Growth & Justice Blog

Less Government? We Tried That. It's Not Working.

The Star Tribune's front-page story today finds that "less government'' is the overwhelming consensus "vision'' for Republican gubernatorial candidates. Peggy Lee and most Minnesotans want to know: Is that all there is?   

Leaving aside that this mantra sounds more like hard-right, activist-energizing radio talk than inclusive vision casting — and has to be extremely disappointing to hundreds of thousands of moderate and progressive Republican voters — we need some context here.   

The Price of Government, an official state Minnesota Management and Budget measure, shows that we DO have less government over the last decade, ever since the no-new-taxes religion, like some southern invasive species, got a hold on the North Star State. (See page 13 of the PowerPoint presented at the capitol last week by State Economist Tom Stinson and State Demographer Tom Gillaspy).

The bar graphs clearly show that our governments are using about two percentage points less (15.5 percent in 2008 compared to about 17.5 percent through the 1990s) of our personal income share than those governments were spending when the economy was actually doing better. Huge income tax cuts in 1999 and 2000 left us with chronic  budget crises, and the promised payoff in sustained, tide-rising economic growth didn't materialize, either.  

Wealth concentration at the top got worse, bridge and road conditions deteriorated, public school course offerings were cut, and thousands of working low-income folks lost their health care. And our economy is slumping and beginning to underperform the national average on some key indicators.  

We surely could use some more judicious restructuring and redesign of how we do our government work. But the basic things government provides are essential for our shared prosperity and quality of life.  

NOTE: The Price of Government measure is one of the most comprehensive of all the measures we have to describe the size and role of government. It counts state and local government revenues as a percentage of total income and therefore accounts for inflation, population growth and economic growth. It was instituted at the behest and with the approval of business groups in the late 1980s.

— Dane Smith

Minnesota Poll's progressive majority on health care

As a former reporter for the Star Tribune who wrote scores of news stories based on the Minnesota Poll, I am very familiar with the science of polling and its limitations,  and the crucial importance of context.    Here's some important context for the poll results and the headline that declared "Obama's support declines sharply.''   

 A drop in 10 percentage points on job approval, after the "honeymoon" and late in a president's first year,  is typical, but especially if he's mounting the most sweeping social and economic reforms in decades during the most serious recession in a century.    The coroporate bailouts and continuing war in the Middle East have  angered the left, the bailouts and the expansion of a public role in health-care have infuriated the right, everybody's still worried about their personal finances, and still the president's approval rating is about 20 points higher than his predecessor's.

The concerns about health-care transformation undoubtedly are an overriding factor but it appears that the dissatisfaction with Obama's plan comes from many liberal folks who wish he'd gone further.   Although Minnesotans disapprove of his overall "handling" of health care (45 percent to 39 percent),  there is clear approval of the  "public option'' despised by the right-wing critics (51 percent to 37 percent).   Most in the poll  approve a law requiring coverage (54 percent to 37 percent) and a slight plurality (43 percent to 40 percent) actually favor the overall changes being supported by Obama and his congressional allies.   Most important,  perhaps, the poll showed that about 40 percent of Minnesotans are either worried about losing coverage or are currently uninsured.

We've often made the case that there is a sustained majority in Minnesota who favor the moderate-to-progressive position on key economic and tax-budget issues.   These key issues include support for public education, transportation, public health-care, environmental protection and most of the worthwhile vital investments that our governments provide.    This majority also favors  a fairer and reasonably larger tax burden on those at the top of the income scale,  and polls show it opooses an  inflexible "no new taxes'' orthodoxy.

Dane Smith

After Labor Day, keep working on economic justice

I had the great privilege of delivering the Labor Day Sunday sermon at my church (Unity Church, Unitarian Universalist, in St. Paul). I offered the best I could find from Abraham Lincoln, the Bible, Catholic and Lutheran teachings on social justice, and recent economic studies to make the case that we have an inequality problem in Minnesota and the nation. And it was a treat to get Donna Summer's great song, "She Works Hard for the Money'' into the liturgy as the postlude.  

Here's one point I made about labor and fairness, and democratic and religious traditions.

