A Natural Disaster?

As we head into the consequential New Year, let us ponder for a moment State Senator Bob Jauch (D-Poplar).

For the first time in more than two decades, Democrats now control all the levers of state government, which means that it falls to them to single-handedly solve the state’s massive (and ever-growing) budget hole. There will no bipartisan compromise, no wrangling between a Republican assembly and a Democratic Senate; no deadlocks on Joint Finance; no games of political chicken.

All of the spending – and taxing – decisions will be made by Democrats. Like Bob Jauch.

On Thursday, Governor Doyle announced that the state’s deficit has metastasized to a surprising $5.4 billion. Surprise, however, is a relative term. Only days before, Doyle had suggested that he faced a $5 billion deficit so the new number, while mind-gaggingly large, was the fiscal equivalent of adding love-handles to a 600-poound man.

Which brings us to Bob Jauch, one of the Democratic senators who will have to craft a budget fix.

Jauch’s first reaction was to declare the deficit an act of God..

"It's a Katrina-style collapse," he opined, suggesting that politicians of both parties should treat the budget deficit as – and these are his words -- “natural disaster."

But if the deficit was caused by the equivalent of a hurricane, from whence came all of the hot air?

As our own Christian Schneider pointed out, the deficit did not fall from the sky – it was very much man-made; more specifically, made by men like Bob Jauch. As Schneider noted, Doyle and the Legislature “have no one to blame but themselves.“

When the pols cobbled together a budget “fix” earlier this year, he notes, "they actually made things worse.  They can’t say they weren’t warned.“ Well, yes they can. Just ask Jauch, who along with everybody else in the Capitol wants desperately not to be held responsible for the mess.

But Schneider wrote:

“Wisconsin is completely caught with its pants down.  Our elected officials are the worst in the nation at planning for fiscal downturns.  We have virtually no rainy day fund and no minimum statutory balance to soften the blow when the economy goes bad.  Most states reserve between 5% and 10% of their general fund revenues to maintain programs when tax receipts fall.  But not Wisconsin, which holds less than 1% in reserve.  As a result, we’re driving our state’s economy on a flat tire - the axle is going to break in half, sending us careening into a ditch.“

Which brings us to the second of Jauch’s knee-jerk responses: raising taxes. For Jauch, it’s 1983 all over again. "I could vote for a surtax on the income tax - personally, I could," Jauch told reporters.

But here’s a rub that not even Jauch can ignore. Even a one-year, 10% increase in the state individual income tax would only raise about $700 million, far short of the cash needed to patch a $5.4 billion deficit -- not to mention, of course, the possibility of plunging the state into a deeper, longer term one state recession by raising taxes during a downturn.

Coupled with the splurge in local spending and increases in property tax, a big state tax increase would almost certainly negate much of the “stimulus” promised by fellow Democrats in Washington.

For their part, Republicans have the luxury of sitting back and watching all of this from the sidelines. With Democrats like Bob Jauch, the show should be entertaining.