Wednesday, September 19, 2007

Budget wishes and realities

I read this letter-to-the-editor in the Freep and immediately thought "be careful what you wish for."
Our best hope now in this budget mess is for government to shut down in the state. We don't fear it; we welcome it -- the longer the better. The services we receive are easy to live without. In fact, I can't think of a thing they do for me or a thing I'd miss. Government shutdowns don't hurt any of us who pay the bill, only those on the public dole.

Jon Etnyre, Sterling Heights
So what is Jon referring to? Michigan legislators have till the end of the month to come up with a new budget or the state faces a shutdown. Republicans want $1 billion in budget cuts along with a state income tax hike from 3.9 percent to 4.4 percent. Gov. Granholm said the state can't sustain such high cuts without hurting people and has proposed $300 million in cuts. Democrats are also proposing a hike in the state income tax to 4.6 percent.

How did our state get to this point? Jack Lessenberry explains:
The present crisis has been a long time coming. The politicians have starved state government and set up the current crisis by slowly choking off public money through a series of tax cuts.

Stay with me for a minute while I explain how that happened: For many years, Michigan's income tax was 4.6 percent. That was cut to 4.4 percent in 1994, when Proposal A increased the sales tax to finance education.

That was fine and dandy. We wouldn't be in the mess we are in if they had just left it at that. But the Legislature then gradually cut the income tax rate from 4.4 percent to 3.9 percent — without replacing that money.

What that meant was that every year the state came up short. Those who wanted the tax cuts said, "Fine, that means we should cut spending." In fact, the Legislature did, gradually eliminating programs, some of which (sorry, liberals) probably deserved to be eliminated.

But those savings weren't enough to make up for the loss of money, and inflation and other factors (such as the growing prison population) meant the state needed more and more money for legitimate needs.

Things also have gotten worse as the dwindling auto companies threw people out of work, further reducing tax revenues coming in.

What did our lawmakers do about that? Ducked responsibility, that's what. They raided whatever savings and "rainy day funds" the state had. They shoved the problem over into future years. Last May, in a move that should have gotten the legislators all impeached or shot for dereliction of duty, they sold off money the state was due to get in future years for an outrageous fraction of its worth.

According to the national settlement against the tobacco companies, every state gets a pot load of money every year to compensate for medical expenses incurred by the millions of people tobacco kills. Michigan's irresponsible lawmakers traded $900 million in future payments for $400 million right then.

That was, again, to avoid dealing with this year's budget problem. They also shoved a lot of the deficit into next year's budget. Now, the party's over.

There are no more funds to loot — not enough, anyway, to come up with the money needed. Now, the cupboard is just about bare, and the state starts out with a deficit of $1.8 billion. Not million, billion.
Granholm has already reconciled more than $4 billion in budget deficits and state government is at its smallest size since 1973, but Republicans - and Jon - want more cuts that will increase class size in our schools, take police off the streets, take away health care from thousands, and possibly shut down the state. It's easy to say "shut it down," but are Republicans and people like Jon really prepared to live with the consequences? This letter-to-the-editor writer isn't:
I was fascinated by the Sept. 14 letter "Go ahead, shut the state down" (from a letter writer in Sterling Heights), which said shutting state government down would hurt "only those on the public dole."

One out of every three state employees works for Corrections, so I guess we can release all those prisoners; may I suggest Sterling Heights as a nice place to send them? Then there are the remaining state mental hospitals staffed by state employees; we can send those patients to Sterling Heights as well.

I guess the writer eats only at home, so he will not miss the state employees who survey restaurants to make sure they are compliant with public health requirements. And he must never go to the hospital or know anyone in a nursing home, so he will not miss the state employees who survey them for compliance with state licensure and Medicare and Medicaid rules.

The writer must never leave Sterling Heights to visit any of the state parks or forests, so he won't miss the state employees who work there. And he doesn't travel the roads that the Department of Transportation work on, so there is no need for those people. He must never visit the casinos, so he won't miss the state employees who need to be working for those to run.

Hopefully he is not a doctor, nurse or in any other type of job that needs a state license, because the people who process those licenses -- and those who investigate reasons why some doctors, nurses and other professions need to lose those licenses -- will all be gone.

He probably has never been unemployed, so he would not need the state workers who handle unemployment. And, of course, he would never need the state troopers for any reason, nor the Secretary of State's office.

Andrea L. VanDenBergh, Belleville
I side with Andrea on this, and she didn't even touch on the sick, poor or children, all targets of Republican cuts. And what about all the people who will lose their jobs because of the cuts? Our state needs more jobs and more revenue, so how does it help our economy to put people out of work? Those people pay taxes on their income and spend it in their communities.

