Green Room

The Establishment’s False Solution to Public Debt

posted at 1:14 pm on June 10, 2012 by

Ronald Brownstein argues that Wisconsin Gov. Scott Walker fought an unnecessary 1 1/2 year battle by responding to the state’s budget crisis “with a sharply ideological plan that targeted its pain almost entirely at Democratic constituencies.” He claims that it would have been better purse the “balanced approach” taken in the Nutmeg State:

In Connecticut, Gov. Dannel Malloy, also elected in 2010, closed a deficit as large as Wisconsin’s with $1 billion in spending reductions, $1.5 billion in tax increases, and $1.6 billion in union concessions. It wasn’t easy, but the plan ultimately drew support from public-employee unions (after initial resistance) and the chief executives of the major insurance companies that anchor the state’s business community. The fact that Malloy pursued tax increases and spending cuts made it easier to seek union concessions—and vice versa. “It was a balanced approach, and that made it easier to do that big ask of labor,” said Roy Occhiogrosso, Malloy’s senior adviser. “It was a big ask. But it was also a big ask of taxpayers and people who depend on the social safety net.”

An impressive story, if you rely on the governor’s adviser as your source of information. However, here’s what right-wing extremists from the New York Times reported on Connecticut in February:

Not everyone is so impressed. The rating agency Moody’s, which speaks a language familiar to Connecticut’s many financially inclined residents, downgraded the state’s debt last month, citing the high debt accumulated over years of borrowing as well as the depletion of the state’s “rainy day fund.”

The General Assembly’s nonpartisan Office of Fiscal Analysis reported the state had a $145 million deficit in January, when the Malloy administration was projecting surpluses. And critics, not limited to Republican lawmakers, have raised questions about how real his projected cost savings, including from his agreement with the unions, really are.

Oops. And this month, the Connecticut Mirror reports that the state continues to tap into its capital project accounts to pay its operating bills. In May, Gov. Malloy’s won approval of a plan to divert more than $200 million originally dedicated to pay off 2009 operating debt to instead close the current deficit. According to Connecticut Deputy House Minority Leader Vincent J. Candelora, despite more than $1.5 billion in state tax and fee increases ordered in May 2010, “revenues are not coming in at the pace that was anticipated and we are failing to achieve the budget (savings) that we were counting on.”

Apparently, this would be news to Brownstein and other establishmentarians who keep demanding “Grand Bargains” involving a “balanced approach” of “shared sacrifice” to public debt problems. The establishment continues to ignore that a history of fiscal consolidations in 21 countries of the Organization for Economic Cooperation and Development over 37 years shows successful attempts to balance budgets rely almost entirely on reduced government expenditures, while unsuccessful ones rely heavily on tax increases. They continue to ignore that the Tea Party extremists at the International Monetary Fund advise that a prolonged period of weak growth and high unemployment be addressed by spending cuts and temporary tax cuts, not tax increases. They ignore successful examples including New Zealand, Canada, and the post-WWII United States. They ignore that the “balanced approach” is failing where tried in Europe. In comparison, Estonia, Lithuania and Latvia have bounced back strongly after adopting strict austerity measures and vastly reducing government indebtedness. Indeed, Estonia is just starting to get good coverage in America, causing Paul Krugman to mislead his readers about it.

The establishment ignores all of this because to do otherwise would force them to confront the importance of public-sector unionism to the Democrats and thus center-left governance. The Cheesehead Days of Rage were fueled by Gov. Walker’s reform of some public-sector collective-bargaining rights and compulsory public-sector unionism (unions were willing to increase the employees’ contributions to their medical and pension plans), yet Brownstein treats it as a secondary or tertiary concern. As Jay Cost details in his new book, Spoiled Rotten, Democrats legitimized public-sector unions as private-sector unionism began to decline. However, private-sector unions depend on a growing private-sector, while public-sector unions depend on ever Bigger Government. The differences between the private-sector and public-sector bargaining almost inevitably produce the budgetary problems faced by Wisconsin and other states.

Establishmentarians like Brownstein want to avoid the ugly reality that the Wisconsin budget battle was about reforming a system in which: (1) government unions forcibly extract dues from employees; (2) government union officials enrich themselves; (3) government unions kick back donations and in-kind contributions to Democrat pols who defend them and promise substantial pension and medical benefits; and (4) legislatures fail to adequately contribute to public pensions and medical plans, while looking the other way at public pension accounting that would be criminal in the private-sector. Progressives will complain that public-sector union-busting harms women and African-Americans, who make up a disproportionate share of the public-sector workforce. They rarely mention that the establishment has been effectively defrauding the public-sector workforce for decades, let alone protest the Democrats and moderate Republicans most responsible.

The common thread is the establishment’s ideologically extreme insistence on center-left compromises. Center-left government is at the heart of most of the crises America currently faces; it is at the heart of the budgetary crises here and in Europe. People like Brownstein see them as a virtue, despite their track record of failure.

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Correction: “He claims that it would have been better to pursue the “balanced approach” taken in the Nutmeg State.” My layers of editors and fact-checkers failed me.

Karl on June 10, 2012 at 1:20 PM

Overreach, and settle for half; overreach, and settle for half. Why would anyone “compromise” after 70 years of this?

cthulhu on June 10, 2012 at 2:08 PM

Establishment: “Go-along to Get-along”

The People: “NO more, NO more, NO more”.

