This blog entry was published by MinnPost on February 15, 2010.Click here to visit the original article.
Last week, the sign outside a local church announced that Sunday's sermon would
be, "Sounds Fishy?" The preacher might have had in mind the latest
rhetoric on the federal budget deficit. Everyone rants against the federal
budget deficit and our outstanding national debt, but few national leaders have
demonstrated that they have or will cut the programs or raise the taxes
necessary to balance the federal budget.
The federal budget deficit has risen to relative levels not seen
since the Second World War. For 2011, President Obama has proposed expenditures
greater than revenues of $1.3 trillion dollars or 11% of Gross Domestic Product
(GDP). A large federal budget deficit is bad because the nation has to borrow
money to finance the deficit, which crowds out more productive borrowing by the
private sector and leads to higher interest rates. Some of the buyers of
federal debt are foreign nations raising questions about the financial security
of our nation. Since the last budget surplus in 2001, the federal government
has taken in less revenue than it has expended each year. The second president
Bush, who claimed he wanted to lower the budget deficit, instead reduced taxes
and increased expenditures. The expenditures were used to fight the wars in
Afghanistan and Iraq and to increase drug benefits for senior citizens, which
increased the deficit dramatically.
Beginning in 2008, federal revenues fell because of the
"great recession" and expenditures were increased to bail out the
banks and stimulate the national economy. By the end of Bush's last term, the
federal budget deficit was projected to be 10% of GDP. We now have Republican
and Democratic politicians demanding that the federal budget deficit be
lowered. The calls for reductions are easy to make, but which program do they
recommend be eliminated and/or which tax do they recommend be increased? For
example, Sen. Sessions (R - Alabama) has been critical of President Obama on
the federal budget deficit but he doesn't want the space program important to
his state cut as the president proposed. Sen. Lincoln (D - Arkansas) also wants
the deficit lowered, but doesn't want farm subsidies cut as the president
proposed. Others have criticized the federal budget deficit but then turn
around and argue that federal taxes should be cut, which would increase the
deficit.
In Minnesota, we have our own example of "sounds
fishy." Recently on a nationally televised Fox News program, Gov. Pawlenty
criticized the federal budget deficit as a ponzi scheme." Does Gov.
Pawlenty, who has national interests, have the state record to criticize Obama
and Congress on budget deficits?
Here are the facts on Pawlenty and state budget deficits in Minnesota during
his two terms:
• A recent national study by the National Conference of State Legislatures
found that Minnesota at 41% of the budget was second only to Alaska of all the
states in using one-time fixes (better know as accounting gimmicks) to balance
the state budget last year. Because of those accounting gimmicks, the Pawlenty
administration will "borrow" from local school districts and the state's
colleges and universities because the state is running out of cash;
• Gov. Pawlenty proposed borrowing $900 million from future tobacco law suit
settlement payments to balance the operating budget, which would hurt future
generations; and,
• In 2012-13, when the next governor takes office, the state faces a projected
budget deficit of at least $5.4 billion because Gov. Pawlenty failed to solve
in real ways the current budget deficit.
Resolving the federal budget deficit is difficult, inglorious
work, particularly when our leaders are using rhetoric that misleads people
from the stark facts. Our nation must undertake real spending reductions (some
of which will impact us) and real tax increases (some of which each of us will
have to pay) if we are to reduce and eliminate our federal budget deficit.
Hopefully, Gov. Pawlenty will make the hard choices necessary this legislative
session to both balance ongoing state revenues with ongoing state expenditures
for this biennial budget and leave a balanced budget for his successor for the
next biennial budget. If he does, he will demonstrate that he is prepared to
take on the federal budget deficit and distinguish himself from other national
leaders.
Posted February 15, 2010
