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M.D. Harmon: Taker-to-Maker ratio ranks Maine as a fiscal “Death Spiral State”

Here’s a headline seen on forbes.com on Nov. 25: “Do You Live in a Death Spiral State?”

Unfortunately for residents of the Pine Tree State, the answer is “yes.”

Maine is on the magazine’s list of 11 states that are “danger spots for investors,” who can look forward to “a rising tax burden, deteriorating state finances and an exodus of employers,” according William Baldwin, who covers investment strategies for Forbes.

It didn’t take long to find verification of that claim, as the proof was to be found in the lead headline on the front page of the Portland Press Herald on Nov. 26: “Democratic Legislature will re-evaluate tax cuts.”

To which I say, “D’oh!”

The article noted that the incoming Donkey Party’s majority will be facing a projected “$756 million revenue deficit for the next two-year budget,” while simultaneously the state will acquire a “bill” for “approximately $342 million” in Republican-sponsored tax cuts that “comes due in 2013. That means lawmakers will have to decide how they plan to pay for the cuts in the face of grim revenue forecasts … ”

I know, I know. It’s hard for people who actually speak English (and not ‘liberalese”) to understand why letting taxpayers keep more of their own money is a “bill” that has to be “paid for.”

I know that this is a web site read by people of all ages, and I hate to use language that isn’t considered family-friendly by liberals, but here’s an idea: How about continuing to cut spending?

And that’s not the limit of my lack of restraint. Here’s something even more shocking: How about continuing to make the state more business-friendly to add jobs for workers who would then boost revenues?

Now, if I were a liberal confronting that argument, I would respond not with a genuine argument that higher spending and higher taxes were good in themselves (though they do believe that).

Instead, I would say that the GOP had plenty of opportunity to make its case for less regulation, lower taxes and reduced spending during the last campaign and the party was convincingly repudiated by Maine voters, who gave the reins back to Democrats in both House and Senate.

In response, I would probably quibble over how well Republicans made their case—because I thought they did an extremely poor job of it—but you can’t argue with the outcome: Democrats do run the Legislature by some fairly significant margins.

But not, I would note, by veto-proof majorities. Ergo, I would expect Gov. Paul LePage to be more than a bit reluctant to let the burden of higher taxes fall on Mainers without a fight (recalling, after all, that the people who voted for him probably support the lower tax rates nearly unanimously).

Keeping faith with those voters, I suspect, ranks fairly high on his scale of political values. At least, it should, and I hope it does. Loyalty counts with our governor, I believe.

So here’s my offer, governor: If your veto pen runs out of ink, I will personally send you a brand-new case of pens to keep up your good work.

If Democrats want to raise taxes, LePage and the remaining Republicans should resist to the last ditch. But if the Democrats do make tax hikes unavoidable, assuming they can, make them “pay for” any increased revenue with equal spending cuts—and keep rubbing their noses in reports like the one from Forbes that shows the way the rest of the nation looks as Maine’s fiscal and regulatory policies.

In that context, let’s consider this odd quote from the PPH article: “Politically, repealing the tax cuts may also be difficult, because that could expose Democrats to criticism that they are raising taxes.”

Um, if Democrats raise taxes, they might be criticized for . . . raising taxes? Sigh. All I can say is, I would certainly hope so.

ALL OF WHICH LEADS US back to the Forbes column: It’s a professional’s advice to people considering not just investing in state or local debt, but in buying a house or starting a business in states that are, in the author’s words, “at high risk of a fiscal tailspin.”

What makes Maine a high-risk state, starting at the bottom with New Mexico and moving on to Mississippi, California, Alabama (Maine is next), New York, South Carolina, Kentucky, Illinois, Hawaii and Ohio?

“Two factors determine whether a state makes this elite list of fiscal hellholes,” Baldwin says. “The first is whether it has more takers than makers (this sentence alone is guaranteed to drive liberals nuts).”

He defines a “taker” as “someone who draws money from the government, either as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector.”

He is quick to add that we should give takers “the benefit of our sympathy and assume that every single one of them is a deserving soul. This person is either genuinely needy or a dedicated public servant or the recipient of a well-earned pension.”

Still, he notes, that doesn’t make much a difference to the balance sheet. “But what happens when these needy types outnumber the providers?” Baldwin asks. “Taxes get too high. Prosperous citizens decamp. Employers decamp. That just makes matters worse for taxpayers left behind.”

And so the first reason there are 11 states on his list is that they are states where the number of takers is equal to or higher than the number of “makers”—tax-paying workers or entrepreneurs.

New Mexico is at the head of the list because it has the worst taker-to-maker ratio in the nation, with 1.53 people getting benefits to every one paying for them, and Ohio just makes the bottom at 1-to-1.

Maine is in the middle of the 11-state list, with a 1.07-to-1 ratio, which you might not think is bad—until you consider that somehow many states manage to have ratios lower than 1-to-1. Maybe we ought to find out how they do it.

The second qualification to make Baldwin’s “death spiral” list is a state’s rating on a scorecard of creditworthiness by Conning & Co., a money manager that he says is “known for its measures of risk in insurance company portfolios” and which “focuses more on dollars than body counts.”

Its formula “downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.”

So, Baldwin says, a state made his list if its taker/maker ratio equaled or exceeded 1.0 and it was in Conning’s bottom 50 percent.

Sad to say, it took decades of bad fiscal policies to get us to “hellhole” status, and the GOP, despite my criticism of its PR ineptitude, had no chance of repairing all the damage in just two years.

Now the voters, in their infinite wisdom, have given the people who did the damage the opportunity to return to all those errors of yesteryear that put us where we are in the first place.

NOW, A PAIR OF final words: First, I personally am on the “taker” side of this equation, having retired from full-time employment more than a year ago. But I was a “maker” for 41 years. So while I contribute to the downside of Baldwin’s ratio, I did my share for the other side for more than four decades.

Second, sometimes people who point out that liberal fiscal policies have all the staying power of a hankie in a hurricane get criticized for “talking down the state” and “discouraging investors.”

These (mostly left-wing, tax-and-spend) critics say that things would be just peachy if the passengers in the car they were driving wouldn’t keep yelling about all those “Bridge Out Ahead!” signs along the road.

Those comments deserve disdain, as they are transparent efforts to shush the people who accurately see what’s going on. They can easily be ignored by those in Maine who actually have the welfare of the state and its citizens in mind.

What’s worth adding, however, is that it really doesn’t matter what people in Maine say or don’t say.

What’s really going on is perfectly obvious to national experts, and they will not be silenced by Maine’s home-grown, welfare-state liberals carping about people who express justified concern about the obvious outcomes of their irresponsibility.

And those national experts are the ones that national business leaders and investors are listening to.

Want to make the experts change their tune? Give them some good reasons to do so.

 

M.D. Harmon, a retired journalist and military officer, is a free-lance writer and speaker. He can be contacted at:mdharmoncol@yahoo.com.

 

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