An unbalanced idea from the governor

"A man's got to know his limitations."
TNS Regional News
Jul 28, 2014

 

John Kasich, now seemingly positioned to win a second term as governor of Ohio, may or may not run for president. When the question recently surfaced about pursuing the White House in 2016, the governor reprised Clint Eastwood playing Harry Callahan as part of his less-than-definitive answer: "A man's got to know his limitations."

The governor did say, as reported in the Columbus Dispatch, that he would be traveling the country in the coming year. He intends to pitch for a balanced budget amendment to the U.S. Constitution. Actually, he unveiled this campaign a year ago. He argues that if Congress won't act to advance the amendment, the necessary 34 states should call for a constitutional convention.

Predictably enough, the governor insists that if Ohio and other states can balance their budgets every year, the federal government, with a debt of $17.6 trillion, surely can and must do the same -- "because it's the right way to manage taxpayers' money and helps create a jobs-friendly climate."

The thoughts are tempting. They couldn't be more misguided. Perhaps a man also should know the limitations of his policies.

Robert Kogan of the Center on Budget and Policy Priorities recently examined the likely fallout from the amendment. He explains how the requirement for states to balance their budgets means the federal government must have flexibility to respond in dire and changing economic circumstances.

Consider the dynamics of a recession. Revenues decline due to diminished economic activity. Spending increases as "automatic stabilizers" such as food assistance and jobless benefits expand. The result is larger budget deficits. If anything, most economists advise running deficits as part of cushioning the blow of a downturn.

A balanced budget amendment would not permit such a response. The task would be to raise taxes or reduce spending or both, sending the economy into deeper trouble, prolonging the hardship.

Kogan points to an analysis by Macroeconomic Advisers, a leading private forecasting firm, weighing the impact of a balanced budget amendment in 2012. The report describes the effect on the economy as "catastrophic," about 15 million more people out of work, the unemployment rate doubling, the economy shrinking by double digits instead of growing 2 percent.

Not exactly the right way to manage, let alone jobs friendly.

The country learned lessons long ago about navigating through tough economic times. Know that as states such as Ohio balanced their budgets in the recent recession, they amounted to a drag on the overall economy. A key purpose of the federal stimulus package was to counter the effect.

Backers of the amendment cite provisions that allow for waiving its requirement in a crisis. Yet the hurdle is high, securing three-fifths, or two-thirds, of the House and Senate. That won't come easily, especially in today's Washington. More, economic data already lag. Add Capitol gridlock, and the response would be slower.

If families must make ends meet, why not the federal government? Gov. Kasich likes to make this case. What he overlooks is that families borrow money, or engage in deficit spending, to buy a home, or a car, or a college education. States perform similarly, through their capital budgets, their cumulative debt at roughly $1 trillion.

The governor also likes to lecture about the Ohio way. How has he kept the state budget in balance? Count among his top tools redirecting revenue streams to state coffers, reducing spending on local governments and school districts, plus leveraging a larger sum in federal Medicaid money.

That final item contains a doozy of a twist. The governor scolds Washington for "inexcusable" budget mismanagement, yet he has embraced its funds. Let's remind ourselves: The Medicaid expansion, for which the governor rightly has taken bows, would not have happened without federal spending.

And what if Washington followed the Ohio way? Things would get difficult for the state as the feds pushed the fiscal burden down to lower levels of government.

Obviously, the country faces a big budget challenge, an aging population fueling the main drivers of long-term deficits, Medicare and Medicaid. That means hard choices. Yet a balanced budget amendment hardly is an effective framework for addressing the problem.

Better, as Robert Kogan advises, to think about the deficit and the debt as percentages of the overall economy. The deficit peaked at 10 percent in 2009. It now is around 3 percent, and soon projected to rise. As a rule, the national debt should grow more slowly than the economy (except when the country deals with recessions).

Kogan points to the three decades after World War II. The debt fell from 106 percent of the economy to 25 percent -- all without a balanced budget amendment.

EDITOR'S NOTE: Douglas is the Beacon Journal editorial page editor. He can be reached at 330-996-3514, or emailed at mdouglas@thebeaconjournal.com.

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By MICHAEL DOUGLAS - The Akron Beacon Journal (MCT)

(c)2014 the Akron Beacon Journal (Akron, Ohio)

Visit the Akron Beacon Journal (Akron, Ohio) at www.ohio.com

Distributed by MCT Information Services

 

Comments

LecterQ

You gotta love them Det. Harry Callahan quotes.

nakedtruth

Kasuck is an idiot. His various ways of balancing the budget included stealing tax dollars from local governments, which reduced safety forces. Cut funding for schools, which led to higher school taxes and wage freezes for educators. He also reduced felony offenses to minimal or no jail time and the sentences of lower felonies must be spent at county jail, not prison. This has put a larger burden on local jails and increased crime. All the time, he and his staff continued to receive raises. He never cut his spending. In fact when he took office he remodeled his office and mansion when he took office that cost over 100k for no reason. Typical politician. He tried to steal money through SB5 an now is trying to take more. Local governments have to enact local taxes to survive since he took their money once already, now he is trying to pass law that requires the state to collect all local taxes. The agreement back in the 70's permitted the state to do this and he stole that money and now trying it again. He needs to go...

