Issue of the Week: Did Someone Fail Macroeconomics 101?
Plus Hero of the Week
Why are we having so much trouble balancing the
state budget? Previous governors came to office facing large deficits and
managed to balance the budget and move the state forward. The first question is:
Should we have a balanced budget at the state level? The answer is yes, and the
state constitution even mandates that we have a balanced budget each biennium.
As a result, we always balance the budget. The last governor faced a $3.2
billion deficit when he came into office, and the budget got balanced. The
issue is: How do we get to this balanced budget without killing jobs, hurting
the economic recovery and destroying the fabric of the state we love?
First of all, the state's economy is not really out
of balance now, and Gov. Scott Walker's emergency budget repair bill was
totally unnecessary. The budget shortfall of less than $140 million for this
biennium could easily be pushed into the next budget cycle. For example, the
state owes the state-created Patients Compensation Fund money that could be
paid in July, when the new budget begins, and that alone would more than cover
the $140 million potential shortfall for this year.
Is this irresponsible budgeting? Absolutely not. The
Patients Compensation Fund will get paid and the budget will be balanced. It is
simply a question of how to handle this matter in a way that creates the
minimum disruption to our lives and Wisconsin's economy. Every homeowner faces
this type of decision in December. Should I pay my property taxes before Dec.
31 and deduct that expense in the current year so that my taxable income for
this year would go down, or do I push this payment into the next year and pay
my property taxes in January before the Jan. 31 deadline? The property taxes
will get paid, but each homeowner considers their current economic
circumstances and decides in which year to make the payment.
Now that it is clear there is no need for an
emergency budget repair bill, how does the state deal with the projected budget
deficit for the next biennium? Since the economy is beginning to grow, the
state must be careful not to cut back unnecessarily and hurt the recovery. In
pure economic terms, the state government's money is no different than yours or
mine when it buys things from the private sector like new tires for its fleet
of cars or new computers for its offices, so we don't want to hurt our local
private businesses and economy by dramatically cutting back on needed state
spending. Also, since we have a constitutional mandate to balance the budget
without borrowing for operating costs, we have no fear of building up long-term
debt for the state. It is again like the homeowner who has to manage his or her
bills. Do I pay my entire property tax bill at one time or do I pay it in the
two installments as provided by law? Private businesses make decisions like
this every day as they "manage their payables."
Then it comes down to sound budget and policy
decisions. Previous governors like Republican Tommy Thompson and Democrat Jim
Doyle managed to balance the budget and keep our economy growing. For the next
budget starting July 1, 2011, the state legislators need to do what they do
each budget session: Scrutinize the budget requests from each state agency,
including the transfer payments to local units of government, and make wise
budgetary decisions that include not only cuts, but also expansions of good
programs.
Then they need to look at the other side of the
equation: revenues. As they say, Americans have always wanted more government
than they are willing to pay for.It
is time to look at fair taxation and increasing the taxes on those who can
afford to pay. According to a Wall Street
Journal/NBC News poll, 81% of the population believes that we should
increase taxes on the wealthy. Not only is it fair, but also consider: When you
increase taxes a little on the wealthy, in general they do not alter their
spending patterns; economic demand is barely, if at all, affected. If that step
is too much for some legislators, they can increase the tax rate on the wealthy
with a sunset clause so that it goes back to the current rate when the economy
recovers, "full employment" returns and the tax revenues return to a higher
level. Right now the state needs smart economic decision-making to grow our
economy, not right-wing ideological decision-making.
Heroes of the
Week
The
International Union of Painters and Allied Trades (IUPAT) District Council 7
Thank you, IUPAT members, for volunteering to repair
any damage to the state Capitol from the historic protests in opposition to
Gov. Scott Walker's union-busting proposals. The union—along with the rest of
Wisconsin—scoffed at the Walker administration's estimate of $7.5 million in
damages to the Capitol from taped signs to the interior of the historic
building. (Actually, most of the tape used to put up posters in the Capitol was
painter's tape, which does not cause damage.) That estimate has since been
downgraded about 95%, to less than $400,000. IUPAT business manager John
Jorgensen called Walker's $7.5 million estimate "yet another gross overreach."
