There’s a Budget Shortfall; Let’s Take Advantage of the Situation!






In early January, politicians across the nation will gather in their state Legislatures, lamenting the fact that the national economic downturn has resulted in “budget shortfalls” and that they don’t have as much tax money to spend as they’d like. Crocodile tears will flow as every special-interest group imaginable comes forward, explaining why their particular program should be spared the budget-cutting knife. In a spirit of “all for one and one for all” (or is it “hang together or hang separately”?), the “spending lobby” will offer dire prognostications, citing calamities of enormous magnitude if taxes aren’t raised to cover the gap between how much tax revenue was anticipated and how much is really being collected.

I’ll be the first to admit that the economy is stumbling. The joy ride we experienced during the last half of the 1990s came to an abrupt end when the stock market bubble burst two years ago. For the previous few years, a false sense of wealth provided by artificially high 401K’s had resulted in people spending and borrowing beyond their means. When the stock markets corrected themselves by returning to more sensible levels, a lot of people were left holding a bag of air and a load of debt. People scaled back their spending, which cut into retail sales, forcing companies to limit production, which resulted in higher unemployment levels.

In economics, everything is cyclical, and there are already indications that better times are ahead. In the meantime, there may be some short-term discomfort, but within that discomfort exists an opportunity to incrementally reshape and refocus our lifestyle and priorities.

Far from wringing our hands and lamenting the “loss” of these “valuable resources,” we should view the so-called “budget shortfall” as an opportunity for citizens to become more engaged in the political process, to help their elected officials make prudent budget decisions that set realistic expectations and more properly weigh the balance between public necessity and excessive government involvement in our lives. The current “crisis” should encourage taxpayers to compare the financial “shortfall” that exists in their household budgets and retirement funds to those in public coffers, and help lawmakers recognize that solving the public shortfall through increased taxation will only exacerbate the private shortfall.

A few disclaimers: I believe that government plays too great a role in our lives. I believe that taxes are too high, that government offers too much misplaced “assistance,” and that individual initiative and self-determination have suffered. I believe that individuals should have the right to succeed – and also the right to fail. I believe that, for the most part, we are born equal with the chance to become unequal, depending on our willingness to work hard, sacrifice, learn and grow. Most importantly, I believe people are where they are in life, not because of random luck, but by actions they have chosen to take, and that at any time in their lives, they can change their situation by changing their actions.

Elected officials seem to forget that every dollar of tax revenue they love doling out comes from the pockets of hardworking men and women; that every dollar government taxes and spends is one less dollar families will have to feed, clothe and shelter themselves. It all comes down to one question: whose money is it? The answer is, it’s our money. We earn it, and through the electoral process, we determine how much we’re willing to contribute to finance government programs. Since the 1930s, too many elected officials have acted like our income belongs to them; they act as if it’s up to them to determine how much of our money we get to keep. Understand this: Government cannot give something to one person without first taking something from someone else. In its attempt to “level the playing field” and redistribute the nation’s wealth, the spending lobby has provided a disincentive to become educated, work hard and excel -- to the detriment of America.

We’ve become a nation divided into “givers and getters” -- people who pay more in taxes than they receive in government benefits, and vice versa. Unfortunately, the polarization has increased in recent years, with more people getting and fewer people giving. Half the population pays practically nothing in taxes (4 percent of all collections), while the top 5 percent of income earners are responsible for half of all taxes collected. Some people think that’s great; not surprisingly, the vast majority of them are getters, not givers (I encourage them to go to their local library and pick up “Atlas Shrugged” by Ayn Rand, which describes what happens when a greater and greater burden is heaped upon fewer and fewer “producers”).

There are two reasons why state tax collections are 15-20 percent below expectations. Yes, people’s incomes are down; they’re not making as much as they were a few years ago, and thus aren’t in line to pay as much tax. But more importantly, the spending lobby was “betting on the come,” anticipating that the gravy train wouldn’t slow down. At a time when inflation was running 3-4 percent annually, public spending was rising at twice that rate. New programs were being initiated and existing programs were being beefed up. By increasing public sector spending, proponents of Big Government enlisted new members into their spending lobby and increased the reliance of those already beholden to state subsidies.

