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January 14, 2009

The Wednesday Update

January 14, 2009   Volume 3, Number 1     In This Issue:   Gone with the Wind,  No Pork on Walker's Fork

January 14, 2009 Vol 3, Number 1	Wednesday Update
In This Issue: 1. Gone With the     Wind 2. No Pork on     Walker's Fork 3. Pinnochio Politics 4. The Great Train     Robbery	Gone With the Wind On December 12, 2008, Wisconsin Governor Jim Doyle appeared before Congress with both hands out, asking for more than $3.5 billion to "ease the effect of the recession" on Wisconsin's state budget.  Doyle claimed that the recession was to blame for Wisconsin's $5.4 billion deficit; pretending state elected leaders had nothing to do with the budget hole. The Governor went on to explain how he couldn't possibly be to blame for Wisconsin's fiscal mess since he had been so responsible in his budgeting.  "I made $270 million in cuts to state government this year," Doyle said. "Those cuts, when combined with actions we took in our original two-year spending plan, totaled $500 million in reductions to state agencies.” Actually, the most recent budget adjustment bill Doyle signed into law spent $13.5 billion in general purpose revenue in 2007-08 and $14 billion in 2008-09.  Compared to the $13.2 billion in budgeted expenditures in 2006-07. This represents a $1.1 billion spending increase in the budget Doyle claims “cut” spending.  In his 2007-09 budget Doyle created BadgerCare Plus, which increased taxpayer-funded health care to Wisconsin residents. The program was $25 million over-budget within months of being signed into law. Further, the last budget signed by Doyle left a $1.6 billion structural deficit.  While the budget must be balanced on a cash basis, Governors can play games by pushing appropriations off into the future, leaving it to subsequent legislatures to pay for the spending.  So before the current recession hit, Doyle already knew his budget was $1.6 billion in the red. Some tax watchdog organizations have questioned Doyle's $5.4 billion budget deficit figure because nearly $2.8 billion of the deficit is derived from departmental spending increase requests, rather than actual spending.  So why would Doyle make the deficit look bigger than it is?  The Lakeland Times hits the nail right on the head: if Doyle can make the deficit look worse, he might be able to beg the feds for more cash to prop up his atrocious budgeting.  If the deficit looked smaller, Congress might not be quite as generous when it cuts a check to the state. In case there was any confusion about whether the Governor's budget numbers are all about federal aid, Doyle joined four other governors in early January, calling for a $1 trillion bailout package.   Doyle's budget tricks have dug the state into a deep fiscal hole which he now blames on the recession, and he has overstated the effect of the recession in order to prop up the state budget with pork from the federal “stimulus” package.  If Doyle is successful in getting one-time federal tax money to cover his tracks, the next state budget will have huge funding holes and an ongoing structural deficit.  But like Scarlet O’Hara, Doyle can’t think about that right now.  He’ll think about that tomorrow.  After all, tomorrow is another day! That's leadership, Wisconsin-style.   No Pork on Walker's Fork In a demonstration of real leadership, Milwaukee County Executive Scott Walker announced that he would not seek federal funds to prop up the county budget.  In an editorial featured in the Milwaukee Journal Sentinel, Walker argues against using federal money to bail out state and local governments, preferring tax cuts to get the economy moving again. How many people would take a gift of $1,000 and go out and buy an expensive sports car? While the gift might be nice, it makes no sense if you cannot afford the monthly payments. The same is true with the federal "stimulus" package. What taxpayer would want to use one-time funds for operations to bail out governments that cannot balance their budgets? Yet that is exactly what Gov. Jim Doyle and four other governors recently called for from the federal government. Even before the national fiscal crisis, Wisconsin had one of the largest GAAP (Generally Accepted Accounting Principles) deficits in the country. Bailing out operations with one-time funding will only make future budget deficits worse. The real way to stimulate the economy is not to put more money into the hands of the government but into the hands of the people. For months, I have called for tax cuts to get this economy going again. Unlike infrastructure projects that take months - if not years - to have an impact, tax cuts can go into effect immediately. This will truly stimulate the economy. Forty-six years ago this month, President John F. Kennedy told members of Congress that: "It is no contradiction - the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates." Walker came under immediate fire from Doyle and other Democratic leaders who equate the success of a community to the amount of money its government spends, yet these officials have no idea how much “stimulus” money the county would be getting, or how it would be used.  