As Americans we mark our progress by looking back at forms of liberation from exploitation of labor. In our western hemisphere, we look back in horror at the forced conversion and attempted enslavement of aboriginal people to Christendom and efforts to bring them under the English and Spanish or French yoke. We are proud of the American Revolution and our fight against the illegitimate seizure, without representation, of our labor. We are proud of the great fight led by liberal religious founders of our own Unitarian Universalist denomination against the enslavement of African people. Interestingly, southern defenders of slavery used the Bible’s apparent approval or neutrality on the subject to advance their secessionist cause.

In the last century, we’ve made enormous progress against the much more subtle forms of semi-slavery that come with unbridled capitalism and the slanted bargaining table set up between employers and employees: the simple and basic right to organize, child labor laws, the 40-hour work week and overtime compensation, the minimum wage, the civil rights movement and ongoing efforts to finish the Emancipation Proclamation and end the de facto slavery imposed on people of color, the migrant workers’ reforms, and in more recent years but throughout history, hugely important, the oppression of women in the workforce.

I urged the congregation to consider the mountains of evidence that show economic inequality growing once again, after we reached a high-water level of overall economic equality in the 1970s. And I urged folks to do whatever they possibly could to change policies and laws to bring about more equal outcomes, chiefly through more and better investment in human capital.   

The full text of the sermon is available here [PDF]. 

— Dane Smith

Who's hurt by transit funding cuts? The poor and smaller communities.

Transit for Livable Communities blog links to a report by Transportation for America that surveys the nationwide "Impact of the Financial Crisis on Public Transportation." 

The report notes that the price of a monthly bus pass for the public transit system serving the city of Marshall and Lyon, Redwood and Jackson counties has jumped from $25 to $80 per month. The price bump is just one consequence of the cascade of spending shifts as state funding for local services diminishes — through unallotment and budget cuts and, in the case of transit, through a decline in dedicated funding streams such as state sales taxes on motor vehicles.

Especially in urban areas, there are two types of transit riders — those who ride by choice and those who are transit-dependent. Bus service cuts and fare increases may drive the "choice" users back to their cars, but for the households without a vehicle (see chart) their options shrink. In rural areas, where transit may be their only link to employment, medical care or other services, the impact of underfunding goes far beyond "transportation."

 

The post by TLC's Katie Eukel underlines some of this local impact, quoting the director of the non-profit that runs the Marshall system.

“Transportation services are not a luxury for people living in rural areas — they are a necessity," says Jeanette Porter, Transit Director with Western Community Action. "When transit providers are forced to shift so much of the financial burden onto our passengers, or agencies helping their clients, it creates a devastating cycle that is already beginning to take effect... Often people must move to a larger area where more options are available. This not only affects those who depend on public transportation, but the economic and social vitality of their communities, as well.” 

It's a point we made in a recent editorial, but it bears repeating again and again as the state tries to set budget priorities. Transit service cuts and fare increases may make sense if you’re looking for ways to affect a budget line item. But they're a poor bargain if you’re looking at the actual people and communities affected.  

— Charlie Quimby

Tax Commission report is reasoned, but...

The Governor's business tax reduction commission — can we dispense with the "21st Century Tax Reform" bit and call a spade a spade? — released its report on Friday, with the lead recommendation of repealing the state corporate franchise (income) tax. Another recommendation would exempt from taxation 20 percent of "pass-through" business income to individuals.

Given the Republican and business tilt of the group, the panel's report [PDF] is not surprising — but predictable is not the same as wrong.

You won't hear complaints from this quarter about its assessment of Minnesota's economy, the need for investment in education and academic research and the importance of business in creating wealth and well-being in the region.

And you won't even get much argument with ending the corporate franchise tax, either. If you have to cut a tax, it's not a bad one to choose. It's regressive, volatile and has a negative — though over-dramatized, in our view — effect on some business decisions.

But as we must learn over and over, not everything that's good for business is unfailingly good for the public.

In good times, the corporate franchise tax contributes a lot of revenue to the state. The recommended cuts would cost the state about $1 billion a year. 

