ST. PAUL LEGAL LEDGER CAPITOL REPORT
When we see an assemblage of rich, white, middle-aged alpha males in expensive suits making a political statement, we can’t just assume that their demands will be beneficial immediately or long-term for the rest of the people in the nation.
So it was a happy surprise last week to see just such a group of our nation’s wealthy CEOs open the trading on the New York Stock Exchange with a bold new “Campaign to Fix the Debt,” and calling for tax revenue increases — on themselves, if necessary — to get that deal done.
This quote from their press conference drove right to the bottom line in typically blunt CEO fashion.
“To say that you can solve this without increases in taxes is ludicrous,’’ said David Cote, CEO of Honeywell, also a Republican and a member of the Bowles-Simpson fiscal commission of 2010. Cote added, in regard to the taxing necessity: “Most wealthy people get it.”
News reports on the Campaign to Fix the Debt noted that although many of these CEOs still support Mitt Romney for president, their broader message was a bold refutation of the libertarian Grover Norquist dogma that all taxes are job-killers and that any changes to the federal tax code must be “revenue-neutral,” meaning no overall net increase for deficit reduction or for making investments in human capital and infrastructure.
The New York Times suggested the group could exert one of the most “muscular interventions by corporate America in memory.” And many observers are beginning to wonder whether the dramatic rhetorical shift toward moderation in “Moderate Mitt” Romney’s presidential campaign further shifts the momentum toward responsible federal and state tax increases, at long last.
Pivot to Minnesota.
Our state government also is operating with a significant debt, even though deficit financing for general expenditure is technically illegal in our state constitution. As our Legislature and governor get set for another budget-setting session, the state owes roughly $2 billion from previous accounting shifts and borrowing from public schools. Estimates of the further shortfall for the next two-year budget period add another $2 billion, accounting for inflation, and federal cuts in everything from education to health care programs could add billions more to our shortfall over the next decade.
We thus are teetering on our own fiscal cliff, the payback for unsustainable permanent income tax cuts in 1999 and 2000, and two recessions that further diminished revenue for our fundamentally important public sector. We addressed the shortfalls of the last decade almost entirely with funding cuts and budget shifts, as a cynical anti-government, anti-tax philosophy held sway.
Lucky for us, we have long had responsible business leadership in Minnesota that understands the long-term business value of public investments and common good. In 2006, dozens of wealthy civic leaders signed a full-page ad in the Star Tribune with the bold headline, “We Can Afford to Pay More Taxes (And We Can’t Afford Not To).”
The statement noted that state and local government spending had declined as a percentage of income (still true), that much more investment was needed for higher education completion (still true), for ensuring all kids and families can afford health care (getting better but still true), for transportation and transit improvements (still true), and that the state’s tax burden had grown more regressive, favoring the most affluent (truer still).
That statement was signed by some 200 prosperous Minnesotans, including prominent business owners, CEOs and scores of other professionals.
Opinion polling consistently shows an overwhelming consensus that higher-income folks can and should contribute more to address our fiscal crises. And many economists believe that higher taxes for somewhat more than the top 1 percent of earners is necessary and good policy.
But the case really is strengthened when we see a growing number of folks in that sometimes-maligned 1 percent agree that higher taxes will be necessary to navigate through the current budget crisis.
In 2006, Gov. Tim Pawlenty scoffed at the full-page ad and stood with the more extreme faction of business leaders who insisted on a cuts-only strategy and steep reductions in public investments. His second term in office consisted of cuts, more cuts and accounting shifts to accommodate the declining revenues and a second recession, handing off to Gov. Mark Dayton one of the largest budget shortages in the state’s history. Conservative majorities in the House and Senate prevailed with yet another cuts-and-shifts solution in the last budget session, leaving the state still facing a long-term structural deficit.
Here’s hoping that no matter how the election turns out Nov. 6, Minnesota will grow one of the strongest state chapters in the nation in the “Campaign to Fix the Debt,” or some other cadre of high-income earners and business leaders pushing for responsible budget policies.
Warren Buffet, the so-called Oracle of Omaha who lives far from Wall Street and a couple states away in Nebraska, is one of the most fabulously successful capitalists and investors of all time. He has been a tireless and courageous advocate for responsible tax policy and more payback by those in the top 1 percent, arguing that their wealth and income has soared relative to the 99 percent. Here are a few of my favorite Buffet-isms, which are as refreshingly blunt as Honeywell’s Cote:
“[The wealthiest] pay a lower part of our income in taxes than our receptionists do — or our cleaning ladies, for that matter.”
“If you’re in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.”
And this: “When a country needs more income … they should get it from the people that have it.”
A version of this column originally appeared in the St. Paul Legal Ledger Capitol Report on Thursday, November 1, 2012.