Mitch Pearlstein: A bit of context for the state budget crisis

  • Article by: MITCH PEARLSTEIN
  • Updated: December 8, 2008 - 8:07 PM

These are the moments that produce change, so let's be smart about it.

In a November 1981 speech announcing just how big of a budget shortfall Minnesota then faced, Gov. Al Quie explained to a statewide television audience that even if all the institutions run by the Department of Public Welfare were shut down -- including all hospitals for the mentally ill, all seven campuses in the old Minnesota State University system and all 18 campuses of the old Minnesota Community College system -- the savings would total less than $500 million of the $768 million the state had to find. Keep in mind that even those inadequate savings were predicated on having a full two-year budget cycle to work with, when in fact the 1982-83 biennium had begun five months earlier, meaning a significant portion of dollars had already been spent.

Also keep in mind that this very substantial deficit was only one of a seemingly ceaseless string of large, recession-caused shortfalls that whacked Minnesota during the second half of Quie's term and that, in proportionate terms, combined to be every bit as nasty as the $5 billion-plus hole now facing Gov. Tim Pawlenty and the 2009 Legislature. Point being, especially when including the $4.2 billion deficit welcoming the newly elected Pawlenty in 2003, Thursday's news wasn't exactly original. What useful lessons might be drawn, especially given demographic problems that really are seminal in the life of the nation? Let me suggest a few.

In the matter of spending cuts, I try never to lose sight of how they can hurt real people in real need as well as government workers who really need their jobs. Nevertheless, life in Minnesota has managed to go on, humanely and progressively, each and every time budgets have been cut over the years. Despite accelerating claims to the contrary, we haven't been, nor will we ever be, reduced to a medieval state. Or as Yankee chauvinists have been known to put it, Mississippi.

President-elect Obama's chief of staff, Rahm Emanuel, recently was quoted as saying, "You never want a serious crisis to go to waste," by which he meant these are precisely the days when big improvements in government and the rest of society are possible. He was right, as was the late economist Milton Friedman, who said that only crises, actual or merely perceived, produce real change, and that when they occur, actions taken depend on "ideas that are lying around."

What good and germane ideas are lying around? State Sen. Geoff Michel, R-Edina, and State Rep. Laura Brod, R-New Prague, took advantage of one last week when they proposed leasing Minneapolis-St. Paul International Airport and the Minnesota State Lottery to private operators, a move that could increase state revenues by billions without compromising public safety in the least.

It is easy sport for opponents to dismiss big ideas like this, but it wasn't manufactured out of the thin blue; variations have a successful track record. This is particularly the case, ironically, outside of the United States, where public officials are often more eager to pursue market-based, public-private solutions than we are.

Tim Pawlenty is a low-tax guy, and not just because he signed a no-tax pledge half a dozen years ago. I note this because I hope my colleagues on the right give him sufficient latitude as he labors in navigating -- in collaboration with an overwhelmingly DFL Legislature -- an utterly immense, constitutionally mandated balanced-budgeting act. It sounds like almost everyone, on both sides of the aisle, is currently saying the right things about not raising taxes, but it's hard to believe that higher taxes, in some form, won't be part of a grand and fragile compromise in mid-May when the (regular) legislative session closes. I hope this does not come to be, but if it does, it wouldn't be helpful or fair to abandon Pawlenty because of it -- as a lot of Republicans abandoned Quie back then.

Yet it's also critical not to forget certain inescapable and complicating basics, two in particular.

First, while not too many people are eager to pin hero medals on "rich" people (defined as you choose) who financially succeed in Minnesota but then leave for sunnier tax climes, it is their perfect right to do so, and it would be self-defeating if we adopted tax policies to encourage more such fortunate folks to depart even earlier by ganging up on them in populist frenzies.

And second, if current budget and other economic numbers don't add up, they really don't compute in regard to the coming boom of retiring and increasingly ill and infirm baby boomers. I would very much like to think differently, but I simply can't conceive of how we will be able to pay those Social Security, Medicare and Medicaid bills down a not-distant road without federal tax increases. That being the case, it is incumbent that every feasibly frugal step be taken now so as to keep total tax burdens in reasonable check later on.

To say I have great appreciation for the excruciating job confronting everyone in St. Paul is anything but a facile salute.

Mitch Pearlstein is founder and president of Center of the American Experiment in Minneapolis. He served on Gov. Al Quie's staff from 1981-82.

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