New Year's resolutions for Minnesota's economy
Once again, it's the time of year for resolutions. Many of us resolve to watch less television, exercise regularly, eat right, etc.
What does the Minnesota economy need for a better, brighter future? Here are our New Year's resolutions to promote the state's economic health.
Resolution 1: Have a sensible discussion of the role of government in Minnesota's economy.
To quote the Declaration of Independence: "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed." Thus, one of our founding documents asserts that government has an essential role to play in protecting our basic rights and creating a better life.
While the Founders rightly feared the corrupting possibilities of concentrated power, they also understood the necessity of coordinated collective action to secure vital public goods. The Framers declared: "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence [sic], promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America." We the People decide what our government will and will not do.
State and local governments have roles to play in Minnesota's economy and we should vigorously debate and discuss them. Where can government help? In terms of economic performance, is Minnesota's government too big? Too small? Just right?
To answer these questions, we must utilize metrics such as income growth, unemployment rates and income distributions across time. Organizations such as Minnesota Compass are already providing these data, so let's put them to work. We must take advantage of the deep well of social science research to examine the relationships between these factors and government policies, and have a conversation amongst citizens, within city councils and the state Legislature, and on the op-ed pages of state and local media throughout Minnesota.
Resolution 2: Recognize that we need both competition and community.
John Brandl put it well in his book "Money and Good Intentions Are Not Enough": "Competition and community do not substitute for government. They are instruments through which government facilitates the working out of public purposes by a free people. To simplify, conservatives today generally advocate competitive (market-based, solutions to our problems) while liberals often favor more communitarian (public-sector, strategies). Clearly we need both. The question is, what balance will we strike?
A good place to start is "An Agenda for Reform: Competition, Community, Concentration," prepared by Brandl and Vin Weber in 1995. The problem they identified then remains with us today: "For many years to come, state and local governments will face huge and growing imbalances between spending demands and available revenues." We can't deal with this by privatizing everything government does, or by simply spending more. We have to think about both competitive and communitarian solutions to our problems.
Resolution 3: Balance the state budget in the long-term.
Government actions need to be stable and predictable in order to promote long-term growth. A key foundation for this is long-term budget balance. Rather than simply saying that taxes need to be higher or spending needs to be lower, we have to think broadly and deeply about how to fund government.
To do this, we don't need to appoint committees to study the problem. Gov. Tim Pawlenty appointed a tax-reform commission and ignored its findings, in particular the call to broaden the sales tax, simplify the income tax and equalize the property tax. Let's use the report as a starting point to get the job done.
Two proposed solutions to our problems are to cut services or to become more efficient in their provision. To address the first, as we've tried to make clear, the general welfare requires that government provide certain services. As to the second, there are not enough inefficiencies in the system to balance the budget.
Furthermore, many of the things government does are inherently, inescapably, inefficient. Sometimes, the labor-intensive, one-on-one teaching moment is the only way for a child to learn. That costs money. Is this where we want to invest our public dollars? How do we balance this with other important public services such as health care and transportation? We need to decide.
Resolution 4: Improve our state's infrastructure.
One of the most important drivers of Minnesota's long-term growth is the quality of our infrastructure. Our guess is that once we have a deep, respectful conversation about the role of government there will be at least three areas of agreement: transportation, water resources and education.
A well-maintained transportation system is essential to keeping goods and people flowing throughout the state. In addition to roads and bridge repair, we would encourage development and improvements to mass transit (especially in areas outside the Twin Cities) and railroad corridors that connect underserved areas of the state with national railroad networks.
Water and sewer systems play an important role in both residential and commercial development. Companies that do not have access to adequate fresh water and treatment facilities will not remain in these areas; this is already a pressing concern in greater Minnesota. (The West Central Initiative Foundation has an excellent overview of this problem.)
Our citizens want and need to improve their human capital through education. In particular, the achievement gap between white students and students of color must be closed so that all of our children are ready for the challenges they will face.
Minnesota's economic strengths
Historically, Minnesota's economic strength is based on a diversified economy built on a foundation of high-quality human capital and publicly provided infrastructure. Let's resolve to work through the problems facing us by taking a hard, clear-eyed look at the situation, having spirited debates about how to proceed, and then working together to make it happen.
Susan E. Riley is assistant professor of First-year Seminar at the College of Saint Benedict and St. John’s University. She has a Ph.D in Political Science from the University of California, Berkeley.
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Comments (8)
A hard, clear-eyed examination of the problems facing Minnesota (and the US) would address the inefficiencies of the health insurance system in America whereby we pay twice as much as the next industrialized nation and have worse outcomes; and, the outscale size of the military/defense expenditures to an extent far beyond the remainder of the world.
Both of these issues affect the international competitiveness of US business and workers--they are essentially non-tradeable goods that add to the bottom line cost of any good or service that is offered in the international market. Paid by private insurers or by the taxpayer, these costs ARE reflected in the price of American goods or services.
Another fundamental issue that must be addressed is that fewer and fewer workers are required to produce the same amount of goods and services through the magic of automation/mechanization/computerization. An instructive example is that the manufacturing sector is apparently improving and spending on equipment in that sector is higher than ever--BUT employment stays the same or falls. We have arrived at the automated future, but have no clear way of occupying or paying for the new idle time. Too many of the jobs that remain are low paid, face-to-face contact, service jobs.
What will be the future?
All that we see around us on the streets and in the institutions of society are the result of the great economic expansion from WW2 onward-- the direct result of rising wages and rising benefits and widespread development of a secure middle class and an expansion of government programs and benefits.