Contango

Re: "Local governments have to enact local taxes to survive,"

Why should smaller districts support the larger ones?

Why not reduce state taxes and let the locals be largely responsible for their own public service spending?

Thumper

We all should be thankful he was able to get the budget under control. The previous governor only lied that the state was not as bad off as he was telling Ohioans. This state was billions of dollars in the hole until Kasich was elected. Someday, instead of setting budgets of spending tax dollars you don't have, maybe we all need to learn to live with what we have.

nakedtruth

I agree with living within our means. However taking money from local communities, schools and allowing criminals to run wild is the wrong way of doing things. He never cut his or his staff spending.... Kinda two faced. I agree with the necessity of reducing spending but at what cost, our safety, our children? Not worth it to me. People think he did all this great stuff and reduced taxes. Not true. The previous idiot reduced taxes over 5 years before he left. Kasuck wante to overturn it and couldn't. Therefore he cut budgets where it hurt tax payers anyway, not by living with what they have. His political smoke screen has fooled many.

Thumper

You reply with calling names and rambling on with the cuts that were necessary. There is no being two faced when somebody has to start cutting government spending and government job creation. You can not have a private workforce supporting a large base of a public workforce, with the benefits they receive, being greater than what the private workforce is able to attain. Big government does not work...

Many people have moved from the same areas you talk about where the public services were provided and cut. That was necessary to cut, because there are less to provide for. Hopefully, somebody has figured out that you also need to cut those services when less is needed.

We have become a society of take , take, take. Well I for one believe we need to earn our way and quit the taking.

Kasich was smart enough to realize that with no tax increase, the burden of the services that the public has become accustomed to taking, had to be cut from the state budget. You want the service, cough up the money yourself or maybe you don't need it. Learn to live with what you have, there is nothing for free.

Dr. Information

.....and Obama has done all of the above and Im sure he's a saint in your eyes.

nakedtruth

Clearly you all missed the part about local government funds that were create in the 70's. Local communities found that they needed a tax base to survive, with the need for police, fire and ems. Before that time they had untrained volunteers for fire and ems was ran by funeral homes. So instead of hiring tax collectors they entered into an agreement with the state to collect these local taxes and redistribute, less admin costs. This worked for years. So when the governor stopped the return of these monies it caused the local communities to go after more tax dollars. When this trend kicked off two years ago, the communities now have to hire collectors or go through a private firm. The governor is tryin to pass legislation making requiring local governments to use the state tax collection service. This sets them up to do the same thing. So for your information we have already paid for local services and the governor took our money from safety services and schools. What a hero!!! People should realy check into what he did and not look just at the surface of his political agenda. If he was so great, why has he not cut the budgets for himself, odot or state safety forces. That's right, he only took the money he was not due. One last fun fact, he is in the process of taxing utility services of local communities too. All his actions appear that he is a hero and the local governments are just wanting more or wasting funds.

Thumper

And which tax monies are the state keeping that was for the services you mentioned? I was under the impression if a tax is passed it is primarily used for the purpose it was intended.

And what is wrong using volunteers? It still works for many communities today. Recently was told from a firefighter that Norwalk cant use any volunteers anymore. Asked him why? "Because they are not trained as well." Seems rather odd then that many area towns still use them...But lets just call it what it is...I called it job security, eliminate a possible person who may be able to do the job at a cost savings, helps protect that persons profession. Since many nearby communities still use volunteers that take their training very seriously... Seems all is well in those communities.

Once you create a government job that many private companies should and most times do a better job, good luck trying to get rid of the government job. We need to privatize a whole lot more services and then you will get a fair market value.

And your last sentence on government wasting funds, privatizing helps that too. What business owner do you know that waste money like the government? They cant or they would be bankrupt.

nakedtruth

Oh and by the way, I agree big government doesn't work. That was no where in my platform. I also agree that when services are not needed, cut them. As far as I can see, crime rate is on the rise, drug use and violence is on the rise and education is needed to maintain the US as a fighting force in the global economy. Therefore the cuts he made were in areas we need. Why don't he cut areas we don't need. Look at the abuse and corruption in ODOT. Let's make cuts there. Why don't we cut ohio tax collectors and do a flat tax. Everyone pays equal percentage. This state has serious issues. We are over taxing and outlawing the use of Tabacco and alcohol all while trying to legalize marijuana. Before you jump, Im not against legalizing it I am just saying why crush one while opening the gates to the other. This tax is due to the health risk of use, why don't we tax people by the pound as obesity has overburdened the health system far more than Tabacco or alcohol has.

Contango

Re: "crime rate is on the rise, drug use and violence is on the rise and education is needed to maintain,"

The idea that govt. is broke and incapable of solving it is proof of all of the above - and more.

Dr. Information

All for a flat tax here. That way everyone pays and we nearly rid ourselves of the IRS.

Thumper

I agree. And in the meantime, keep the government cuts coming.