The glossed, the obscured and the skirted

The commission was originally charged to cover the costs of reform in its proposal, but the final report avoids a specific tally of how proposed taxes would counter the cuts — settling for recommendations to expand the sales tax base and increase the tax on cigarettes by up to $1 a pack.

The commission says Minnesota's high corporate income tax rate puts the state at a disadvantage. It seems to acknowledge that our poor business tax climate is more perception than reality, but believes we must address it. (Why the financial types who drive business decisions can't see the difference between a statutory tax rate and actual total tax burden is a subject for another day.)

In support of the competition argument, since 2002, the report says, six states have reduced corporate tax rates or replaced the corporate income tax. We looked up the most recent growth rates for those states and threw in other states with no corporate income tax, plus our business-friendly neighbor, South Dakota. The growth picture for those states is definitely mixed. 

 

To its credit, the commission did not try to oversell the stimulative benefits of its corporate tax cut and other reforms. We believe they are likely to help business. The open question is how much. And the unanswered question is how even revenue-neutral reforms will help address the state's revenue shortfall.

Another point, with which we agree, is Chairman Mike Vekich's "Businesses don't pay taxes. You and I do. Where we tax businesses, we are taxing our own wealth."

But on the other hand, the commission seems reluctant to tax that wealth. Where income flows from businesses to people, the Commission also wants to see a cut. It amounts to a backdoor personal income tax cut for higher earners.

Small businesses would get a special boost -- one-fifth of owners' profits would be exempt from taxation.

House Taxes Committee Chairwoman Ann Lenczewski, DFL-Bloomington, said she was "stunned" by that recommendation.

"What it means is a managing partner at a small law firm will pay a smaller top rate on income than the associate partner who makes less," Lenczewski said. "The boss gets a big tax break because he owns the business, but the secretary doesn't. I agree with some of the commission's recommendations, but this one just confounds me."

And this is really the most disappointing aspect of the report. The commission skirted the issue of fairness to individuals, only acknowledging that replacing a regressive business tax with regressive sales taxes probably wouldn't make the system more regressive.

Fair seems to mean fair for business. Indeed, the word "fairness" appears only three times in the report's 34 pages, always in a list of general principles. The commission's second principle for reform is:

Tied to benefits received. There should be a strong, direct relationship between the nature and level of business taxation in the state and the cost of benefits and services provided to businesses by state and local governments.

This so-called benefits principle is a particular favorite of conservative theorists, but the devil is in the details. It wasn't the commission's charter to think about business tax reform's impact on a single, unemployed mother with a child in public school, but the legislature will.

In all, the commission's report adds another useful, philosophical perspective to the budget discussions. Progressives — and the governor — should open their minds to what it has to say.

—Charlie Quimby

Click on "10000strong.org" for Martin Luther King Day

This is about here and now.   At Growth & Justice, we try to focus relentlessly on the long-term and the strategic, on the thinking and research and advocacy that will expand and improve our public investments for a more shared prosperity.   And we don't focus so much on the immediate, the obligation to take care of more urgent injustices.   Few human needs are as immediate and pressing as hunger, and by all accounts this problem is spreading in Minnesota during a time of deep economic travail.    Here's something I'm doing right now, and I urge you to do so also.   Click on 10000strong.org, watch the powerful and compelling video,  and do what the good people tell you to do, or as much as you can.   It's an effort, led by Second Harvest Heartland, one of Minnesota's premier non-profits, to enlist at least 10,000 people  in the Land of 10,000 Lakes to alleviate hunger now and, eventually to end it in our state.  It's a most appropriate thing to do on Martin Luther King Day and Inauguration Day. 

Dane Smith

Minnesota Poverty: Still better than Mississippi's!

This decade has not been kind to low-income Minnesotans.

According to new U.S. Census data analyzed by Lutheran Social Service and the Minnesota Budget Project [PDF], Minnesota lost ground in poverty, health care coverage and household incomes during the six-year economic recovery that lasted from late 2001 through 2007.

Minnesota is one of 24 states that saw its overall poverty rate worsen since 2001. Nearly one in ten Minnesotans, or 9.5%, lived in poverty in 2007. This is significantly higher than the 2001 poverty rate of 7.8%. Nationally, the poverty rate was 13.0% in 2007, which is also significantly above the 12.1% rate measured in 2001. Remarkably, the poverty rate was higher after six years of economic recovery than during the 2001 recession.

