Advanced Search
A Deadly Sin or Two
Here’s my confession: I cultivate both pride and parochialism regarding Minnesota. I grew up here, listening to the broadcasts of farm reports while I ate breakfast at our kitchen table. I miss the farms. Although I have been “back” in Minnesota for a decade; I still struggle with the changes that took place during my 15-year absence.
I joke to my husband that I apparently brought him to Minnesota to witness the demise of the state whose values I loved. So many of those values I returned here for are presently on scarce display. Values like funding for libraries, family farms and public education. Who ever likes watching something you love struggle?
I miss cooperation. I’m not so naive to believe that things at the state capitol were all wine and roses during my youth. I realize the Minnesota Miracle was hard fought and hard won. Yet, at least there was an understanding of pulling in the same direction for the welfare of the state. Let me say that again: The welfare of the STATE. Not the: “either my idea/or your idea” we witness today in LGA spending, bonding bills or the entire 2012 state legislative session.
Instead, Minnesotans created the atmosphere and cooperation that led us to the unanimous conclusion that we would graduate our children from the finest public schools the country had to offer. We supported small businesses and farmers because we invested in their shops and products—in short, our own communities.
Contrast that with today’s proposal by the dominant party in both the house and senate to (mal)adjust the state constitution by circumventing the Governor rather than work with him on issues concerning Voter ID; worker’s rights and the anti-marriage amendment. Each of these issues deserves to be vetted and carefully considered (and heard) by people we elect to do this work.
I want there to be a tangible benefit this session: Movement toward the good of all the citizens of the state, not just the ones who already have everything. That gets accomplished when people participate in the exchange of ideas—also known as democracy.
I know I have echoes of, “Why can’t we all just get along.” I realize we are a different generation with different demands, but I’m not sure why cooperative civil discourse got lost along the way. I guess we chalk it up to another piece of collateral damage in the larger “death of the commons.”
Posted in Fiscal Policy | Related Topics: Government Policy Minnesota Legislature State Budget LGA
We Pay More Because We Make More
With conservatives spending the last decade telling anyone who would listen that Minnesota is a high tax state and a bad place to do business, how do they expect to attract entrepreneurs and thriving companies?
That’s like a business person shouting in front of her store, “I’m over charging you! You can get it cheaper down the street! There’s no value in my product!”
Still, you’re sure to hear conservatives echoing this discouraging rhetoric again this legislative session. In fact, a recent op-ed ran in several northwest Minnesota newspapers making similar misleading claims.
Yes, looking at per capita taxes in isolation from all other factors, Minnesotans pay modestly more than most neighbors. But high per capita income states like Minnesota almost always pay more in taxes than low per capita income states. That’s because high income states receive less federal aid, have higher labor costs, and demand superior educational systems, public services, and infrastructure. In fact, that’s how they got to be high income states in the first place.
People in the know—including experts at the Minnesota Department of Revenue and many knowledgeable business leaders—agree that taxes as a percent of personal income provide a more meaningful way to measure tax levels. By this measure, taxes in Minnesota are less than in Wisconsin and North Dakota and comparable to Iowa. In fact, if we look at all sources of revenue—including not just taxes, but also fees, special assessments, and other sources—Minnesota is below the national average.
While some low wage, low skill job providers along the South Dakota border might look west for lower tax climates, I don’t see the high wage, high skill jobs running for the Dakotas. Instead of engaging in a race to the bottom, Minnesota is best served investing in education, a skilled workforce, quality health care, roads, and smart economic development strategies that will attract businesses and encourage existing companies to expand.
Posted in Fiscal Policy | Related Topics: Income Tax Tax Fairness
6 Comments ->
Banking on Cooperation
Thrivent Financial Bank is "half way home" to being a member-owned, member-governed cooperative credit union and wants to "complete the journey," its president and chief executive officer explains after reports that the Thrivent bank is seeking regulatory approval for the conversion.
The bank is a subsidiary of the member-owned Thrivent Financial for Lutherans. The conversion to a credit union will simply make both the parent and the subsidiary member-owned and democratically controlled, said Todd Sipe, the president and CEO.
Minnesota 2020 likes the route Thrivent is taking. We've advocated for member-owned co-op, credit unions and mutuals, which are all considered cooperatives in international business literature but are incorporated under different business codes in the United States. We see the need for more such enterprises to rebuild the U.S. and Minnesota economies with business ventures that have members and community best interests at heart.
Sipe said small banks and credit unions have become popular after the financial crisis linked to large banks that lead to the Great Recession. That is not a consideration behind Thrivent's seeking regulatory approval to become a credit union, however. He doubts any Thrivent financial institution or program was mistakenly thought of as a large Wall Street or multinational bank.