Even Tim Sheehy, President of the Milwaukee Metropolitan Association of Commerce opined, “"If Washington opens the spigot, we ought to be there with a bucket." But Walker knows from experience, as well as common sense, that there’s no such thing as free money. Free money’ sounds nice until you read the fine print and realize Milwaukee County taxpayers may be required to provide a local match that they cannot afford.  For example, if our county receives $50 million for infrastructure projects under this formula, our taxpayers will have to come up with an extra $10 million. And if we borrow to cover the $10 million, the cost goes up by about $920,000 a year. This hardly sounds like ‘free money’ to me."     Pinocchio Politics While Governor Doyle begs Congress for federal cash, Wisconsin legislators are deciding which taxes they’ll raise to fuel their next spending spree. According to a recent report by the Wisconsin Taxpayers Alliance, taxes now claim 34.2% of the average Wisconsinite's income – but that’s not high enough for the Democrats who run both houses of the legislature and the Governor’s office. Christian Schneider at the Wisconsin Policy Research Institute Blog pointed out that while Senate Democrats claim tax increases should be a “last resort,” Democratic State Senator Pat Kreitlow listed three new taxes that he'd vote to increase: The state hospital tax The state gas tax A new $15.2 billion tax on employers and employees to fund “Healthy Wisconsin,” a plan that offers taxpayer-funded health care for illegal aliens and non-Wisconsin residents. And those are just the tax increases Kreitlow doesn't consider to be tax increases. As Schneider observes, regarding the hospital tax: Of course, the line that he has been fed is that all this federal revenue will fall out of the sky once we tax health care in Wisconsin, which will pay back these hospitals.  But the new revenue will go primarily to hospitals with high Medicaid caseloads, so consumers at hospitals with low MA rates will get stuck with the bill.  In this case, making health care more affordable means making it more expensive, as the tax will be passed on by hospitals to their consumers. It’s not Kreitlow’s fault that he wasn’t in the Senate when the state counted on $175 million in federal intra-governmental transfer funds (IGT) to balance the budget, only to have those funds disappear when the feds pulled them back. With regard to re-implementing gas tax indexing, (automatically increasing the gas tax without legislative action) Schneider said: In actuality, automatic indexing merely absolves legislators from having to take tough votes, which Kreitlow apparently doesn’t appreciate.  Plus, when looking at the shabby state of the state’s transportation fund, he may want to recognize that Jim Doyle has transferred $1.1 billion out of the fund in the last 3 budgets to balance the general fund - which dwarfs any revenue loss from the repeal of automatic indexing. Democrats say they will do “everything they can” to avoid tax increases. Look carefully and you'll see their noses growing.   The Great Train Robbery  Doyle’s primary pork obsession with the federal government has been to get “free” money to build a commuter rail system between Chicago and Milwaukee.  Apparently, while Wisconsin couldn’t afford the system when the economy was good, the Governor believes we can afford it now that everybody’s broke. In December, the Reason Foundation issued a report regarding transit options for South Eastern Wisconsin.  The report found that the KRM commuter rail system would be far more expensive than the supporters would admit, and that the projected economic impact was grossly overstated. You are invited to hear transportation policy expert Tom Rubin, the author of Reason's study Kenosha-Racine-Milwaukee (KRM) Corridor Transit Service Options: An Investigation and Analysis, speak on Friday, January 16 at 10:00 a.m. at the Milwaukee County Courthouse, room 203b, located at 901 N. Ninth Street in Milwaukee. This presentation is open to the public. Rubin and Ken Yunker, Deputy Director of the South Eastern Wisconsin Regional Planning Commission (SEWRPC) will also address the Independent Business Association of Wisconsin (IBAW) breakfast at the Wisconsin Club on Friday.  Please contact IBAW to make reservations. IBAW January Breakfast Meeting Friday, Jan 16, 2009 7:00AM - 9:00AM (program begins at 7:45 am) Location:  Wisconsin Club 900 W. Wisconsin Ave Milwaukee, WI 53223   Contact:   IBA Office 4600 American Pkwy, Ste 208 Madison, WI 53178 (608)251-5546, (608)241-7790(fax) iba@ibaw.com