Is it Truly Over?

 

Finally it is over.  After 20 days of crippling political deadlock over a projected $5 billion deficit, the longest government shutdown in recent US history has come to an end.  As a Minnesota taxpayer, I am extremely displeased with Dayton’s decision for the shut down considering the cost.  Minnesota lost millions of dollars in revenue and got saddled with millions in new expenses over the past few weeks with the widespread state government shutdown.  In revenue, the state was estimated to lose $1.25 million per day from lost lottery sales, $50,000 per week on MnPass collections from the motorists who used express lanes to beat the traffic, and $200,000 a day of state park revenue from 90,000 potential state park campers and visitors daily.  In addition, the Giants Ridge golf resort was estimated with a loss of $80,000 for the first week of shutdown.  In expense, an estimated $13 million a week of unemployment benefits were given to roughly 22,000 freshly laid-off state employees who were entitled to collect 50 percent of their pay while not working. More significant was the interruption in highway construction with more than 100 road projects shut down by MnDOT in the middle of the construction season. 

 

Governor Dayton, a Democrat, and the Republican legislative majorities were both really good at finger-pointing and blame-casting for the budget stalemate.  Both were at fault by starting with budget proposals completely unacceptable to each other, and were frozen to their own proposal, reluctant to change; while we, the Minnesota taxpayers, were forced to watch this ridiculous political dance. 

 

Do I disagree with one party more than the other?  Yes. Even though they were both at fault for the state shutdown, I blame the Democrats more by trying to solve the spending crisis solely on tax hikes.  Rather than seriously addressing out-of-control spending and entitlement reform, the Democrat continues to propose (at the State level and at the Federal level by the Congress and the President) major tax increases to help pay for our governments’ reckless spending habits. When spending continues to balloon out of control, tax rates would have to be perpetually raised to keep pace.  When we look at today’s government spending, you will find that the levels are rising at a speed much higher than the tax revenue collected over the years.  If government is looking at increasing taxes to cover the resulting deficit, Americans will have to radically increase the amount of taxes they pay to cover the overspending.  The urgent step for the Congress and the President to take is to stop the current trajectory of massive spending and borrowing and cut spending immediately right before interest expenses and entitlement spending take off.  Does the theory of only increasing the tax to the rich works?  I don’t know.  How much rate increase would that have to be imposed?  Would it be to the point that the rich can longer afford the rate increase and simply stop producing, working, and investing as the governments come close to confiscating almost every additional dollar they earn.  Would they then move their economic activity underground or to another country?  Will this then kill your economy?

 

Let me ask you a question.  If you are the head of the household and each week you are faced with your inability to pay the bill to make ends meet, would you continue to increase spending and move forward with that fancy car purchase?  Would you ask your son who hires you and the majority of your family members to unconditionally give you more money so you can keep up your lavish spending just because he has more money?  What incentive does your son have to keep earning more money, creating job opportunity to the family members and paying you and them the salary when you continue to squeeze more out of him to satisfy your spending?  If you don’t have a way to keep your budget balance by increasing revenue, shouldn’t you think of reducing your expenditure?  Your son is not an oil well to save you from your crisis.     

 

Now, you understand why I am so displeased with Dayton, the Democrats and the President.  Increasing tax is not the solution to your budget problem.  Thinking that increasing tax will solve your budget problem would only lead you to a bigger hole.  How much more tax increase do you have to exercise to stop the bleeding?  Do you continue to raise taxes each year to cover up your budget hole?  Masking the surface won't cure the problem.  Raising taxes only temporarily relieve the symptoms at the surface and not the root cause at the root of the problem.  What if those people whose tax would be raised decide to move their business out of Minnesota or out of the United States?  Do you then find another group of people to increase the tax?  In this fragile economy, everyone is trying to cut cost and increase efficiency to stay in business, so why can’t the government follow suit?  Increasing tax rates never brings in the projected revenue.   It is all but an illusion.  We can't spend more than we have! 

 

When I say government spending must be cut, I am not proposing cutting all government spending.  There is a difference and Republicans aren’t asking that either.  Government spending is indeed important to fuel economic recovery.  However, raising taxes to plug the gap in public finances will also clobber an already fragile economy.  There needs to be a limit to government spending, or else there will never be enough to cover the overspending, no matter how frequently you raise the taxes and how dramatically an increase the tax hike will be each time.    

 

When we have endured a State shutdown, do we have to suffer for a Federal Government shutdown as the deadline for the debt ceiling approaches and when Obama and his team continue to carry out their tax hike proposal and keep deficits at unsustainable levels throughout the 10-year window?  Let’s be realistic.  Try harder to balance the budget.  Stop thinking of continuing to increase spending by simply increasing taxes.    

 

The agreement reached between Dayton and the Republican majorities was nothing but a short term fix to the Minnesota government spending deficit, based mainly on delayed payments and borrowing into the future.   Ideally, if Dayton and Republican leaders could work together on a balanced approach of tax increases and spending cuts, it would have avoided delayed payments to schools, health care funds and tobacco funds that fund medical research.  Haven’t we taken enough money from the future to fund our overspending?   

 

I am really curious at the outcome of the August 2nd Debt Ceiling Deal.  I do wish that they can come to the table with a realistic approach.  It is about time that the government seriously spends more time thinking about cutting their overspending.      

 

 

Written by Elisa English

On July 22nd, 2011 in Minneapolis

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