"This just aligns the bank with the member owners," he said.
Thrivent is essentially a mutual insurance organization started to serve Lutherans anywhere. It evolved and grew over time, including starting banking services that are open to everyone regardless of faith affiliations.
Posted in Fiscal Policy | Related Topics: Co-ops Financial Industry Personal Finance
Graph of the Day: Free Money!
Investors are actually paying the U.S. in some cases to keep their money safe. Check out the graph.
You’re looking at the daily cost to the U.S. of loaning money, adjusted for expected inflation. What’s most noteworthy is the tail end of that graph, which shows present interest rates. Lest you doubt yourself, I’ll say it: The real interest rates on five, seven, and ten year interest rates are negative. Ten-year rates dropped below zero last month, seven-year rates have been there since July, and five-year rates have stayed that way for almost a year now.
In the short term, investors are literally paying us to borrow their money.
There are a few questions this fact inspires. First is the obvious, “Why?” Why would investors give their money away?
The answer is, that’s just how bad the global economy is right now. With Europe in deep financial trouble and consumer demand very low around the globe, there are so few good investments—so few “sure things”—that many investors are willing to put their money in treasury bonds for a yield that’s lower than inflation. The U.S. has never defaulted on its debt, and investors consider repayment guaranteed.
Another question worth pondering: “What should we do about this free money?” Given the state of the economy, I can think of a few things. The federal government could put that money to work on one-time expenses that won’t add to our long-term debt problems, such as investing in our deteriorating infrastructure and other projects that could put unemployed Americans back to work and stimulate consumer demand.
We can also use these low interest rates to buy ourselves time toward addressing that long-term debt issue. We do have problems down the road that we should tackle before they’re knocking on our door. And since we don’t have any real deficit problems staring us in the face right now, we should be able to sit down and work out our budget problems in a calm, rational manner.
...Well, we’ve all seen how well that’s worked out.
A short-term focus on investment financed by near- and below-zero interest rates coupled with a long-term focus on balancing budgets is exactly what this graph prescribes.
Posted in Fiscal Policy | Related Topics: Financial Industry International Trade Economic Recovery Federal Government
Taxes are Price of Civilization
Oliver Wendell Holmes wrote, “Taxes are the price we pay for a civilized society.” It is a quote that could raise quite an argument in today’s political landscape, but what does it mean?
Today as we argue over the size of government, we think of government as the services provided such as plowing the roads, or medical assistance for poor. Certainly that is piece of government, but the reality is that the civilized society that we live in is to a large extent the result of government and the taxes that we pay.
There is a tendency to think only in the present, and what services we are now receiving. The reality is that our country is the result of our collective investment from our nation's earliest days. Our educated population and workforce is the result of investment in schools. Our transportation system is the result of investment in railroads, highways, air and water transportation. Our cities are the result of local and state investment.
We all hear the argument that it is private investment that creates jobs, but we forget that it is government investment that creates the opportunities for private investment. In 1817 New York State started the Erie Canal so that farmers in what was then considered the west could move their crops to market, and goods could reach the farms leading to growth in that area. There would have been no transcontinental railroad without government investment. Would we be able to ship goods up and down the Mississippi without government construction of locks and dams? Would there be a Twin Cities today without government investment.
It is not just the infrastructure. Would we consider flying today without the FAA and its work to improve air safety. Without safety regulations, would the Three Mile Accident have been another Chernobyl disaster and central Pennsylvania a wasteland. I can only skim the surface in this space, but hopefully you realize that civilized society we live in today is in large part due to our local and federal government, which has been paid for with our taxes.
Yes hard work and private businesses are also part of the story, but you can just go to any third world country to see what the result is without quality government input and oversight.
Now you will hear from the No New Tax people that we cannot afford the level of civilization we have today. That is not true. The US pays the lowest percentage of its Gross Domestic Product (GDP) of any developed country based on data from the Heritage Foundation. Germany the economic powerhouse of Europe pays almost 50% more in taxes as a percentage of GDP than the US.
If we want the US to remain a great nation and a great place to live then we have to invest in it. Yes the Trickle Down Economics and No New Taxes people will tell us that high taxes are hurting our nation, but that is a lot of hogwash. Look around the world and learn the truth.
Posted in Fiscal Policy | Related Topics: Government Policy "No New Taxes" Income Tax Revenue Sources
2 Comments ->
What’s your Fiscal IQ?
With our daily grind, it’s tough to sit down, consume multiple news sources, and sort distortions from reality in the debate over Minnesota and the nation’s long-term debt issues.