Still, could be worse. Minnesota ranked only 44th among the states on poverty, compared to number 1 Mississippi at 20.6%.

Last year when these figures were released, the Bush Administration heralded a down-tick in the national poverty rate from the previous year, from 12.6% to 12.3%. At the time, The Christian Science Monitor noted that the reported number might not provide a true picture of economic turmoil in America [emphasis mine]:

The bureau's poverty rate measures a snapshot in time. Some experts say that focus masks a significant increase in economic instability for Americans that makes more people in the middle class vulnerable to poverty. That's because while the percentage of people in poverty at a given time may be declining (it's fluctuated between 10 and 15 percent for the past 20 years), more Americans overall are experiencing poverty at some time during their lives than at any time during the past 30 years, according to a study done at Washington University in St. Louis.

The study found that in the 1970s, about 24 percent of people between the ages of 20 and 29 experienced poverty for a year or more. In the 1980s, that went up to 30 percent. And in the 1990s, it increased to 38 percent. The reasons, according to Mark Rank, one author of the study, are the increase in lower-paying jobs, employment insecurity, and significant decreases in health-insurance coverage.

In Minnesota, we're seeing the consequences of this instability — not just in poverty rates, but in rising unemployment, foreclosure rates and perhaps even in school test results and dropout rates. Whatever growth occurred during the last weak business cycle did not reach many Minnesota families.

According to the Minnesota Budget Project:

Minnesota households had a median income of $55,802 in 2007. This is significantly less than 2001’s figure of $58,363 (measured in 2007 dollars).

Minnesota is still better than average on all three measures noted in the analysis, but the trends are heading in the wrong direction, and the costs are falling largely on state and local governments already feeling budget pinches.

Cutting taxes won't do much to help feed families with marginal incomes, and putting more in the pockets of high earners doesn't directly address the employment problem — helping people develop the skills to find and hold jobs. But unless concerned Minnesotans speak up, cutting programs that aid the poor will be one reflexive response, and tax cuts will be the other. 

— Charlie Quimby

John Brandl's legacy: good intentions AND rigorous expectations

At John Brandl's rather wonderful funeral Monday, former St. Paul Mayor George Latimer said it just right when he described the legislator/policy analyst/professor as the embodiment of the idea that "principled leadership and politics are not incompatible,'' and that "loving-kindness is not incompatible with intellectual rigor.''   Hundreds of friends and admirers of the former state senator filled the Basilica of St. Mary to pay their respects.    The occasion was sad of course, but remarkably uplifting and forward-looking, as was an extraordinary living memorial earlier this summer at the Humphrey Institute,  attended by many friends after it was learned that Brandl was dying of stomach cancer.    Brandl's parting words to us were that he loved us, and we'll never forget that he asked us to say it back to him.   Obituaries and articles in the St. Paul Pioneer Press and the Star Tribune over the last few weeks provided instructive summaries of his powerful legacy in Minnesota's  policy-and-politics world. 

Those of us who knew John personally were always impressed by his unfailing kindness and warmth.   But the essence of Brandl's work might be summed up best in a phrase in the title of his best known book, "Money and Good Intentions are Not Enough.''  Brandl was a progressive and was described by his eulogists as an unapolegetic champion of the New Deal, a believer in government's responsibility to take care of people and to broaden prosperity.   But he also believed with equal intensity that results matter, that hard evidence of effectiveness ought to be applied to public sector interventions in the economy and our society,  and he had a profound respect for markets and free enterprise.   He pounded on the necessity of cost-benefit analysis.   It's hard to imagine a better role model for a practically progressive think tank, and his spirit and intellect will always be important inspirations for us at Growth & Justice.

Dane Smith

 

Eventually, we'll all be minorities. But will we all be ready to succeed?

The importance of our education investment work and the need to focus on minority populations was reinforced in two news items this week in the Twin Cities' largest daily newspapers.

