Focus on smarter spending, not tax cuts, in 2010

Let’s acknowledge something that everyone knows to be true: You can’t cut taxes every single year. And then let’s face up to the fact that, in Georgia, this is one of those years when holding the line will be a win for taxpayers.

The state budget that has already been cut by $3 billion, or about 14 percent, over the past two years. Now it stands to be slashed by another $1.5 billion. Trying to reach that point while also cutting taxes is too much for lawmakers to bite off.

Look, with unemployment still creeping higher, I’d love to see a growth- and jobs-spurring tax cut just as much as the next supply-sider. Incentives matter, and capital is still on strike. The theory is still right.

That said, money is sitting idly today because of the regulation, spending and (future) taxes coming from Washington. People aren’t investing in future growth because the uncertainty is too great.

State policy is playing a much smaller role in these decisions right now. We can’t compete with other states for investments that simply aren’t being made right now.

Lt. Gov. Casey Cagle called for tax cuts nonetheless on Tuesday morning. Yet he seems to understand these dynamics. Speaking with me later that day, Cagle said he’s “not naïve enough to think what is done at the state level equals what’s done at the federal level.”

So, he and other state leaders face a dilemma. “What we do know is that we can’t simply sit by idle, and you can’t be unbridled in your pursuit of growth,” Cagle told me. “It has to be measured.”

Maybe the budget shortfall can be our ally here. Forget tax cuts for this year. Focus on spending — and reducing it in a way that will pay dividends even when times aren’t so lean.

The $3 billion in spending reductions so far have been achieved mostly with the rather crude tool of across-the-board cuts. That approach only works up to a point. What we need is a more strategic approach to “right-sizing” government and prioritizing limited state funds.

This is the path to more fundamental change. And, as Cagle said, “The use of one-time funds and particularly furloughs and the agency cuts are not foundational in that they can be sustained for the long term.”

This kind of effort will take time, elbow grease and, most of all, political will. So, don’t spend political will and capital — whose quantities are limited during an election year like this one — devising a way to cut taxes.

The budget cuts have to be made anyway: A $1.5 billion tax hike would be not just political suicide but economic roulette. By making them in a sustainable way, legislators can avoid some of this cyclical feast-and-famine approach to budgeting in the future.

They could also take an important step toward future tax cuts. They might even agree now to a cut that would be implemented in a couple of years, or gradually over a few years.

After all, the types of investments they are – or should be – seeking are the ones made for the long haul. So, setting out a plan for rates in the future, when the gains from such long-range decisions will be realized anyway, could still be just as big an encouragement for investment now.

With so much upheaval in the budget, the conservative – that is, prudent and far-sighted – strategy is to get some stability. Then we can make the changes that will leave us stronger, not craving another binge, down the road.

63 comments Add your comment

Phil

January 13th, 2010
8:05 pm

Has Casey lost his mind? Seriously, tax cuts in this kind of economy?? Even the most conservative of conservatives would call that stupid. Time for Casey to retire.

Captain USA

January 13th, 2010
8:24 pm

Georgia has a major budget problem due to lack of revenue and Cagle want to cut state revenue more? I guess conservatives can’t grasp the concept of when you’re in a hole that’s too deep, you need to stop digging.

Ace

January 13th, 2010
10:20 pm

Let’s look at my company. Revenues were down, employees took pay and benifit cuts. Maybe the state should cut pay and benifits and quit trying to cut services. Same with my company, there ain’t a whole lot of jobs out there and plenty looking for work so I doubt a bunch of people are going to quit. Thats life and capitalism.

Allen

January 14th, 2010
2:10 am

Kyle, nice column. I would love to hear more in the future about specific areas where you think spending cuts could be best realized. Thanks for your insights.

Karl Marx

January 14th, 2010
6:30 am

We have so many unnecessary programs that could be cut tax cuts are always a good idea. We need to get government out of our lives not hold on to the status quo and cutting taxes will help the people who badly need it, the taxpayer.

stands for decibels

January 14th, 2010
7:54 am

We need to get government out of our lives

How pretty that sounds.

Ok, Karl. Let’s imagine you’re an elected official. Got any actual programs of the “so many” that are “unnecessary” you’d eliminate?

