Thursday, July 31, 2008

Fiscal Responsibility with Governor Martin O’Malley

(Update 08/02/08 3:06 PM: The video of the speech I wrote about in this post is now available online.)

Politically speaking, I’m a fairly liberal guy, or at least moderately left of center. I embrace universal health care, universal pre-k, and active scientific research. I do, however, have one very conservative sticking point that goes hand-in-hand with these liberal positions: good programs are only good programs if you pay for them. I am a deficit hawk with a thirty-foot wingspan. If I were in Congress today, I would have given serious consideration to voting against the recent GI Bill. I’m all for sending veterans to school on the government’s dime, but Congress didn’t pay for the program, choosing instead to add to the federal deficit and debt. I guarantee I would have voted against February’s economic stimulus package, something no Senate Democrat did. As I wrote at the time, the stimulus would add $150 billion to the deficit and do absolutely nothing to turn around the economy. Sure enough, here we are five months later spending a record $482 billion in the red but still mired in an economic funk. And who has to pay for all this? Certainly not the baby boomers in Congress! No, that would be me, and everyone else my age.

Fiscal responsibility matters. When you run large deficits, you can’t get anything done and risk giving economic control of your country or state to outside interests, which is why I attended a speech today by Maryland Governor Martin O’Malley (D) at the Center for American Progress. Governor O’Malley and fellow Democratic Governor David Paterson of New York have an Op-Ed in today’s Washington Post about the current administration’s fiscal ineptitude. Elected just two years ago, O’Malley has almost erased Maryland’s $1.7 billion structural deficit. He spoke at CAP about why fiscal responsibility matters, how he fixed Maryland’s budget, and what else this has enabled him to do.

The Governor began by quoting a Wall Street Journal article that said the 50 states combined face a $40 billion shortfall, and said he approached his job with three goals in mind: “One, we will make our government work again. Two, we will make our government work again. And three, we will make our government work again.” He then recounted his favorite Groucho Marx gag. Groucho and his friends have a very expensive dinner. When the check comes, Groucho looks at it and, turning to his friend, says, “That’s outrageous! I wouldn’t pay it if I were you!” Large checks, O’Malley said, aren’t the only things being passed to the next generation (i.e., me), but also a crumbling infrastructure, an exhausted military, rising college tuition costs, and devastated cities.

O’Malley inherited a fiscal disaster when he took office in 2006, and set about fixing it, calling a special session of the state legislature in the fall of 2007. The work done that session, he said, was neither popular nor easy – four of the six bills passed by only one vote. These measures included reducing future spending growth, cutting 700 government jobs, saving $10 million a year by closing a notoriously violent maximum security prison, saving $20 million a year in overtime costs through the performance measurement system “StateSat,” and modernizing the tax code while lowering the income tax for 90% of Maryland residents.

The unpopular nuts and bolts of all this included raising the sales tax from 5% to 6% (a 20% jump), raising the tobacco tax by $1, and instituting “the first progressive income tax in Maryland history” – a new bracket for those making more than $1 million a year. At the same time, eligibility for the state earned income tax credit was raised by 25% and other taxes were capped and lowered. All in all, despite the tax increases, O’Malley said that 46% of Marylanders actually have lower tax bills now. The final piece of this fiscal package is still pending – O’Malley and the legislature were unable to settle a debate over gambling, and agreed to pass along the measure to the voters as a ballot referendum.

According to a handout we were given, 52% of the O’Malley budget cuts were from spending cuts, 35% from tax increases, and 13% from slots. With fiscal responsibility restored, Maryland now has a AAA credit rating. But O’Malley says the real rewards of fiscal responsibility aren’t in the ratings, but in the actions you are free to take. As a result of the budget improvements, Maryland has frozen college tuition (which had risen over 40% from 2001-2006), increased funding for community colleges, expanded adult literacy programs, put more resources into infrastructure improvement, and eliminate a backlog of unanalyzed DNA samples.

Podesta led off the Q&A by asking O’Malley how a strong federal partner could help. The Governor said he hopes the second stimulus package, if there is a second stimulus package (and I don’t think there will be, given the current Senate climate), will include major infrastructure assistance, as states can’t meet the current burden placed on them. He’d also like federal help in achieving universal health care and lower college tuition. I followed with my own question – “That’s all well and good, but the reason the feds can’t do these things now is the same reason you were unable to do such things two years ago. They have their own massive deficits. What do you think needs to be done to bring about a sense of fiscal responsibility at the national level, here in DC?” His answer focused entirely on the Bush tax cuts. He said he gives credit to Bush for one thing – ideologically, Dubya believes that government could be small and weak, and that’s a promise on which he’s delivered. The Clinton surplus disappeared because of Bush’s tax cuts for the wealthy. The problem with federal deficits is not the national economy or even the energy crisis, but is ourselves. The growing income gap, the shrinking middle class, and widespread poverty are not fiscally responsible policies, yet we never raise them as national priorities. “We make our own circumstances, y’know? And the circumstances we’ve made have feebled our federal government.”

This, I believe, is the start of a good answer, but it’s not the whole thing. Yes, the Bush tax cuts and the desire to make them permanent are a large part of the current deficit. They are not, however, the entire $482 billion. The Iraq War is also a part of that, as is – and you have to blame the Democrats for this, not Bush – that stupid February stimulus package. The Iraq War costs $12 billion a month – $144 billion a year. Remove most of our forces and you drop that by maybe $100 billion a year. Erase the stimulus package, and all other things staying equal (and I know they won’t), that right there is around $300 billion in savings. Then you can talk Bush tax cuts. (Their total size might erase most of the budget, but at least some of the cuts were for the middle class). The problem with this scenario is that it only erases the deficit, it doesn’t create a surplus. I’m reminded of the brutal honesty Governor Howard Dean displayed during his 2004 presidential campaign, when he often said, he said things like, “You cannot promise people tax cuts, college education, health care and whatever else you want, and say, 'Oh, it'll all be fine.’ That's what George Bush is doing. I want fiscal responsibility in this country.''

I’m going to vote for Barack Obama, but he could use a dose of Dean’s honesty. He hasn’t told us how he’s going to pay for his health care policy and other proposals – and I’m not sure he really knows. It’s going to take defense cuts, a few (small and targeted?) tax increases, and even an embrace of the usually-icky Senator Tom Coburn’s demand that we erase old programs when enacting similar new ones. If Obama’s going to accomplish any of this, he’ll need O’Malley’s guts.

But back to the Q&A. Asked a question by ABC News' John Sentamu, O’Malley said that we often hear the refrain that government should be run more like a business, “But what business do you want it to be run like, Bear Stearns? …Enron?” Instead, we just need to make sure we have (and keep) more competent managers in government. And finally, when a woman asked if he has a backup plan for if the gambling referendum does not pass, he was very straight forward: “No, I do not!” with a smile.

Boil it all down, and in O’Malley you have a Democrat who reduced the size of government, is about to balance a budget, AND improved education and infrastructure. Yes, this included raising a few taxes, and his approval rating has taken a hit – a dismal 37% in March. He even pulled a mere 48% from his own party. Since CAP and the voters of Maryland seem to disagree about whether or not O’Malley is a good governor, I will withhold judgment. However, I did like what I heard from him today, his folksy-yet-professional demeanor was a nice touch, and I agree with him 100% when he says not all taxes are a “pestilence, a plague or a disease... Not one of us wants to pay more in taxes. But you know what we want even less? What we want even less is to leave our country to our kids in a worsened condition.”

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