The first, "Nice ACT scores, but ready for college?", in the Aug. 13 Star Tribune, notes that while Minnesota seniors are posting higher scores than seniors in other states, there are significant concerns that “minority students continue to score much lower than white students in the state.”

Scores for black students were more than five points below the average scores for white students. And scores for black, Hispanic, Asian, and Native American were all below the national average for all students. In addition, college readiness scores are particularly poor for Minnesota’s black students.

Minnesota Department of Education Deputy Commissioner Chas Anderson said that while those numbers are disappointing “we need to see it as an opportunity to make changes in the system and how we serve those students,” including early intervention with students who fall behind instead of waiting until high school to address the problem.

The second item, “Eventually, each one of us will be a minority,” appeared on the front page of the Aug. 14 Pioneer Press. The message was that by 2042 all Americans will be minorities, and policymakers must start adapting now, “especially in education.”

Why education? “If we don’t invest in education and training African-American kids, immigrants, and Latino kids, we won’t have a middle class," said Mark Sawyer of the Center for the Study of Race, Ethnicity, and Politics in Los Angeles. “We’ll have a very, very poor disposable class that’s largely black or brown.”

Through our Smart Investments in Minnesota's Students project, Growth & Justice is making the case that we must invest cost-effectively in our students to maintain a strong economy and expand prosperity for a changing population. Our very clear and  ambitious goal is to increase by 50 percent the rate of students who achieve a higher education credential by 2020.

We have identified cost-effective interventions from birth to college, and in the coming months, we will be advocating for a statewide investment strategy that will advance Minnesota toward that goal.

— Ellen Perrault, Growth & Justice communications and outreach coordinator

The anti-government theme and the (alleged) "fall of conservatism''

There’s a temptation in the punditry business to attach too much meaning to the present, to excitedly say "never before,'' and to declare the  "fall of'' and "death of''  this or that.   And in my time I've seen too many premature pronouncements  _ of the death of God, of the decline and fall of liberalism, and even the end of history _ to get too excited.   But George Packer in the latest New Yorker has written an eminently readable treatise  about “The Fall of Conservatism.’’   It was referenced in a Star Tribune editorial Saturday about the Minnesota Republican Party’s state convention, and the Packer piece promises to be prime grist for the mill this summer. 

Packer quotes conservatives themselves who fear that the movement is out of ideas and intellectually fatigued and he draws some amazing admissions  out of Patrick Buchanan about how Republicans consciously and aggressively exploited southern white fury over the civil rights movements to build their counter-attack in the late 1960s.   Packer also does a good job sketching out broader and more defensible non-economic motivations for the rise of conservatism:  concerns about “the chaos of the cities, the moral heedlessness of the young and the insults to national pride.’’ I've always maintained that "liberalism'' got to be a dirty word because of "free love'' and drugs and flag-burning and goofy dalliances with Marxism, not because of its efforts to alleviate poverty and social problems and gross inequalities in wealth and income.

And Packer gets closest to explaining the conservatives' strategic mistake when he cites David Brooks’ analysis about how conservatives overreached with their hostility to government.  “An anti-government philosophy turned out to be politically unpopular and fundamentally un-American…People want something melioristic, they want government to do things.’’  And in the end, because of a very contradictory conservative view of government as limitless when it comes to security and national defense, conservatives after almost 30 years of dominance  “hadn’t made much of a dent in the bureaucracy, and they had done nothing to provide universal health-care coverage or arrest growing economic inequality.’’   Packer goes on to quote conservative David Frum as saying that “smaller government is no longer a basis for conservative dominance.’’   And he points to young conservatives like Ross Douthat and Reihan Salam who are pushing progressive ideas like wage subsidies for low-income workers and tax credits for children with families.    

I don’t want conservatism to fall or die, anymore than I want yin to wipe out yang or night to eclipse day.      And it doesn’t matter what I think because conservatism and the great ideas it stands for _ individual and market freedoms, personal responsibility,  family values, respect for the past, and religious convictions _ will and should always be with us as we try to build a better world.   I just think conservatism needs to return to the healthy accommodation its adherents used to have for other principles _ equality of opportunity, social justice, and a respectful faith that community and the “we” are at least as important as the individual and the “I”. 

Dane Smith