Don’t do it: Manufacturing budget problems in St. Paul

Minnesota capitol

Source: Flikr Creative Commons

Stop me if you’ve heard this one: a state has a budget surplus, so the legislature and the governor strike a deal to cut tax rates permanently and increase spending permanently.  Things don’t turn out as well as the forecasts predict and the state finds itself with large budget deficits in a few short years.

These are the outlines of the budget deal starting to materialize at the Capitol this evening. And it’s giving me flashbacks.

Does no one in St. Paul remember the past 17 years?  In 1999, Governor Jesse Ventura, House Speaker Steve Sviggum and Senate Majority Leader Roger Moe agreed to exactly the scenario I sketched out above. This, along with a recession and demographic changes, caused repeated budget deficits during Governor Pawlenty’s terms and ultimately resulted in a $6 billion whopper of a deficit in 2011.

From 2003 to 2011, we had round after round of spending cuts, funding shifts, and bookkeeping shenanigans, year after year.

Governor Dayton came into office promising to put a stop to this. A Democratic governor and a Republican legislature dealt with the problems from 2011 to 2013, and that same governor along with a Democratic Senate and House put in place policies to prevent deficits from returning. Now, with government split once again there is the temptation to trade Republican tax reductions for Democratic spending increases in order to get an agreement that both sides can pass before the legislature adjourns.

This is madness. We shouldn’t throw away all that’s been gained in fiscal responsibility over the past five years.  Over the long run, the present value of government spending must match the present value of government revenue. Tax reductions and spending increases throw off this long-term balance and force either

  • a slowdown in the rate of growth of state spending or absolute reductions in expenditures;
  • tax increases in the future.

I say it’s better for both sides to walk away and leave everything as it is.  Then, we can have an election that gets at the real dispute: the size of state government spending. Democrats like the path we’re on, Republicans don’t.

We can have the argument, and we won’t have to manufacture a budget crisis to do it.