This lack of knowledge compromises our confidence in policymakers’ choices. What sounds reasonable in a 15 second sound bite, like “no-new-taxes,” is actually poor long-term policy, as Minnesota’s continual budget deficits show.
Take a few minutes to test your knowledge of federal fiscal policy at FiscalIQ.net.
The Comeback America Initiative, which advocates a nonpartisan fiscal solution to annual deficits and debt, designed the quiz as a first step to informing the public about the country’s long-term fiscal needs.
The former Comptroller General of the United States and head of the U.S. Government Accountability Office (1998-2008), Dave Walker, founded the organization.
Minnesota 2020 does not endorse all of these policy proposals—many are out of the conservatives’ playbook. However, Comeback America’s long-term fiscal framework does contain many key progressive values, especially in the areas of health care, social security, reduced defense spending, and revenue. It calls for compromise.
Sadly, conservatives have been unwilling to make most of the modest concessions this plan calls on them to make.
Take the quiz, and tell us how you did.
Posted in Fiscal Policy | Related Topics: Public Policy Revenue Sources
Comeback America, Comeback Revenue
I watch way too much C-SPAN. In fact, my only regret about canceling cable two years ago is losing TV access to C-SPAN2 (Senate coverage) and C-SPAN 3.
My fellow C-SPANers have probably seen David Walker, founder of the Comeback America Initiative, a policy organization advocating a nonpartisan fiscal solution to annual deficits and long-term debt. Walker is also the former Comptroller General of the United States and head of the U.S. Government Accountability Office (1998-2008).
The Comeback America plan advocates a more conservative approach than many progressives would like; however, the long-term fiscal framework does contain many key progressive values, especially in the areas of health care, social security, infrastructure spending, reduced defense spending, and revenue.
At least this plan realizes there is a need for a balance fiscal policy that includes revenue. Part of the plan advances a 3:1 cuts-to-temporary revenue increases strategy. It also calls for eliminating credits and other loop holes in favor of lower overall rates.
While top income earners’ marginal tax rate is 35%, they actually pay an 18% effective federal rate with credits and deductions. Comeback America calls for eliminating most deductions and lowering the rate to 25%. (Minnesota’s highest income earners pay a lower effective rate for all state taxes than the bottom 99%, by the way.)
It recommends letting the Bush tax cuts expire, along with a list of fiscal policies that would elicit anger and applause from progressive and conservatives.
While the plan suggests sun-setting (or gradually repealing) the Affordable Care Act (ACA), it advocates some form of universal coverage. Progressive policymakers must nail down exactly what that looks like. The plan acknowledges what many progressives believe to be ACA’s shortcoming: doing little to control rising health care costs. Comeback America also advocates a pay for outcomes system, preventative care and overall wellness.
It calls for competitive bidding for federally-funded prescription drug programs, a smart fiscal move that conservatives have consistently blocked.
One particular compromise that combines progressive values with modest conservative goals is Social Security reform. It’s likely the easiest starting point on the path to overall fiscal health, and would signal that Congress is getting serious about reform.
Comeback America’s plan is not the first progressives would endorse. It drips with conservative code words and does little to ensure wage equity.
Progressives, though, are willing to compromise on many of the tough choices it establishes. Sadly, as Minnesota’s government shutdown and other congressional actions have shown, conservatives aren’t willing to budge at all on revenue, leaving another policy plan to die in cyberspace.
Posted in Fiscal Policy | Related Topics: Government Policy Federal Government "No New Taxes" Revenue Sources
No New Taxes Goal
Recently I watched an interview of Grover Norquist on 60 Minutes. Norquist, if you are unfamiliar with him, is a conservative activist, a lobbyist, and the founder and president of the Americans for Tax Reform.
He is probably best known as the promoter of the “Taxpayer Protection Pledge,” which pledges the signer to never support a tax increase. Almost all congressional conservatives and all but one of the 2012 conservative presidential candidates have signed it.
While conservatives talk generically about smaller government, he's given specifics, saying federal government should shrink to its size in 1900. It is hard to measure the size of government, but I am going to use government revenues as a percentage of Gross Domestic Product (GDP) as a measure to give some idea of what Mr. Norquist would like to see for our country.
I am using data compiled by Christopher Chantrill. In 1900, U.S. federal, state and local tax revenues were about 8% of GDP with about half for federal taxes. In 2009 it increased to about 27% with about 2/3 going to the federal budget.
If you accept percent of GDP as a valid measure of the size of government, then that is almost a 350% increase in the size of government. No wonder Mr. Norquist wants to return to the past, but before we get to excited by this huge increase in government lets look at some of the facts to bring us back to earth.