Lessenberry sums it up best:
Taxes are the price we pay for a decent life. Restoring the state income tax rate to 4.6 percent would cost someone who makes $50,000 about five bucks a week. You blow more than that on vending machines. Failing to raise taxes might double college tuition, lower the quality of our schools at the same time, risk the public heath and raise license fees through the roof.
The cupboard is almost bare, and regardless of what the Republicans or people like Jon say, a majority of Michigan's voters support a tax increase combined with reasonable cuts. "Reasonable" is not throwing people under the bus for a few dollars.


JPowers155 said...

Well said, as usual. I often wonder what rock people must be living under when they seriously do not think that government is important. From the roads we drive to the food we eat, our local, state and/or federal government in likely involved.

Anonymous said...

This isn't difficult. What has happened is that Michigan - under liberal, central-planning leadership that seeks to pick "winners and losers," - has pressed for bigger and bigger programs, costing more and more tax dollars.

Business - the Golden Goose that provides jobs - has been choked, and is wobbling to get out from under the choke hold by crossing the state line.

Michigan consumers have been paying business's taxes in HIGHER PRICES, a neatly hidden tax that the politicians figured could go on forever.

When Michigan chose Jennifer Granholm, after the first miserable four years, instead of a person who understood about how Golden Geese propagate, what did they expect? And to add insult to injury, they gave the Michigan House away to poltical types that feel oh so comfortable taking from the producers to build a captive constituency.

There is a long-term solution for Michigan voters: It's called scrapping the Michigan Income Tax, and enacting the Michigan FairTax. Under the FairTax, Michiganders, visitors - even illegals - will pay for government the way Michigan working families are paid, when something is sold.

Under a FairTax, no more politicians' hands in our family paychecks; no more politicians' hands in our business checkbooks. No more income tax code to harass individuals and businesses, complete with audits, interest, penalties, even confiscation of property and jail.

Under a Michigan FairTax consumption tax, Michigan families pay for government in the process of meeting their family's needs. And every Michigan resident family will receive an advance monthly reimbursement on taxes expected to be paid on poverty-level spending based on family size. Thus, it is a progressive tax system, yet voluntary because it will apply only on new retail purchases, not used, and on services.

The Michigan FairTax is a revenue neutral proposal that will put Michigan workers in charge with information on the cost of Michigan government on every retail receipt! And, the politicians will no longer be able to pit poor against rich, individual/family against business.

Anonymous said...

David Freddo at National Review Online observes:

"Michigan has now lost net jobs two years in a row. Its unemployment rate is a staggering 7.2 percent, the highest in the nation (only Mississippi comes close with 6.7 percent). Between June and July, the state lost 20,000 jobs. It has lost 70,000 since July of last year. Michigan also ranks third in home foreclosures, with almost 14,000 new filings in July.

"Between state and local property taxes, sales taxes, income taxes, and business taxes, the state of Michigan siphons off 11.2 percent of its state’s economy — above the national average, according to the Tax Foundation. With few jobs and high taxes, it’s hardly surprising that Michigan’s population declined last year — not just in proportion to the other states, but an actual decrease of 5,000. Meanwhile, the state has been buying nationwide ads daily on CNBC, in which actor Jeff Daniels urges entrepreneurs to move their businesses to Michigan. Another version of the same ad runs on local stations, urging business owners to stay in Michigan.

"In this context, a large tax increase hardly seems practical.

"The Mackinac Center identifies several other sacred cows that can be eliminated from the budget with hardly anyone noticing a difference. “History and Arts” subsidies can be eliminated, public transit funds can be cut, and the state’s “prevailing wage” law can be repealed for combined savings of nearly $300 million. A change to the state university funding formula and a cut in payments to wealthy school districts could save another $96 million. The state could save $614 million more by using private prisons for a small percentage of its inmates and requiring reasonable co-pays for state employee health insurance policies.

"And that’s just the beginning.

"So far, Democrats have only offered to make small cuts in future spending increases, but their first resort for dealing with the budget shortfall is a tax increase. They began their marathon vote with hopes that as many as 12 Republicans would support their plan if “bribed” sufficiently with promised expenditures in their home districts."

Kathy said...

Jpowers, thanks for the kind words.

Ian, your proposal is unrelated to the topic at hand. The legislature has to work with the tools they have available at this point in time and the Fair Use Tax is not one of them. Thanks for the comment though.

Bartlett said...

Gerald L. Ford School of Public Policy/University of Michigan:
"Whereas the overwhelmingly negative portrayal of Michigan's economy over the last half-decade has resulted in a public sense of gloom and self-doubt, this report presents evidence of numerous positive developments occurring in the state economy... While there are certainly long-term struggles yet to come, there are also signs that Michigan is navigating an historic transformation between economic models, as its former industrial foundation gives way to a growing post-industrial knowledge economy."

Phil Power:
Michigan's economic weakness was confined to just three industries - manufacturing, construction and government. They play a disproportionate role in this state's "misery index." Together, those three sectors accounted for more than 80 per cent of Michigan's net declines from 2003 to 2006, even though they only made up around 35 per cent of the state's GDP.