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

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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.

 

1 COMMENT

  1. What if Maine had a high percentage of military retirees? They would be counted as takers, and yet they have a positive effect on our economy, right? If I understand the article they are in fact counted that way.

  2. You may have a point about military retirees being counted as takers. But I suspect that even if their number is subtracted the taker/maker ratio might not be significantly different.

  3. I think the entire formula is flawed. There are too many variables that are not considered in this article. It might be interesting to work up a counter article and see what it where Maine ranked, along with those other ten states.

  4. I’m a veteran, not a retiree. I work every day. I get a disability check for $123 a month from the VA because I was around too many jet engines, explosions and machine guns some 42 years ago. I have my old logbooks. 42 years ago today I flew four missions in the Mekong Delta. Maine has the highest percentage of veterans of any state.

  5. Excellent explanation of how the liberal path of – duh – spending, dependency, and de-employment has worked in past decades to ruin this once-great state, and will now continue to gallop down that same old road at breakneck speed. Get back in the wagon for another ride, liberals! I’m not pushing any more, but have a nice ride down the hill over that now famous “fiscal cliff”.

  6. After Gov. Romney made his “47%” comment, researchers noted that almost everyone is in that category at some point in their lives, but almost no one is always in the category.

    Like Mr. Harmon, people are sometimes net beneficiaries of government spending (takers) and sometimes net contributors (makers), or, as he puts it, “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.” Military retirees fit that dynamic, as does everyone who made little when they entered the workforce and more later.

    The percentage of what Harmon calls “takers” varies depending on the age demographics of a state, the degree to which income is relatively equally distributed or skewed toward the top, as well as the state of the economy. During a recession, relatively more receive benefits and during periods of economic growth, those folks are working and paying more in taxes than they bring in.

    In any case, whether one falls into the category of “taker” or “maker” varies over the course of nearly every individual’s lifetime.

  7. Is this the point? the demographic of the taker? I don’t see it as the point. The Givers are having a hard time finding a good paying job and lower living expenses and they won’t be coming to Maine anytime soon! Maine has just gone back to the way it always has been: “The Old Normal”: poor; due to the Demolition Party.

  8. A “taker” is anyone receiving government benefits, payments or entitlements, whether they are retirees, state and municipal workers or welfare recipients. It is not a slur. The problem is that Maine has more people “taking” from the government than people in the private sector who are making jobs, salaries and tax revenue. Don’t be distracted by the negative connotations that liberals ascribe to the word “taker.” Focus on the very real problem: it is unsustainable.

  9. Those of us who “take” stand opposed. I give of my time, my experience and my commitment to America every day and ask noting in return but that which I’ve earned. Your “unsustainable” nonsense is merely a charade for greed.

  10. Any government worker (no matter how important you think their job is) is “taking” money from the government. Where does the government get any and all of its money? The taxpayer. Every dollar your government analyst takes home is one more dollar taken from the working stiffs in the private sector. With more and more “takers” on both the state and national levels and fewer and fewer “makers,” please tell us where the money will come from?

  11. Finn Murphy “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”….Wasnt that Maine 15 years ago? How much farther can we go? We dont even have any paper mills left.

  12. If said government workers job is disseminating information that minimizes transaction costs for other economic actors, that is value generated, not dollars lost. i.e he’s a maker (which by the way is a juvenile and stupid way of talking about this issue). Ergo, that metric is hyperbolic garbage.

  13. Peter A. Steele, I agree with your assessment. We need to start putting more people to work and less people on the dole. For starts we need to downsize and simplify government. Doing so will ensure greater freedom for all.

  14. Generating “value” is a wonderful concept. (Socialism is wonderful concept, too.) But “value” doesn’t balance the budget or pay off debt. Only real dollars do that. This isn’t moot court or a classroom exercise. This is reality. So, again, with so many “takers” relying on government money in one form or another, where will that money come from? We’ve already racked up $122 trillion in national debt and unfunded liabilities trying to create “value” for our citizens. Please provide specific examples of government minimizing costs for the private sector.

