Commentary: Honest Abe can make way for Pinocchio
This article first appeared in the St. Louis Beacon, Dec. 6, 2009 - When Illinois needs courageous, forthright leaders more than ever, we will enter this crucial election year courted by pandering Pinocchios.
Democrats, who have steered the state to the precipice of insolvency in their seven years at the helm, want us to believe they can rescue it from their own shameful stewardship. They offer platefuls of tax dollars to politically beefy interest groups while promising to spare most of us a reflux-inducing tab.
Meanwhile, Republicans vow to erase a deficit expected to reach nearly $12 billion next year simply by stimulating employment in the private sector and downsizing state government - a proposed remedy that may entice voters but affronts reality. Not allowing facts to intrude upon fetching phrases, a couple of the GOP gubernatorial candidates tout tax cuts to help spur the economic surge they contend would stabilize finances and allow our government to pay its bills on time.
Appealing? You bet. Doable? Let's crunch some numbers.
Assume we freeze tax rates and a robust recovery produces revenue growth of 7.79 percent from the sales tax, 13.2 percent from the personal income tax and 41 percent from the corporate income tax - all of which would match spikes over the last quarter century. The yield would be $2.4 billion, only 20 percent of the deficit.
Illinois revenue experts consider even that scenario wildly optimistic. None of those categorical high points occurred in the same year. Moreover, the generally prosperous 1990s produced annual growth of 6.3 percent from the sales tax, 8.1 percent from the personal income tax and 11.1 percent from corporate and business taxes.
"If we would see revenue growth from the existing sales and income tax bases of $1 billion in a single year, that would represent a significant improvement in the economy," says J. Thomas Johnson, president of the Taxpayers' Federation of Illinois.
Clearly, a vigorous economic comeback cannot eradicate the red ink even if we also send political hacks and unneeded bureaucrats packing and cut the pay of legislators to minimum wage. Again, the numbers provide valuable context. We could wipe out the entire state government work force and reap $3 billion. We could level the legislature and dent the $12 billion deficit by about $70 million.
That does not mean we should abide the spend-and-borrow mania that brought Illinois to its knees. We can save hundreds of millions - perhaps more - by retooling government. We must reform unaffordable pension systems and corral health-care costs. We must spend tax dollars wisely before seeking more from taxpayers. But we also must raise taxes. Indeed, the failure to act resolutely will further sour the job creation climate that Republicans claim they want to enrich.
"Illinois has no budget any more. It is appropriating money it does not have. Huge pension obligations aren't being addressed. It is avoiding the pain of hard decisions now, which will make them even more painful to deal with in the future. Business cares about the level of taxation, but it is even more concerned about the inability to predict what its tax obligations are going to be five, 10 or 15 years down the road," says Laurence J. Msall, president of the Civic Federation, whose members include Illinois-based corporate giants.
It is difficult to envision the man we elect as governor next November having the guts and the moral authority to make those "hard decisions" and sell them to lawmakers if he has misled us to win. Unfortunately, given the malarkey up to this point, it is much easier to foresee the state printing its own currency with Pinocchio replacing Honest Abe on the $5 bill.
Mike Lawrence, former director of the Paul Simon Public Policy Institute at Southern Illinois University, writes a twice-monthly columm.