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Stupid is as stupid does


Fri, Mar 8th, 2013
Posted in All Commentary

This well known quote from Forrest Gump seems to mean a person is tagged with the label of stupid when he or she does stupid things, regardless of that person’s intelligence. Our national political leaders have once again earned this designation.

The “sequester” or automatic $85 billion in spending cuts from the 2013 budget that went into effect on March 1 is not, in the light of the total national budget, that big of a cut back on spending. The nation will be able to absorb it, but at some pain and loss of economic growth. However, any of us that have trimmed a budget for business or for our own household know that when we need to cut back, we do that by reducing or eliminating items that do the least harm. The “sequester” cuts are estimated to cause a loss of one half of one percent in economic growth. The automatic spending cuts in defense and discretionary spending were never intended to be allowed to go into effect, but were meant to be so unpalatable that it would force a compromise. The presumed ramifications of these cuts failed to thaw the icy barrier standing in the way of progress in Washington.

Let’s face it: many Republicans “hate” President Obama to such a degree that anything his administration proposes is met with their disapproval, regardless of the merit of those ideas. Obama and Democrats have distorted the pain and loss that would be felt by the country with the “sequester” in order to win the public in their favor. No doubt there will be pain, but most of us will not feel it directly and not for some time. Unfortunately, thousands will loose their jobs or have their work hours reduced. These showdowns that fail to produce positive and consequential legislation for the country again and again have turned the public off and hurt the economy and the nation in the eyes of the world. Nobody wins, not the Republicans, not the Democrats, and especially not the American people. Our two party system is ready to ‘cut the baby in half” rather than give in a little to the other side and do what it best to nurture it.

We need tax reform which will produce added revenue, mostly through reducing subsidies and eliminating loopholes. Our government has real structural problems that need to be addressed for the long term economic health of the country. This is the one fact that both sides recognize. We need reforms of health programs including Medicare and Medicaid to keep them solvent for years to come. Every Washington politician knows that. They have seen the projected numbers as the baby boomers retire, people live longer, and health care costs continue to sky rocket year after year. The “sequester” for the most part makes no attempt to deal with the cost of health care. Medicare and Medicaid expenses last year were about 5 percent of the Gross Domestic Product (GDP). By 2037 Medicare and Medicaid are projected to be nearly 10 percent of the nation’s GDP.

It is likely that the cutbacks will take one step forward in reducing the deficit and at least a half of a step back. If military equipment is kept in service without proper maintenance, it may cost more in the long run to fix damage that could have been averted. There will be less tax revenue if the economic recovery is slowed. We won’t know what medical research break through may have been delayed for years or may never happen due to cutbacks. These are examples of the kinds of losses that could be limited with smart, thoughtful spending reductions.

The next looming crisis is the continuing resolution to keep the federal government running later this month. Let’s hope some of the adults in Washington can do their jobs, act competently, and take the lead to get the big long-term bargain that puts our nation on the road to fiscal health. This inability to get past the nation’s fiscal problems will get in the way or delay addressing other important issues facing our country like immigration.

Minnesota Tax Reform?

Governor Mark Dayton has proposed tax reform that would raise about $2 billion and shift the tax burden, especially away from property taxes. His plan is to wipe out the $627 million 2014-2015 structural deficit and provide more funding for education, property tax reductions, Health and Human Services, and economic development. The deficit for the next biennium is expected to be $463 million less than the earlier estimate of $1.1 billion.

His plan would broaden the sales tax base and lower the sales tax rate from 6.875 percent to 5.5 percent, lower the corporate tax rate from 9.8 percent to 8.4 percent while expanding the corporate income tax base (closing loopholes), and provide tax relief for property owners. Sales would then be taxed on additional items including, but not limited to the following: digital purchases, clothing costing over $100, over-the-counter drugs, personal care services, legal and accounting services, repair services, and business to business services. He would create a fourth income tax rate tier for the top 2 percent of income earners raising the rate to 9.85 percent, a 2 percent increase. The cigarette tax would be increased by 94 cents to $1.42 per pack. The business property tax will be frozen for two years and then subject to a slower rate of increase year to year.

Dayton suggests that the broadening of the sales tax base and the lowering of the rate will not cause a net tax increase for most Minnesota families.

Dayton wants to provide $40 million more funding for County Program Aid and $80 million more for Local Government Aid. These increases would begin in 2014. Local property taxes would presumably see less of an increase with additional state aid. That is if other changes he has proposed don’t cost counties and cities more and have the effect of neutralizing any additional aid. He has proposed a $500 rebate to homeowners regardless of income.

Whether or not these tax reforms proposed by Dayton become law even in part, it is healthy to consider a rebalancing of the tax burden and to begin the discussion. A priority in Dayton’s plan is property tax relief. The plan provides for additional funding to some areas that have been burdened with significant cuts over the last several years.

This plan is thought out and there surely are and will continue to be differing opinions on its fairness and benefits. Whether or not his proposals become law, the proposals deserve examination and consideration for taking a first step toward rising above “stupid is as stupid does.”

Comments:







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1223

5:11:49, Mar 14th 2013

Bonita Underbakke says:
Dear Karen,
Thanks for your well-chosen words. I appreciate your thoughtful columns.


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