Submitted by John Blankley, former candidate for state senate and state treasurer.
How shall we spend our surplus?
A subject as dull as dishwater now comes before us: it’s the state’s finances. Don’t go away: there’s some excitement – we actually have a surplus!
I know you’d much rather contemplate practically anything else in this world, but, for the moment, let’s take a minute to think about the surplus and what to do with it.
State finances are a distant and for the most part (to most people) an unintelligible game of numbers and concepts. Well, a few nerdy folks like me stay up at nights thinking about these things. Some say I was born that way but let’s move right along.
Mirabile dictu (I told you I was a nerd) our state is enjoying a current surplus. When Wall Street does well, so do we. Add to that, federal dollars from the American rescue plan and the recent trillion-dollar infrastructure bill (some of which will trickle down to us) and we end up with a rainy day fund surplus, a budget surplus and decisions to make about spending on roads, 5G and whatever else.
To use the vernacular, we have money coming out of our ears and what are we going to do with it?
I am taking pen to paper today because I fear short term thinking will dominate the debate. Already I hear the siren song of tax cuts, an ever-popular theme for the economically illiterate and the politically motivated. Republicans talk of income tax cuts, Democrats think in terms of tax credits, particularly property tax credits and better Democrats contemplate rebates for lower income (and non-property tax-paying citizens.) What all this ignores is the longer-term problem of our debt overhang and our unfunded pension liabilities, combined over $90 billion, which place us next to last among these United States. Perhaps, just perhaps, paying down some of these liabilities would be the right thing to do?
So, it’s short term versus long term! In my races for state office this has been, if not articulated this way, the core of the debate. In the short term is political advantage for elected officials but in the long term the can will have been kicked down the road one more time. What, do I hear you say? Tax cuts now will produce revenues later through spurred economic growth? Definite maybe on that one. Ask Governor Brownback of Kansas how that worked out for him: short term advantage followed by no increase in state revenues, in fact a decrease, followed by school closures, slashed social programs and general misery. I cannot think of a better proof that supply-side economics doesn’t work.
The nuance though is who gets the tax break? Tax cuts for low wage earners do actually have the desired effect of alleviating suffering and anxiety while producing economic growth. At the national level the Congressional Budget office has a list of the tax cuts that produce the biggest bang for the buck and it’s Supplemental Nutritional Assistance Program, (SNAP) payments. $1 of SNAP payments produce $1.60 of federal income. At the state level this would argue for rebates for low-income households. The argument is compelling. This money will be spent because those living paycheck to paycheck must spend it. This in turn of course creates demand and stimulates the economy.
However, having satisfied that worthy cause I would urge our elected officials to act responsibly, as they have done in the most recent budget, by making, for example, even more contributions to the state pension funds. On the campaign trail I and others, including Governor Lamont, decried the poor governance by our political classes over recent decades that resulted in debt overhang and unfunded pension liabilities.
So I say to the Governor and the legislature, think long term and you will go down as exemplars of fiscal probity. That’s a legacy worth striving for. If on the other hand in the years ahead we look back and see that our surplus was squandered, you will simply be added to the long list of failed politicians who mismanaged our state’s finances.
Former candidate for state senate and state treasurer.