For 20 years, I’ve advocated the same solution: by cutting taxes when times are good and cutting spending when times are bad, we can slowly over time pare back the size of government, putting control and responsibility back into the hands of individuals. When the economy is rocking and rolling, the way it was in the late ‘90s, the increase in tax collections should be returned to the taxpayers, not spent like a lottery windfall. And when the economy drops into the toilet, as it will occasionally, tough choices should be made that force government to live within its means.

More accurately, government needs to live within our means. Recipients of government programs need to recognize that they are the beneficiaries of moms and dads working 40-plus hours a week, making the monthly mortgage and car payments, saving up for a family vacation or a college tuition payment, and on top of it all, trying to put something away for retirement.

Either way, there’s going to be a short-term budget shortfall in 2003; there’s only so much money to go around. The question lawmakers and their constituents need to ask themselves is, which budgets should take priority during a time of diminished resources, government’s or individual household’s? If advocates of Big Government get their way and increase taxes, the shortfall within individual households will be deeper and more painful.

If a decision is made to hold the line on public sector spending, the next question is: where to cut? If I were still in public office, I’d use this opportunity to bring more fairness and into play. My premise would be that people (and cities, and school districts) need to be treated equally and equitably, and that the recipients of public services (the “getters”) don’t deserve better than the “givers” receive from the private marketplace.

I’d question why some cities receive 70 percent of their total financing from state aid, while other cities receive less than 1 percent. That’s not fair. If it were up to me, I’d allocate state aid to cities on a per-capita basis, and I’d cap state aid at no more than 20 percent of a city’s overall budget. If cities want a full-time fire department, rather than relying on local volunteers, let them pay for it through local property taxes; don’t expect folks who don’t receive the benefit to pay for it.

In that same vein, I’d question the disparity that exists in school aid funding. Education should be state government’s top spending priority. The state should guarantee a funding level ensuring that every child receives an adequate education. If local districts want to raise local money to finance local projects or bump up teacher salaries to attract better staff, that should be up to local voters.

I’d prohibit cities, counties, schools and any other governmental unit from hiring a lobbyist. It’s ridiculous that tax dollars are being used to lobby for more tax dollars. That’s like an emaciated cat chasing its tail looking for dinner. We, the taxpayers, end up paying at both ends. Local units of government don’t need to hire lobbyists. Every city has a state senator and a state representative; it should be those elected officials’ responsibilities to represent the concerns of their local jurisdictions.

Along those lines, I’d immediately release every public relations staff member in every state department and governmental office. Private companies may need to package their products and spiff up their images; after all, they are competing in the marketplace. But government has a monopoly; it isn’t competing for customers. It’s a waste of money for government to hire image-makers. If the public or the media have questions about a given program, let the person running that program answer the questions.

I’d attempt to rein in the rising cost of health care by creating group purchasing pools and contracting with HMOs. The larger the pool, the greater the purchasing power, and the cheaper the rates. If recipients don’t like the minimal level of care, or the limited number of providers, they should be able to take their own money and upgrade their coverage, at their own expense.

For the next 12 months, I’d put state employees on a 32-hour workweek and cut their pay by 20 percent. For years, the public sector has offered better pay and benefits than the private sector; that’s why so many people have sought positions within state departments. When private companies run short of money, their employees bear part of the burden. There’s no reason (short of union contracts) that public employees shouldn’t bear that same burden. If they think they can make more elsewhere, let them apply for a private-sector job; my guess is, there’ll be a dozen people lined up to take their spot the moment they’re gone.

If the state wants to provide a kick-start to the local economy and create some new jobs, they should look at upgrading their infrastructure. Improved roads and bridges help trigger private-sector economic growth, and since the roads can be used for many years, it makes economic sense to finance the project by selling long-term bonds.

Will any or all of these things be done? Unfortunately, I’m fairly skeptical. The spending lobby is pretty powerful, and there are far more getters than givers. The special interests have lobbyists at the state Capitols; the taxpayers do not. Maybe over time, by taking incremental steps, we can begin to peck away at the 800-pound gorilla. But if it doesn’t happen now, when the pressure is on, it’ll never happen.


Previous Articles

Determine Your Beliefs
Personal Experience
Half a Loaf
Compromising on Strong Opinions
Economics
Short Shots

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About the Author;
Vic Ellison, Apple Valley, Minnesota, is the father of three and the grandfather of two, and has been married for 25 years. Vic is an independent businessman with extensive backgrounds in politics and writing. He can be reached at Vic@boomerjournals.com