten a tire or even break a wheel.  We have lots of potholes in Minnesota, but they're rarely that bad individually, let alone in epidemic proportions.   The reason it seems to be an epidemic, based on my conversations with MN DOT planners, is this chronic, decades long underfunding.  Roads, rather than being scrapped down to the bed, were patched, over and over again.  Some of course have been re-done, but nowhere near enough, clearly.

So, I'd have said to Governor Dayton, please, rather than cutting taxes - or at least rather than cutting them very much, please, please, please, put a down-payment on our future infrastructure.  Pay for our roads first give out happy checks after that.  Anything else is crippling our infrastructure, anything less is a shot through with logical holes as are our inadequately maintained roads.

1 comment:

  1. You are correct Pen - before handing money back, we should have fixed roads and bridges, etc. Those benefit us all, those are essential to our success as a state in terms of both business, and our individual personal safety and security.

    We still have too many bridges in bad repair dating back to the I-35 bridge collapse. Some counties are worse than others, but most have at least a few if not all in bad repair.

    This is the time for that investment, and it would benefit the state as well directly and indirectly with job creation during the construction as well.

    Invest in our state and local assets, then AND ONLY THEN, refund surplus revenue. It's not surplus when we have that important spending that needs to be invested back into infrastructure.