Vinny

January 14th, 2010
8:43 am

Is Cynthia finally gone?

Democrats are Corrupt, Repukes are Lying Scum

January 14th, 2010
8:51 am

We could always tax the big bad banks, like Obama has proposed. It is not the banks per say that are evil and greedy, it is the management sitting in the executive offices. We should be taxing the heck out of bank management, and not let them pass those taxes on to the bank. Of course Obama does not understand this. Do you know what I think President Obama really is at heart? A flim flam man, he talks a good program, but he delivers nothing. His alleged “change you can believe in” has so far amounted to nothing, and he only has three years left in this, his most likely only term in office as president. Con artist is another phrase that in my opinion, I believe applies to Barak and his whole administration. Just to be clear, I was taken in too, I sent the man money for his election campaign, and I voted for him, the only member of my extended family to do so. It looks like I was wrong, and I do hate to be wrong. Fool me once, shame on you, fool me twice, shame on me. I will never vote for Obama or his ilk again, with God as my witness. The next three years are gonna be real ugly, so maybe I will get my campaign donation to the Kenyan back in entertainment value.

Ragnar Danneskjöld

January 14th, 2010
9:03 am

There is no such thing as “essential government spending” other than the minimum necessary to prevent murder and theft. Until there is no such thing as unessential government spending, taxes can continue to be cut. I would modestly propose abolishing all elements of the government of Georgia, save those necessary to prevent and capture thieves and murderers.

Stan Kelley

January 14th, 2010
9:18 am

“That said, money is sitting idly today because of the regulation, spending and (future) taxes coming from Washington. People aren’t investing in future growth because the uncertainty is too great.” How could you possibly know this Kyle? Maybe they are not investing because it is very unclear when prospects will improve. Think before you write.

Stan Kelley

January 14th, 2010
9:20 am

So Ragnar, abolish public schools. Right away or gradually? No public roads. Right now or later? Etc. Etc. Think before you write.

Ragnar Danneskjöld

January 14th, 2010
10:04 am

Dear Stan, good question. Answer, right away, and right now. You leftists always underestimate the capacity of the free market to fill in gaps.

Kyle Wingfield

January 14th, 2010
10:06 am

And why, Mr. Kelley, might they be so uncertain about the future? Most economic indicators suggest a recovery is already under way. Yes, it’s a tepid one relative to historical standards — but again, why do you think that is?

I base my opinions on things like this on the conversations I have with entrepreneurs and businessmen, and other interviews I read/watch with the same kind of people. And the dominant theme I hear from these kinds of people is that there’s a much higher than usual sense of uncertainty about whether successful people will be able to keep the rewards of taking a risk. It’s not a matter of market uncertainty, but of public-policy uncertainty.

Kick Me

January 14th, 2010
10:09 am

Kyle, Not that I don’t appreciate the idea of “rightsizing government” and “prioritizing limited state funds”, but it’s a discussion that’s been raging since Roman times, with no two interpretations of what’s “right” being the same.

JohnD

January 14th, 2010
10:23 am

Yes, let’s bring back unrestricted free markets.

Remove all regulations. Let’s free capital to do whatever it wants.

Enron, Worldcom, etc., that worked really, really well.

And if we eliminate taxes altogether, we will actually increase government revenue.

I heard it on Fox News.

Democrats are Corrupt, Repukes are Lying Scum

January 14th, 2010
11:26 am

Ah hear Papa Doc Obama is forming his own Ton Ton Makut to help out in the up coming congressional elections.

Ragnar Danneskjöld

January 14th, 2010
11:44 am

Dear JohnD, both of your examples were cases of companies thinking they could out-maneuver government constraints. Without government constraints, with individuals taking personal responsibility for their decisions instead, the potential for effective deception is minimized. We understand that leftists think people are incapable of personal responsibility.

dylandawg

January 14th, 2010
11:45 am

I wake up happy every day that Ragner is not in charge. Kyle, I don’t believe you. You did not have those conversations unless you were at a tea party. Please share specifics.

dylandawg

January 14th, 2010
11:48 am

Ragnar, please give some historical examples where the average citizen was better off under the government (or lack therof) that you are proposing. I can’t think of any as in not one.

