The economy is driving the train

The stumbling economy is making moot a lot of campaign chatter over the last two years.

In Minnesota, analysts are predicting a $4 billion budget deficit. Gov. Pawlenty’s aide says now is not the time to cut programs that create jobs which leaves, what exactly? Health care? Education? Few people running for the Legislature this year were outlining programs to cut but with a $4 billion deficit, something has to be cut. There aren’t many card tricks left for the politicians to perform.

Meanwhile, remember that question Barack Obama refused to answer during the last few debates: What of your initiatives would you be willing to give up the economy gets worse? He has to answer it now and on Sunday, his aides started the process.

Eliminating tax cuts for the wealthy? A member of his economic team, William Daley, said the incoming president is leaning toward leaving it in place until its scheduled end in 2011 instead of repealing it sooner.

Is a promise delayed the same as a promise broken?

  • Education spending in various forms (K-12, higher ed, adult ed) is about half of the state budget. Trimming that is very difficult, but it will have to be done unless more revenue is discovered. That’s the real issue for the state – and everything else creates relatively little notice by comparison.

    At the Federal level, things are so screwed up it’s hard to know where to begin.

  • BJ Bonin

    This is only the beginning.

    With deflating property values comes declining property tax revenue.

    With less consumer and commercial spending comes less sales tax revenue.

    Government programs and even basic functions are going to be in dire condition soon if they aren’t already, which is going to feed into the already existing economic deflationary death spiral.

    Many tax-dependent jobs (teachers, public works, etc.) will have to be cut, adding to the job losses from the private sector, causing further losses in tax revenue and additional expenses (to manage vacant property, unemployment insurance, etc.).

    Welcome to the Great Depression 2.0

  • BJ, I said a year or more ago on my blog that a Depression was a distinct possibility. However, we can still avoid it. Job loss is only starting, so there’s still a chance we can avoid a serious problem. However, the possibility is real and the implications for our state and local governments is indeed severe We can expect a lot of creativity in taxation in the short term, and the possibility of a major overhaul in how we tax is likely.

  • BJ Bonin

    The State has made cuts for how many years in a row? There isn’t much fat left to cut. The current Governor will not raise taxes. Cities and Counties have already cut back services, and these will be decimated soon. Duluth has started already, for example.

    The current economy is already in a rapidly accelerating deflationary spiral – the problem is already critical. With regards to small governments like Cities and Counties in Minnesota, there isn’t really anything that can be done to stop the carnage given our current Governor and the inevitable lag in Federal funding.

    I hope that partisan bickering can be set aside to address the major problems facing the State, especially regarding the Governor’s tax pledge. However, I do not believe it possible to prevent the crisis that is already brewing. I can only hope that I am wrong.

  • Mark Gisleson

    I didn’t know Obama had locked in those tax cuts, only that he was planning — God willing and the creek don’t rise — to go that way if possible. Obviously, with Bush in charge of the economy, Obama can’t control what happens between now and the election. It’s pretty obvious things have gotten worse since the election.

    Gotcha questions like Gary Eichten’s, however, only penalize honest politicians while forcing reasonable politicians to hedge and dishonest pols to lie and that usually means the liars profit while the honest candidates reap the talk radio whirlwind.

    It’s also funny how Eichten’s questions always center around his pocketbook. Has he ever pressured a politician over their stand on Iraq?

  • bsimon

    “Is a promise delayed the same as a promise broken?”

    No, or generally no. When it comes to policy promises, voters understand the politicians are saying “in an ideal world, this is the policy I would like to implement.” In the real world, politicians are rarely faced with getting to vote for or against (or sign into law) exactly the bill they want. We know that and generally only hold them accountable when they blatantly flip. See Bush, Sr, on ‘read my lips.’

    “The current Governor will not raise taxes.”

    If the economic situation were not so dire, this would be an interesting case to watch. The Gov clearly has backed himself into a corner. He doesn’t want to raise taxes, but has already pared the state budget significantly. He now is faced with the challenge of following conservative orthodoxy, while also trying to manage the state effectively. Will conservatism drive the state further into economic backwaters or save it from plumbing the depths of depression? Can T-Paw both bolster his credentials for national office and make MN a better state?