First we should understand, although we have seen a big jump in the size of government most of the rest of the world has seen even bigger increases. Using data from the Heritage Foundation in Wikipedia there are 118 nations with lower and 58 with higher taxes out of the 178 listed. Which might sound pretty good until you look closely at the list and realize that only China and Singapore of the developed world have lower tax rates than the US. Most of the developed world pay higher taxes.
Lets think about some of the things that we would have to give to return to government of 1900. First there would be no Medicare or Social Security. Not a problem in 1900 when few people lived to old age. There would be no interstate highway system and few if any paved roads. There would be few protections for the environment, workers, and child labor.
I could make a long list of protections that we take for granted today that would not exist. Think about our defense spending, today it is roughly 5% of GDP in 1900 that would have exceeded the entire federal budget. If we spend the same percentage of GDP for defense as we did in 1900, we would have to worry about military invasion from nearly all nearby countries.
Norquist and his fellow “No New Taxers' ” goal is to turn our country into a Third World Nation. This is not the future I see for our country.
Posted in Fiscal Policy | Related Topics: "No New Taxes" Economic Inequality Federal Government
Graph of the Day: Where Does the Money Go in MN?
Last time, we looked at how the federal government's budget gets spent, and today we'll look at our own state government's budget.
(2012-13 Data from Minnesota Management and Budget [PDF])
Let's deal with the obvious part first: more than 70% of our state spending goes to K-12 education and programs with Health and Human Services. The rest gets split between property tax relief, higher education, public safety, the functioning of the state government, and everything else.
What does this mean for Minnesotans? It means that most state spending is either providing services that benefit all Minnesotan communities (the K-12 system, public safety, transportation) or stabilizing our society by supporting those we don't want to see sick or homeless. Our state's spending reflects a deep public investment in a healthy, productive society. (This may help explain why our state is one of the few net producers in the country.)
It is this commitment to a strong society that has helped build Minnesota into a fairly successful state. This commitment, however, is exactly what is under attack from modern conservative dogma. Our state functions well because it seeks to cultivate and develop strong communities.
Conservative policies, however, have caused us to cut back on this cultivation and development. Nearly every state budget battle in the last decade settled in favor of conservative shrinkage. As a result, per capita, inflation-adjusted state spending has declined by ten percent, shrinking that pie above. When it comes to education's slice, real, per-pupil state education spending is down nearly 13 percent since 2003.
Conservatives seem fine watching state support for education dwindle, and with massive human services cuts, they seem fine restricting care for the poor or the sick. Neither of these strike me as particularly moral stands, nor are they right for our state's well-being.
Minnesota's past success did not occur despite our tax policy. Minnesota's past success occurred because of our smart investments. This requires a fair tax system that takes in adequate revenue, and it pays off for everyone. Conservatives who think otherwise should take a look at low tax/low service states, the majority of which aren't nearly as productive or healthy as Minnesota.
Posted in Fiscal Policy | Related Topics: State Budget Income Tax Graphs
4 Comments ->
Graph of the Day: Where Does the Money Go?
Many past Graphs of the Day have looked at our taxes: who pays how much of what kind to whom and so on. Today we're going to shift to what happens after those taxes get collected.
(Data from CBO)
This is how our tax money was invested by the federal government in 2010. Beyond net interest, there are two broad categories to consider.
The first is discretionary spending, the areas the government chooses to invest in. Over half of this is defense spending (and, yes, this includes the wars in Iraq and Afghanistan; 2010 was the first year those payments were incorporated into these figures; for context, the two wars were responsible for 4% of total federal spending between 2001 and 2007).
The other half of discretionary spending is split between domestic and international investments, with a heavy emphasis on domestic work. Anything the government's going to do to stimulate the economy using fiscal policy is going to come from this black slice.
The other major category of spending is mandatory spending. These are payments that government is committed to through pre-existing programs. The two biggest chunks are Social Security and health spending in the form of Medicare and Medicaid. For as much as people have harped about Social Security, however, it's the coming expansion in Medicare and Medicaid brought on by the aging of the baby boomers that's going to bring the hurt to the budget in the long run.
Welfare payments of various sorts, as well as other mandatory programs, all get rolled into that orange slice of “Other Mandatory Spending.”
It's worth noting that this is not the budget of a socialized government. A big chunk of that defense spending and other discretionary spending will go to private contractors. Social Security checks will purchase things from private businesses, and many Medicare/Medicaid payments will make their way to private firms. We've already seen that how little actual redistribution takes place. Any conservative complaints about socialism should be confronted with the facts.
Posted in Fiscal Policy | Related Topics: Graphs Federal Government Income Tax