Can we afford those programs and benefits in a time of flat or falling wages and decreasing economic prospects? If we can afford them now, how about 10 years from now if the serious economic challenges are not successfully addressed?
Is there anyway we can justify the dreams of American exceptionalism in an environment characterized by greater poverty, cutting wages, fewer jobs, less long-term economic security?
Can we build a bright future on exactly the opposite of what made the country the place that we are nostalgic for?
Couple of comments:
"We the People decide what our government will and will not do."
No, we have a Constitution that enumerates what government may or may not do. When the Constitution says we must make a collective decision, then we vote and majority rules. But we do not get to vote on when we get to vote. Any discussion of the role of gov't in the economy must start and end with what the Constitution defines as "the Object of Gov't" -- Article I, Sec. I of Minn. State Constitution.
"We can't deal with this [resource allocation] by privatizing everything government does ... "
That is true, but it is the wrong question. Privatizing functions gov't should not be doing may be more efficient, but it does not reduce the scope of gov't, which is the problem. Back again to constitutional limits on gov't.
"How do we balance this [education] with other important public services such as health care and transportation? We need to decide."
Who is the "we"? An economist should understand that all systems ration resources. The difference is how decisions about resource allocation are made. The author is advocating a system where some "we" makes those decisions for others and enforces those decisions with gov't police power. His examples -- education, health care (as opposed to public health/safety) and transportation (beyond specified constitutional infrastructure obligations) are properly private market functions, not gov't functions.
If we are going to have the debate the author wishes to have, let's understand that it is fundamentally about who will make decisions about resource allocation -- individuals, you and I, or someone else, some "we" that is not "us."
Craig, "some we that is not us?" Who are we afraid of?
I get the bit about not being allowed to decide what we get to vote for. Stadium anyone? Apparently it is difficult to elect people to do what we want them to do, but referendums on everything sounds unworkable to me.
btw the first object of the MN state constitution says the government is instituted for the security, benefit and protection of the people. How do clean water, healthy neighbors and an educated workforce not benefit all of us?
Good questions.
Whenever some says "we should do this" the "we" means some people will dictate to others what they must do. "We should have high school standards" means that some people will set standards for others. That is to be feared.
To take your stadium example -- whether the Legislature votes or we have a referendum is irrelevant. We should not vote to impose a tax that redistributes personal property from one group of people to another. That is specific, not general, welfare.
Article 1 is a limiting article, like the federal constitution necessary and proper clause. Simple benefit is not the criteria for government action. It must also provide for general, not specific welfare, and not take away the political rights, the right of choice, from the people. Government facilitates, it does not supply.
Resolution No.5:
Stop pretending that cutting revenue by taxing the middle class at higher rates than the wealthy is the way to create a good economic climate in our state (or in any of the countries the IMF says will "recover" from their debt-laden conditions and become prosperous by deliberately shrinking their economies and therefore their revenues).
This theory obviously makes NO sense but yet is widely accepted, mostly by those who studied at the U. of Chicago or who were otherwise exposed at an impressionable age to Ayn Rand and Milton Friedman.
An interesting and thoughtful piece. I only hope that all the legislators coming to St. Paul read it.
Unless Mr. Westover is advocating a return to the paleolithic, when every family decided for itself where to go and what to do on a daily basis, we lived in caves and tents, drank from streams, ate whatever we could find locally (and often starved in the winter), and lifespans were about half of what they are now, much of what he’s suggesting is sophistry.
Absent that prehistoric anarchy, no industrial society can exist without some “we” making decisions for others, and enforcing those decisions with government police power. Saying that some things are “…properly private market functions, not gov’t functions” is an opinion, and one shared by many (recently, mostly on the right), but it’s only an opinion, not an established fact.
Much to Mr. Westover’s dismay, I’m sure, there are no current industrial societies, nor – in my own opinion – will there ever be such societies, in which each individual gets to make all the meaningful decisions about resource allocation within that society. That’s just as true of Minnesota as a state as it is of the United States as a nation.
There are no societies wealthy enough to provide both Mr. Westover and me with computers to do this kind of back-and-forth that do not have taxes to redistribute personal property from one group of people to another. There are no societies that we would view as “civilized” that do not impose upon the general public numerous standards, ranging from what it takes to graduate from high school to requiring some businesses (and/or professionals) to secure licenses.
Indeed, constitutions can sometimes be limiting documents, and in some circumstances, I’m as much for those limits as anyone, but constitutions also lay out responsibilities – directives, if you will – which the government, established by the people and with their consent, is obligated to carry out. Minnesota’s Constitution, for example, *requires* the legislature to establish a uniform system of public schools.
Individual and group choice is always limited. Freedom is never total, and while I think the phrase “Government facilitates…” is one that is often overlooked, the phrase “…it does not supply” is obviously false, both in intent and application.
Mr. Westover is incredibly naive if he believes that there is some magic that happens so that government can carry out it's functions. Other than the credit cocktail consumption that ballooned in 2000 government generally has to get it's money from somewhere. Where does he think it comes from if not from its citizens.
The government doesn't take a dollar from you to give to Joe Smith and say here's Mr. Westover's dollar. It takes the money and says lets give it to medical service providers who treat people who have continued right to life even though they are old and poor.
Get realistic Mr. Westover.
Wonderful post and I couldn't agree more with resolution number three.
Most all of these fiscal commissions or "tax-reform panels" come to a variation of the same conclusion. Which is to build better supports for our so-called three legged stool. Or have be become accustomed to borrow, spend/tax cut, and kick the can down the road?
I also very much support one other suggestion: if strict accounting methods were observed, the cost of future benefits would show up on today's budget, and thus be subject to the discipline of the balanced budget requirement of most states.