Monday, January 31, 2011

NY Times: Taxing Our Patience

The NY Times is at it again-it is congenitally incapable of talking about budgetary matters without calling for, yet again, more taxes on an already overtaxed state: "In the next two months, Gov. Andrew Cuomo and the Legislature will have to make very difficult decisions about how to close a $10 billion budget deficit — which state offices to shutter, which services and aid to cut, which employees to lay off and which taxes to raise. There are no easy fixes left. Mr. Cuomo has vowed to balance the budget without borrowing or using any of the accounting gimmicks that helped dig New York into this hole. That’s good news. But we are skeptical of his no-new-taxes pledge and his promise to let a surcharge on high earners expire. Extending that one tax until the end of 2012 would add an estimated $2 billion to the budget in the coming fiscal year and $4 billion the following year." (emphasis added)

We'll get to the Times' skepticism in a minute-cause there are some useful tidbits in the editorial that deserve a mention: "Is there room to cut? Yes. New York spends more per pupil on education and more per enrollee on Medicaid than nearly any other state. Salaries and benefits for state employees outstrip the private sector. In some cases, such as parts of the Medicaid program, the services are better and would be worth the investment in easier times. In too many cases, those higher costs are the result of Albany’s profligacy and its eagerness to reward unions and other special interests."

But, as knee jerk dependable as always, there's the grudging acknowledgement of NY State's high tax burden-mentioned in order to ignore its implications: "New York also ranks at or near the top of various surveys of tax burdens. The tax system needs to be reviewed, but there is no way to deal with the budget crises — near-term and long-term — without higher taxes. We need to live within our means. The challenge is to find ways to cut spending equitably and limit the disruption to essential services and the damage to the state’s future. Living within our means also requires finding equitable sources of additional revenue."

Where would a Times editorial be without, "finding additional sources of revenue?" Of course, the paper advocates for the maintenance of the so-called millionaires tax-and does so in the usual telling smarmy characterization: "As we said, New York would get an estimated $2 billion of additional revenue in the upcoming fiscal year if it extended the personal income tax surcharge that applies to couples making more than $300,000 and individuals making over $200,000. (A couple with two school-age children and taxable income of $350,000 would pay $3,500 more. A couple making $1 million, with two children and typical deductions, would pay about $20,500 more.) Wealthy families got a generous break from Washington with the extension of the Bush-era tax cuts. Mr. Cuomo should extend New York’s surcharge for two more years."

"Wealthy families?" Are these folks kidding? Those earning in the $200,000+ range are doing OK, but to describe them as wealthy is ridiculous-especially when a great deal of their savings has evaporated because of market downturns. But what really got us, was the Times saying that these folks caught a generous break when the feds, let them keep more of their own money!

A clearer expression of the paper's world view could not be found. But it also seeps into the discussion of education cuts-where the Times, after acknowledging that we spend way more than most other states, advocates for cutting aid to wealthier districts while holding the poorer ones harmless: "Mr. Cuomo and the Legislature must first acknowledge the historical inequity of education financing — and guarantee that the poorest districts will feel the least pain. For decades, Albany has starved poor school districts while lavishing money on wealthy districts...This year, the wealthiest school districts should bear much of the burden, and poor districts should be protected as much as possible."

This is yet a further example of the Times' redistributionist mentality. The better off school districts are those where the community is already bearing a greater share of the state's tax burden. Depriving their schools of more funds than others, is shifting the wealth of these districts to poorer ones-but with no guarantee that the aid will lead to better educational results.

As the Times highlights, "New York’s average per pupil cost of more than $15,000 is well above the national average of about $11,000. In student achievement, the state trails Massachusetts and Maryland, which spend significantly less. That means New York has two challenges: it must address the quality of instruction and the high costs."

The paper realizes that there is no correlation between high per pupil expenditures and academic performance, but still can't get a grip on advocating for more school choice. In NYC Mayor Bloomberg has just about doubled the ed budget with truly meager-and scandalously meager-returns on performance. Continuing to shovel multi-millions of dollars into this failing public educational enterprise-really a cash cow for teacher sand administrators-does students both rich and poor no damn good. But it sure gives you a good idea where the Times' head is at-right up its high taxed, share the wealth, posterior.

But the Times is not simply an obstructionist and, like the stopped clock, is right twice on what needs to be with the state's budget. First on Medicaid: "New York’s Medicaid program— the joint state-federal health insurance for the poor — is expected to spend far more than any other state’s, including the programs in California and Texas, which have much larger populations. In part that is due to the high cost of medical care around New York City. But New York’s eligibility terms and benefits are some of the most generous in the nation. It ranks near the top in providing “optional benefits,” such as dental coverage and long-term care. And it spends more than any other state per enrollee on care for the elderly and disabled."

Of course, the paper shies away from its own observations and concludes that: "Any cuts must try to minimize harm to patients and communities. Unfortunately, cuts in Medicaid could be almost three times as painful as other cuts: if Albany cuts $2 billion, local governments automatically cut at least $750 million and New York will lose $2.75 billion in federal funds, for a total reduction of $5.5 billion." It is precisely this federal spigot, however, that feeds the cycle of fiscal irresponsibility-and leads to the uncontrolled growth of government at all three levels.

Then there is the issue of government workers: "New York will never get its fiscal house in order unless it deals with employees’ extremely generous benefits. By 2013, the average total compensation — salary, pension contribution and health insurance contribution — for a state employee will be $102,000. While private-sector workers pay about 20 percent of the cost of individual health insurance coverage on average, state employees contribute only 10 percent...The state must insist on higher contributions by all its workers to pensions and health insurance, a lower ceiling on the amount of overtime counted in pension calculations and wage increases in line with those in the economy at large."

So, on balance, the Times is making a contribution to Governor Cuomo's reform agenda in spite of its own high tax proclivities. Things are so bad in the state, that even the Times can't stick its head completely in the sand. That being said, we need to steer clear from the grasping nature of the paper's obsession with getting hold of more and more of the people's hard earned money.

Because, even while making a couple of sound arguments for reform, the Times can't seem to help itself-ending its long and winding analysis with the following call: "Mr. Cuomo and the Legislature should also be looking for other sources of revenue. A penny-per-ounce tax on sugary sodas could raise an estimated $465 million in the first fiscal year. This is a no-brainer."

Leaving us with-instead of a soupcon of admiration-a major migraine. The no brainer here is the need to not raise any more revenues-and for the governor to live up to his own campaign promises, pledges that the Times fails to understand form the core of his approach to the state's fiscal crisis. What the paper needs to understand is that government and the citizens both are tapped out-and, lacking the ability to be bailed out by a suspect Mexican billionaire, have simply had enough. Cuomo has drawn the appropriate line in the sand-making the tax advice of the Times happily irrelevant.