By: Mark Glennon*
“Politicians, do your jobs.” “Compromise.” “Can’t we all get along?” In the endless repetition of calls like that, the underlying thought is that “passing a budget” means spending cuts now painfully felt will go away.
They won’t. They can’t. It doesn’t matter whether one or the other side caves completely or they split the difference — for a number of years, that is, until longer term solutions hopefully can pass and take hold.
As Comptroller Leslie Munger recently pointed out, if we tried to cover current operations from an income tax increase, the rate would have to rise from 3.75 percent now to 7 or 8 percent. She added that she didn’t know any lawmaker who would vote for it or any business that wouldn’t flee. She’s obviously right on both points. At it’s current rate of income and expenses, the state is losing $6.2 billion per year — even with the spending cuts now already in place, and ignoring the continuing, massive pension underfunding not counted in that number.
Chuck Sweeny is among the few journalists who seems to have figured out the “just pass a budget” silliness. In a piece today, he wrote: “If only a budget could be passed, [cuts] would be over and life could get back to normal, right? Wrong. This is the new normal. The money is gone — the state has been living a fiscal lie for decades under both political parties.”
Governor Rauner could completely drop his list of preconditions for a tax hike, or Democrats could agree to the whole list. Whatever. Neither side would then propose a tax increase to cover that $6.2 billion operating loss plus eliminate the cuts. And that’s ignoring the gorilla in the room – pensions. If the state ever tries, let’s hope they add one other expense line — expansion of outbound lanes on interstate highways.
And that’s looking at the state in isolation. Many dozens of towns, school districts and cities, including Chicago, are in far worse shape than the state, and each is looking at its own new taxes.
Here’s the real point that hasn’t sunk in yet: Only a much faster rate of economic growth will produce the revenue we need, and that will take a number of years to achieve, at whatever tax rates we finally set. Rauner can be criticized not for a pro-growth list of must-have reforms, but for leaving too much off that list. It should include pretty much everything that’s ever been mentioned — a state of emergency disaster recovery agenda including a constitutional amendment to allow pension cuts (including earned benefits), authorization for municipal bankruptcy (the absence of which is forcing local governments to waste millions every day on pension and debt service that could be cut), layoffs, pay cuts and radical consolidation of units of government. That’s what we need because things are deteriorating far more quickly than understood. Absent that, new taxes will be squandered.
The Democratic General Assembly would, of course, block all that. Why? Mostly because they answer to public unions. Nothing of substance will get done until their influence is slashed. That’s why Rauner’s preoccupation with anti-union measures is not at all mysterious or “bizarre,” as political writers often say. Reducing public union influence is the true precondition to a solution.
Which highlights a second criticism of Rauner, and this one I hear unanimously even from his staunchest supporters: His messaging and communication are awful. He needs to explain his end game, his timeline, his reasons for selecting the reform items he did and much more, and he needs to repeat his explanation over and over.
This mess will get much uglier. Expect no short term answers from either side. Demand a plan that’s drastic but can be over quickly and will restore the essential economic growth.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.