Joan

January 14th, 2010
11:51 am

So long as the government employees are in charge of whether they take pay or benefit cuts, you can bet that won’t happen. Ace had a good idea, but who can force government workers to take pay cuts? Too bad a citizen oversight committee can’t go into governmental offices for example, and do an analysis. I am sure there is a ton of deadwood on the employee rolls–and most of it looks like it is eating pretty well.

dylandawg

January 14th, 2010
11:56 am

Landslide please reaad a history book at some point (Glenn Beck doesn’t count). By no measure was the average working man better off a 100 years ago. Middle class??? Really?? Long point to prove nothing.

dylandawg

January 14th, 2010
11:57 am

Government workers are fat and should get there pay cut. Good point. really??

dylandawg

January 14th, 2010
11:58 am

oh and you do have citizen oversight it’s called voting

2010 Landslide

January 14th, 2010
12:06 pm

Dylandawg….. I mean Olberman….. Your 11:57 point …. Before you suggest I should read a book perhaps you should learn a little spelling. It’s “their” not “there” when you are showing possession.

Wait…. The flute player is making that sound… Shouldn’t you be marching off a cliff with “Great Leader?”

No wait…. Andy Stern and Van Jones have a gig for you…. Census Worker….. YAY!

Kyle Wingfield

January 14th, 2010
12:15 pm

2010 Landslide: I appreciate your comment about the history of taxes, but it’s too long for this blog. If you have a link to that information, please post it.

Minister James

January 14th, 2010
12:31 pm

Jefferson

January 14th, 2010
12:41 pm

Government used to work for taxpayers, now taxpayers work for the govenment. Fancy offices and big paychecks — a banker will tell you that what it takes to get talent. We got talent?

Jack

January 14th, 2010
12:42 pm

Govt. workers in the state of Georgia have already taken pay AND benefit cuts twice over the past two years (and can anticipate more)…more importantly, much of the government pays private consultants to do work (that could be done by state workers) and those private consultants are paid three times what a state worker is paid and the company is paid 140% overhead to support the work (which could be done by the already established state infrastructure)…

Ragnar Danneskjöld

January 14th, 2010
12:52 pm

Dear Dylandawg @ 11:48, “please give some historical examples where the average citizen was better off under the government (or lack therof) that you are proposing. I can’t think of any as in not one.” You correctly note that all of history is one of overlords inflicting their demands over their serfs, until the rebellion of 1776. From 1776 to 1933 the United States government was little more than an apparatus for raising an army. Assuming you know a little of economic history, you are aware that from 1880 until 1904 the US economy grew faster than at any other time in its history. The administration of Teddy Roosevelt introduced the the FTC and FDA, later Wilson introduced the Fed. Economy grew great again in the 1920s, until misguided republicans determined to constrain trade, to prevent job losses. In the depression that followed, President Hoover introduced higher taxes, an error increased by FDR. FDR also determined that regulation of the economy would stimulate it, and in only 15 years the economy began to recover. We see a similar mentality in our overlords today.

Chris Broe

January 14th, 2010
12:55 pm

Hey, why hasn’t someone called me a piece of crap yet?

Joe

January 14th, 2010
12:59 pm

The extremely creative language employed by politicians to explain the simple fact that the State of Georgia is FLAT BROKE and completely out of workable ideas to bring in enough money to pay the bills they’ve run up is just amazing. Anything that can be explained by the average person in one sentence takes a career politician no less than one hour – and Lord help us all if that politician is also a lawyer or a Baptist preacher! First, they lull the crowd into a hypnotic trance by rambling on and on about the most boring, trivial, and irrelevant subjects they can find, then, when they’re sure the group they’re addressing is almost asleep, the politicians finally rapidly mumble through the truly important subject matter in an intentionally confusing manner so that no one has a clue what they’ve actually said. To avoid answering questions from the public or the press, the grinning and waving politicians who’ve just finished speaking immediately leave the podium and rapidly head for the nearest exit as all the other career politicians in the room start a long and loud standing ovation so as to give the speakers plenty of cover so they can escape from the building without interference. How many dozens of times have we all witnessed the aforementioned scenario? Yep, the annual “Gold Dome Circus” is back in Atlanta and those clowns are performing the same old highly predictable acts. As the legislators promise to give us “tax cuts” to “stimulate the economy”, we can expect more “stealth taxes” to be enacted (”red light cameras”, automatic speed cameras, more “temporary” toll roads (ummm hmmm, “temporary tolls”, just like “Georgia 400″), ridiculous additional fines and fees payable to the state for crimes and traffic offenses (for example, the new “Super Speeder” stealth tax), new taxes and regulations on small businesses (how many times have we heard people foolishly say “that tax won’t affect me, my boss has to pay it”?), and cleverly disguised taxes on necessities, like water and utilities……Fellow Citizens, it’s January, please be certain to closely guard your wife, your daughters, and your wallet!