We agree. And we encourage the Walker administration to respect protesters as
they fully exercise their First Amendment rights in the people's building.
Trying to smear the protesters as "slobs" or vandals is not the way to lead
Wisconsin forward—especially when the protesters represent the will of at least
60% of the state's residents, according to recent polls.
Event of the Week
Milwaukee LGBT Community Center Celebration
Celebrate
the Milwaukee LGBT Community Center's new location at its annual fund-raising
gala on Saturday, March 12. This year's theme is "Welcome to Your New Home,"
appropriately enough, since the center has moved to 252 E. Highland Ave. The
celebration includes the "Family Fanfare" from 10:30 a.m. to 2:30 p.m. for LGBT
families with kids or grandkids. Funnywinks the Clown will entertain and Stick
to Your Ribs catering will provide food. The adults-only portion of the
celebration—the "Sumptuous Soiree"—will run from 6 to 10 p.m. Los Angeles
comedian Nadya Ginsburg, best known for her YouTube series "The Worm," will
perform and an auction will be held. For more information, or to purchase
tickets, go to www.mkelgbt.org or call Patrick at 292-3065.



I think the article on macroeconomics misses Walker's point. She Shepherd sound like its ok just for the state to "paycheck to paycheck" with our tax money. As long as we can pay the bills we are ok. No, its not. Its not just about balancing the budget. Its about cutting out all the waste and unneaded spending. Its about restricting workers ability to get excessive pay and benefits. Its about cutting taxes so wealthy people and businesses will stay in Wisconsin or come to Wisconsin. Taxing the rich is never the answer. First what is rich? I know a lot of very wealthy people. They pay little to no taxes. Why? Because they don't have an income. Their business might have an income. Their trust accounts in the Bahamas might have an income. Many have double tax free Wisconsin municipal bonds -- and we could never tax that, that would be unlawful. Many wealthy people who live in Wisconsin don't legally live here. They "live" in a tax free area where their vacation home is located. Most wealthy people don't own any property. Their trust accounts own the property. When I read all this crap about taxing the rich, I have to wonder if the writers know anything at all about tax planning and avoidance designed for wealthy people? I know a lot of business owners that have very strong positive cash flows but they show a loss every year and pay no taxes. They are just following the law. You can raise taxes on the rich all you want but its not going to actually produce more revenue. Maybe a little, mostly on the middle and upper middle class folks who collect decent sized paychecks. But the really wealthy -- no way.
A smart family lives withing its means, sets some money aside during good times, does not spend it just because it's burning a hole in their pocket. This money is handy to draw upon when times are bad, this being the feast or famine world that it is. (Note: stock-traded business won't do that, cash surplus invites hostile takeovers).
For the family, and the state, the trouble with having "good times" lasting too long is that saved money is temptation, why not reduce the tax revenues, or spend some of it on both liberal and conservative programs, (depending on who is in charge at the moment.)
Besides, the movers and shakers of business (or you can call it profit and greed) will market and make it the "right idea" to dump ALL savings into the economy. Dumping all that savings into the market place does grow the economy faster, which is great if you are set up to capitalize on that spending... at the expense if those doing the spending that is. It's the American way!
My earlier comment on how it took a large middle class to make this growth over the last fe decades happen.. Actually, growht due to most of us taking out long term debt, people who shouldn't have building houses from the ground and such.
Imagine if I could set up a situation where everyone (but me) takes out a 30 year note, good intentions to have another 30 good years in which to pay it all back. Me and my businesses collect all that borrowed money, then yank the rug out from under the whole mess. I got my money, but now some bond-holders are stuck holding those 30 year notes, and no way for the people to pay them back. That's the key... I already got paid, and did not get taxed on it. It's someone else who got stuck holding the bag.
It means "I'm winning", (unlike Charlie Sheen).
That's the macroeconomic capitalist way.
Can you point out a real situation that mirrors the one you outline in your 5th paragraph?