Difficultas_Est_Imperium on June 10, 2012 at 2:13 PM

Anti-establishment’s OK, but look who the GOP nominee is. Come on.

ddrintn on June 10, 2012 at 2:22 PM

nobody can compare CT and Wis…

Wis was already in the top 5 per capita tax bracket…and per capita income only ranks in the middle of the pack…27 I think out of 50 (or 57 depending on who is counting).

CT is using “band-aids”…Walker had to go with amputation (his predecessors used all the band-aids)…

teejk on June 10, 2012 at 2:41 PM

OK let’s compare Connecticut and Wisconsin:

CT: The largest Tax increase in the history of the state. Last years tax increase was larger than when the (temporary) State income tax was enacted. But we here in the Nutmeg state are seeing revenues fall way short of projections. That seems to happen every time, and we are looking at deficiets yet again. Even with the Fiscal year versues calendar year shennagians. The Governors lame justification to take an extra 6 months of increased taxes out of everyone’s paycheck who lives or works in CT:

“We tax on a calendar year and we budget on a fiscal year. No one really wants to do that but that’s how the two calendars interact.”

WI: No tax increases and behold, some cities actually saw surpluses.

Johnnyreb on June 10, 2012 at 5:37 PM

Connecticut taxation is NUTS!
That whole region (New England) is just a cesspool of taxation and “Liberal” social failure.

KMC1 on June 10, 2012 at 6:53 PM

Excellent column.

BTW, Patterico called out Brownstein as a “mouth organ for the Democrat Party” here in 2007.

Buy Danish on June 10, 2012 at 9:09 PM

(unions were willing to increase the employees’ contributions to their medical and pension plans)…

Well, that is what they said after all the fleebagging and circle drumin’ anyway. The problem is the union heads threw this out as an 11th hour hail Mary but they didn’t have the authority to make the bargain. In order for such concessions the Union leaders would have had to bring it to a vote of their members first -and given the temper tantrums that were shown one can guess how that would have played which meanwhile either would have stalled a reform bill while waiting for the vote from the union members or which would have cratered the bill if it went through based on a promise the union had no power to make and which then couldn’t be enforced.

The union leaders of course know this but it is important to point this out as the media has tried to use this as a wedge to show that Walker was the uncompromising one when in fact he just didn’t enter a last minute deal that was proposed in what was (at best) bad faith.

Betenoire on June 10, 2012 at 9:43 PM

ddrintn on June 10, 2012 at 2:22 PM

In contrast, look who the current socialist is…we give the current candidate a chance, if he fails he’s out on his keister too…pretty simple stuff. No more hand-wringing about not having the “perfect” candidate – get the current destroyer-in-chief the hell out of our Whitehouse, NOW!

Well, in Nov/Jan…but you get the point.

ontheright on June 11, 2012 at 9:04 AM

Apparently, this would be news to Brownstein and other establishmentarians who keep demanding “Grand Bargains” involving a “balanced approach” of “shared sacrifice” to public debt problems.

Tsk, tsk. Haven’t you gotten the memo? There is no establishment. Everyone except the radical fringe understands that big government is the wave of the future. What are you, some right-wing extremist Tr00Kon? ///

we give the current candidate a chance, if he fails he’s out on his keister too…pretty simple stuff.

ontheright on June 11, 2012 at 9:04 AM

I would love to hear the details on how we will “get rid” of Romney if he’s elected president and backstabs us with tax increases. Perhaps the same way we “got rid of” Boehner and McConnell after they proved unequal to the task of cutting spending after November 2010?

The fact of the matter is that if Romney blows it, a Democrat will be elected in his place, and then we’ll be right back where we started in 2009.

Doomberg on June 11, 2012 at 9:18 AM

One thing that Mitt has promised that I find encouraging is to reduce Govt spending to 17% of GDP. Since it’s now around 25%, getting it back down to 17% would sure help turn the economy around. I think in this era even Mitt would take Gov Walker’s approach.

JimK on June 11, 2012 at 9:21 AM

…but the “balanced approach” sounds good!

DavidW on June 11, 2012 at 9:37 AM

“with a sharply ideological plan that targeted its pain almost entirely at Democratic constituencies.” He claims

Name the Republican constituencies please.

Herb on June 11, 2012 at 9:51 AM

Man this is complicated. Are you trying to tell me that if we spend less we’ll have lower deficits? And not only that we won’t have to raise taxes which always lead to more spending,—-and deficits.
Actually it’s ordinary common sense. Brownstein doesn’t want his civil service babies to give some, but ok to stick it to the rest of the population. Government and it’s workers matter, nobody else. Corrupt !

arand on June 11, 2012 at 10:56 AM

Well written, concise and informative article. Too bad reality based common sense has to be published though. I found myself explaining those four basic concepts to a couple over dinner last Thursday. They are almost 10 years older and better off than me and had no clue about what the beef was in Wisconsin and how it applied to our under funded municipal pension plans in Houston (brought to us by dems and SEIU).

Very sad but heck, look at the potential to inform.

DanMan on June 11, 2012 at 11:30 AM

“with a sharply ideological plan that targeted its pain almost entirely at Democratic constituencies.”

On the other hand the Great Recession has targeted primarily Republican constituencies. You know, people who work and crate value in the private sector. Defined benefits didn’t get slashed in half like my 401k.

stout77 on June 11, 2012 at 11:44 AM

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Allahpundit on June 12, 2012 at 12:12 AM