  15. Please excuse my finger fault, M.D. – the point remains the same. The notion that I or you or thousands of Mainers who are now receiving the income that they so faithfully worked for are “takers” is completely repugnant to me.

  16. Why does this debate always have to be all or nothing? Welfare reform is needed without destroying the whole concept. Tax increases to those who certainly can afford it is absolutely fair. A tax incentive to businesses who do not outsource is reasonable. It is not reasonable to give companies a break who do not employ people in our country. Touch my social security and I may be moved to burning tires in the street-it is not necessary. Deprive those in need and I’ll do the same. Again why all or nothing what is wrong here? Posturing peacocks.

  17. My dear Mr. Harmon: Governor LePage was elected by a mere 39% of the popular vote. In my way of thinking this does not give him a mandate to vigorously veto anything he wants to given his minority party status. I also feel strongly that he should abandon his bully pulpit and show some respect for all of us, even if he disagrees with our opinions. I am told that in everyday social interactions he is a pleasant and likeable person, so why is his public posturing so largely unpleasant?

  18. I say, veto everything. That’s what I elected him to do. The takers out number the makers and I’m sick and tired of paying for it. Baldacci won with scant 38%. How quick we all forget.

  19. Cris, how can you possible say that “unsustainable” equals “greed?” We are concerned that the debts, unfunded liabilities and unpaid bills racked up by your generation over the past 40 years will fall on the shoulders of our children and grandchildren. With a shrinking population and a dwindling private sector, paying it off, along with all the new debt added every year, is an unsustainable position. Your generation demands that you get yours, no matter what, regardless of the long-term costs, and the rest of us be damned. That sounds a lot like greed.

  20. You are confusing two separate issues. Whether or not the government is cost effective at this its still vastly more efficient than if each private business had to A. Build its own infrastructure itself or B. Pay enough that a private entity has to make a profit on the road it controls.

  21. Ever heard of the Maine Turnpike? Because it mismanaged it’s bond schedule, tolls just skyrocketed. How do exorbitant tolls benefit commuters, trucking companies and others who must travel the Turnpike daily? Maine has very high excise taxes and some of the highest gas taxes in the country. Yet our roads and bridges are crumbling because those in government have not maintained them and have diverted highway funds to pay for entitlement programs and plug budget holes. We’re not getting a lot of value for our tax dollars when it comes to roads.

  22. I’d be interested in seeing the numbers if all the retirees who become Florida residents (those who leave the state, don’t support our state’s economy for 6 months each year) were factored in.

  23. It isn’t my generation, or any generation that gave rise to the national debt – it was political ideologies, particularly those that enabled the radical dislocation of U.S. wealth from the bottom to the top over the past 50 years.

    Neither a “shrinking population” or a “dwindling private sector” is an accurate description of the United States’ present condition if one looks at any reasonable time frame. These are nonsensical talking points which are designed to paint a picture that appears dismal and justifies draconian changes to our commitment as a nation to the well being of our citizenry.

  24. If a thing is unsustainable it will come to an end. Events will resolve the question. Debate will not. Contending about the definition and ignominy of “taker” is mere froth. It will not affect events one way or another.

  25. Roger Ek You have a point. Maine may have more than its share of veterans pensioners. Yet even if these pensioners are taken out of the equation, the ratio of takers to makers would still be too high in order to maintain a healthy economy and will continue to increase as more and more baby boomers retire. Figures don’t lie. Entitlements are headed higher for several years as the population ages. Unless there’s a course correction soon, money will have to be pumped in the pension systems through taxation and borrowing in order to keep up government obligations. Higher taxes and more borrowing are certainly not the answer as these will inflict a death blow to it.

  26. Cris Edward Johnson As a retiree I’m a taker as well. Yet I’m willing to postpone annual cost of living increases as much as is needed in order to help resolve our economic woes. If we can’t agree to doing this we will all sink together. So what is better, sacrifice now with a frozen pension or suffer shortly down the road with far greater consequences? To me the choice is clear.

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