Ragnar Danneskjöld

January 14th, 2010
1:06 pm

Dear Chris, I would respectfully honor your request, but such an act would be insincere; I think you are the funnniest poster on the blog.

Joe

January 14th, 2010
1:08 pm

NEVER VOTE FOR ANY INCUMBENT or ANY CAREER POLITICIAN!

Jefferson

January 14th, 2010
1:14 pm

The firings will continue until moral improves….

Ragnar Danneskjöld

January 14th, 2010
1:16 pm

Dear Joe, to the extent you address people who are not competent to distinguish a true conservative from a leftist, your advice is sound. Of course, a more intelligent course is to only vote against leftists of all parties (i.e., including RINOs.)

Joe

January 14th, 2010
1:25 pm

dylandawg – 100 years ago the U.S. Constitution was still being enforced as the Founding Fathers originally intended and the PRIVATELY OWNED “Federal Reserve Bank” did not exist. 100 years ago, the Citizens were MUCH better off than they are under the current tyrannical, corrupt, evil, and overbearing government. Karl Marx and Joseph Stalin would simply adore Constitutionally ignorant people like you. The Kenyan Marxist who is now illegally occupying the White House would be their darling. http://puzo1.blogspot.com/

JF McNamara

January 14th, 2010
1:26 pm

Why not just eliminate all taxes, then we’ll have unbridled growth and everything we ever wanted we’ll have?

This is just another poor use of the Laffer curve to try to cater to supply siders. At some point, you go below the optimal tax rate, and the effect of tax cuts diminish revenue. How do we know we aren’t in that area? Why don’t you share the optimal tax rate with me, so that we’ll all know when to switch sides?

We need to raise taxes. We have services we need to support like education and roads. I know its politically unpopular, but you have to pay for what you want. I agree that we do need be very stringent on what we spend the money on, but we need more money. Raise taxes.

Ragnar Danneskjöld

January 14th, 2010
1:38 pm

Dear JF, I mostly disagree. You are arguing that taxes are necessary to provide unnecessary services. I argue that the concept of “necessary services” is mostly unrelated to the levels of services provided by the unproductive economy.

Joe

January 14th, 2010
2:05 pm

Ragnar Danneskjöld – I’ll only vote for candidates who agree to uphold the U.S. Constitution exactly as it is written, NOT as the silly courts have twisted, turned, and intentionally misinterpreted it to suit their tastes. The Founding Fathers never intended for the Constitution to be a “living document” and whoever started the “living document” fable absolutely despised the principles on which the U.S.A. was founded. 99% of the Citizens of this nation possess almost no working knowledge whatsoever of the Constitution and the Bill of Rights. I’ll also never again vote for ANY “Democrat” or “Republican”, this country was meant to have MANY viable political parties, it was never intended that we should be limited to a “two party system”. It’s well past time for the states to stop attempting to limit us to only two parties in the election process. I am directly descended from two presidents, John and John Quincy Adams and indirectly related to nine others. John Adams was a Federalist, John Quincy Adams was a Whig. My political views closely align with the philosophy of the Whigs. The two major parties now in control of the Congress and the states of the U.S.A. are both disgracefully corrupt and openly hostile to the wishes of the average Citizen.

Democrats are Corrupt, Repukes are Lying Scum

January 14th, 2010
2:11 pm

Gee, it looks like another Black person trusted with someone else’s money has done a little self improvement. The SCLS seems to be out 500K, couldn’t happen to a more deserving group. ha ha ha, will the city of atlanta lose more money to black crooks? I am waiting with baited breath for that moment, so I can say “I told you so.”

