Monday, June 08, 2009

Permanent Spending Cuts, Temporary Taxes

In adjourning without having submitted a budget to a legislature that technically could pass a budget over Gov. Jodi Rell’s veto, Democrat leaders of the state House and Senate were simply following Mark Twain’s axiom: Never put off until tomorrow what you can put off until the day after tomorrow.

The problem is: The day after tomorrow invariably arrives the day after tomorrow. And on that day, the problems you’ve bid goodbye to return, sometime with a vengeance.

Connecticut ’s problem is a massive 8 or 9 billion dollar deficit, but the problem is multi-faceted.

Now, there are three ways a government may discharge a deficit: It may raise taxes, cut spending or combine the two. Each of these methods of discharging deficits has consequences, some of which may worsen the economic condition in which we find ourselves.

It is very much an open question whether one of these solutions, raising taxes, is possible without inducing something very much like a heart attack in the body politic. People pay taxes according to their means and, largely owing to a severe business contraction and chronic overspending on the part of the same legislators who last week applied Twain’s axiom to their budget, people are, shall we say, maxed out, the way over-strained credit cards become maxed out.

However, there are some among us who argue that not all means are created equal. The rich have more means than the rest of us; would it not be a good idea to plunder them, while the rest of us go about our daily business getting and spending and laying waste our powers, as the poet says?

There are a few problems with this solution. The rich – we need not feel too sorry for them – also have been hit by what some people in Washington persist in viewing as a mini-depression. Indeed, the 8 or 9 billion dollar deficit that now hangs over our heads like a Damoclean sword has been caused in part by the indigence of the rich who pay a large proportion of the state’s brand spanking new income tax, a gift from the astoundingly rich Senator Lowell Weicker, who has been dithering over what state he really wants to live in. There is a reason why Weicker is so mobile: He’s rich and can afford to escape unsavory circumstances by moving hither and yon. And this presents a problem for demagogues in the legislature who argue that citizens of Connecticut really can have their cake and eat it too simply through the expedient of getting the millionaires to pay for more cake. They can move and take their wealth with them to states less intent on plundering them.

But supposing we were able to pin them to our state the way butterfly collectors pin their prey to their boards; we should have to kill them first, of course, and you can’t get money from a dead butterfly. This still would not solve the problem. At best it would delay a solution, pretty much the way procrastinating legislators “solved” the problem of an 8 to 9 billion deficit by adjourning before they voted on a rational budget.

The rich ain’t gonna get us out of this ditch.

Here’s why: The real problem in Connecticut has been caused by accumulative excessive spending, a problem only a brave few in the legislature want to solve.

Prove it, doubters say. The proof is in the astounding growth of the bottom line of the budget. The 8 or 9 billion deficit yet to be discharged is larger that the last pre-income tax budget of a little less than two a decades ago. And the present budget is three times as large as that more modest $7.5 billion budget; that’s an increase of an entire budget for each of the three governors who followed the late Gov. William O’Neill into office. Collectively, these governors, and the legislators who during this period used budget surplus after budget surplus to increase spending, are the problem.

Republicans recently have been manfully but unsuccessfully resisting this road to perdition. But, heavily outnumbered, they will not succeed in preventing free spending Democrats from raising taxes on everybody, not just millionaires. However, the resistance can blunt the blow by insisting that any tax levied to expunge the deficit will be self terminating through an attachment to any tax increase of a statutory requirement that the tax increase should be eliminated when the debt has been discharged – so that when the good times return, the state will be positioned competitively with respect to other states and the tax succubus will be tolerable, temporary and equally shared by all the state’s “investors.”

Spending cuts should be permanent, tax increases temporary.
Post a Comment