Wednesday, January 14, 2009

Tenacious Ds

Having experience the unusual phenomenon of losing a tax battle in Massachusetts back in the 1990s when my friend Governor Weld managed to push through significant cuts, Massachusetts "progressives" have not forgotten. These people know how to hold a grudge.

Hence, this blurb in the State House News this morning:
REPORT: REVENUE CHOICES COMPOUNDING BUDGET WOES | Beacon Hill leaders frequently point to the steep economic downturn nationally and globally as the reason for the state’s deep budget problems, but a report out Wednesday morning says another factor has contributed to the red ink: revenue choices. The Massachusetts Budget and Policy Center report says the short-term causes of the state budget crisis are largely issues outside of the control of state policy makers, but concludes that permanent state tax cuts enacted in the late 1990s left Beacon Hill with structurally unbalanced budgets after the 2001 recession. "While the economy was growing the past five years, the state's fiscal condition was never truly strong," said MassBudget Executive Director Noah Berger. "After cutting taxes deeply in the late 1990s, the state suffered in the 2001 recession and then spent the subsequent years delaying needed investments in infrastructure and in people, and not being able to build the reserves needed to weather the next recession." The report found that from 1998 to 2008, net state spending declined modestly as a share of the economy, while state revenues declined sharply as a share of the economy. The report’s authors estimate the fiscal 2010 budget gap at more than $3 billion and take a stab at explaining how state government went from posting surpluses ten years ago to today’s fiscal shambles. Bipartisan proponents of the tax cuts targeted in the report billed those efforts as economic stimulators that would create jobs even as state officials built up one of the largest rainy day funds in the nation.

This is just another go-round in a time-honored dance among fiscal liberals. Having behaved badly for much of the past decade, they reach back over ten years to find the cause of the damage they have done. Surprise! Instead of wondering "how state government went from posting surpluses ten years ago to today's fiscal shambles," how about explaining how state government went from posting a BILLION DOLLAR surplus TWO years ago to today's fiscal shambles?

The answers are not difficult. With the exception of the 2000 recession, until this year the state budget grew every year between the Weld tax cuts (which, by the way, propelled us out of the Dukakis recession) and now. Both "revenues" and spending grew. Guess which grew faster? We also DID build up one of the largest rainy day funds in the nation - and our legislature dipped into it liberally to balance the budget, even when it was not "raining" by anyone's estimation. They repeatedly and casually overrode budget line item vetoes by Republican Governors intended to keep spending in check. They blithely ignored the fact that much of their spending relied upon one-time revenue items. They continued to underfund local services even as the state generated revenue surpluses year after year.

It is easy to look at a crushing credit card bill and blame one's employer for not paying enough. I can't buy a Ferrari and then turn to my law firm and demand that they increase my salary so that I can make the payments. This, essentially, is what this "study" does: it ignores a decade of excessive spending and says, "oh, if only we'd raised taxes higher, we could have afforded all of this great stuff we bought." Sadly, we residents of the Commonwealth don't even get to enjoy the state government equivalent of a Ferrari (and no, I cannot imagine what that would be). Our overspending gave us such baubles as wildly excessive pensions for workers at all levels of government, a transportation system drowning under layers of redundancy, patronage and waste, a legislature that spends freely to please everyone, and feels accountable to no one.

I'd rather a Ferrari.


  1. Hmmm, I find this rather offensive. "Our overspending gave us such baubles as wildly excessive pensions for workers at all levels of government"

    Both my parents are public school teachers, 4th and 6th grade in western mass with over 60 years of teaching between them. They don't live beyond their means, they are good thrifty ynakees. No credit card debt, old cars, small houses (they are divorced now), hardly travel unless it is a drive to see Grandkids on holidays. They both paid into the pension system, which means they don't get social security btw. My Dad is retired from teaching but has to work to make ends meet. My Mom still teaches, but she works a second job so she can make ends meet and is worried that retiring will be more stressful because she won't have enough money. They made so little as teachers that it was hard to put additional money away for retirement. What does this all mean? It means that I sometimes help them out with paying for unexpected expenses, my Mom lives in a house she keeps at 55 most of the winter so she can afford to heat it, and she worries about paying for holiday gifts for the grandkids.

    So please, explain to me, how this is an, "excessive pension" as you say. Explain how two people, who gave their lives to the thankless and low paying task of teaching young children, got such an "excessive pension" that they can't afford to retire on it?

  2. Thank you for the comment. I'm sorry to cause offense, but I don't think the proposition that Massachusetts pays wildly excessive pensions at all levels of government is a debatable one. That is a different statement, of course, from "every government pension is wildly excessive." More to the point, consciously or not yours is a standard labor union response to any pension reform initiative. I have no doubt that there are public school teachers all across the state who are in similar situations to that of your parents. That truth does not alter any of the following truths, however: MBTA employees routinely retire in their forties with full pensions and health care benefits for life, then go on to work several more decades, full time, in another career, all the while receiving their state checks. Pike retirement benefits are even more ridiculous. Legislators who serve one day of a new session and then retire get pension credit for a full year. Connected state workers are routinely given little work and/or no-show jobs for a few years pre-retirement, to make up the last years necessary for a pension bump. The abuses in Boston have been well-documented by the Globe. Cities and towns across the state are drowning in retirement benefit costs - for many of them these represent the single largest chunk of their annual budgets. The Commonwealth, overall, has more than a Big Dig's worth (in dollars) of unfunded pension liability going forward (meaning promised pension obligations for which there is no identified revenue source). This is not a sustainable situation. I am all for the notion that qualified public school teachers ought to be compensated commensurate with the value that society purports to place on their service. Again, though, I do not think that the need to fundamentally reform public pensions (and other retirement benefits) in Massachusetts is a debatable question.


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