Joe

January 14th, 2010
2:12 pm

Plank number two of “The Communist Manifesto” reads, “A heavy progressive or graduated income tax.”…Plank number ten reads “Free education for all children in public schools…”. As children say, “Are we there yet?!”. “None are more hopelessly enslaved than those who falsely believe they are free.”
Johann Wolfgang von Goethe

JF McNamara

January 14th, 2010
2:20 pm

Ragnar,

As Utopian as it sounds to not have government provide any services, its just unrealistic with the obvious examples being military personnel, firefighters, and police officers. Having those things privatized would be a disaster and not having them would be a disaster.

Secondly, I believe that the leaders of yesteryear were just as smart as those today. That’s pretty much backed up because human IQs aren’t increasing at a large rate (if at all). Our past leaders didn’t create our governmental system because it was fun to do. They did it because they had real world problems to solve. They were such big problems that they convinced the citizens at the time to pay for it in taxes.

There are “necessary services”. We can disagree on what is necessary, because what is necessary for one segement of society to be happy isn’t something that some in our society even desire. I understand that, and I view it as a tradeoff because other have things they desire besides me.

That’s the way America is. Its not some dream society where we can cut all services just to make the wealthy 2-3% of the population happy they don’t have to pay taxes. In the real world, we need more money to support our societies desires, and we need to raise taxes to do it.

2010 Landslide

January 14th, 2010
2:22 pm

Dear JF – “I know its politically unpopular, but you have to pay for what you want. I agree that we do need be very stringent on what we spend the money on, but we need more money. Raise taxes.”

And we should not have to pay for things we don’t want… ie – The government can not legally force citizens to buy an insurance plan if they don’t want to.

As for the part about “we need more money”…. STOP WASTING WHAT WE SEND TO DC!

Stop funding ACORN. Stop funding the NEA. Stop funding AMTRAK. Privatize the US Post Office. Stop sending billions in foreign aid to nations that don’t support freedom and capitalism. Stop monetizing our federal debt. And the list goes on and on and on…….

Ragnar Danneskjöld

January 14th, 2010
2:49 pm

Dear Joe @ 2:05, you wrongly malign too many with your broad brush. I respectfully cite Ron Paul and Tom Coburn as proof of your error. Otherwise I generally agree with your more philosophical arguments.

Dear JF @ 2:20, you did not read my 9:03 post. This is your Emily Latella moment.

Intown Lib

January 14th, 2010
3:17 pm

How many times does supply side economics have to fail and be proven wrong before Republicans dispense with their dogmatic attachment to it?

dylandawg

January 14th, 2010
4:05 pm

Ragnar, I understan waht you are saying and would not begin to argue economics with you. However, the average citizen was not better off in that time period then he is today. Not by any measure that i can think of. Nor was the government at that time anything like you are proposing.

Landslide- thanks for pointing out the grammatical mistake. You got me good. However, you never addressed my point. Because your e-mail was pointless. Sounds like it should mean something but it just doesn’t. . I would double-check to see if I misspelled anything etc. but i really don’t care. Please show me how people were better during the time period you addressed. Please.
Geez, it looks like I didn’t use a capital I. Maybe I should just paste some crazy e-mail that I received regardless of whether it makes a valid point. Sure does sound like it should though.

dylandawg

January 14th, 2010
4:09 pm

Lanslide, although you caught me in an egregious error, ouch, you never answered or addressed my point in any way. Please explain how that e-mail you pasted is relevant in any way.

Democrats are Corrupt, Repukes are Lying Scum

January 14th, 2010
4:38 pm

Remember the Kenyan battlecry “change you can count on?” Well the double ugle, ignorant hag sarah piglan now has one “things are changing.” What a joke she is, yet some in the GOP are busy putting lipstick on this pig. Please, find a better candidate, or count me out of your election plans, ah reckon ah’ll go independent..

Glenn Beck

January 14th, 2010
4:53 pm

D are C R are L -

Ughhhhhhh…. YOU R RIGHT !

Biggest mistake Fox News has ever made. She’s nice to look at but as soon as I hear her voice I start searching for my sledgehammer to smash my TV.

Churchill's MOM

January 14th, 2010
5:06 pm

Rag Head.. Did you vote for Saxby the Socialist and his Lobbyist son?