Small businesses understand competitive realities, role of government

There are lessons in the nationwide survey: Folks in small business understand that not all business tax breaks treat businesses equitably, or help the economy.

Mike Owen
Mike Owen

Political talk pandering to small businesses is commonplace, and often involves inaccurate assumptions about positions on taxes and the role of government. Thus, they are not only frequent, but frequently wrong.

A survey released today by the Small Business Majority (SBM) www.smallbusinessmajority.org — a nonpartisan small-business advocacy group — found wide acknowledgement of the need for more equitable, sustainable fiscal choices in Washington. As noted by SBM:

Contrary to popular belief, nationwide scientific opinion polling conducted earlier this month found that the majority of small business owners—more of whom identify as Republican than Democrat (47%-35%)—believe that raising taxes on the wealthiest 2% is the right thing to do in light of our budget crisis. What’s more, 40% strongly believe this.

The polling also found the majority of entrepreneurs see a productive role for government in helping small businesses achieve success. Nearly 6 in 10 agree government can play an effective role in helping small businesses thrive.

These are interesting results but they should not be terribly surprising.

Folks in small business know:

  • Budgets have two sides — spending and revenue.
  • Small businesses benefit when employees and consumers are educated, safe, healthy and financially secure.
  • Small businesses can compete when the playing field is level for all businesses; it’s hard to compete with bigger competitors who are getting special breaks from the referee — government.

And there are lessons in this for state policy makers as well.

Tax breaks geared to multistate corporate giants that can shift profits to other nations or states do not benefit small businesses, or all businesses equitably, and do not always help the economy. It is clear that people running small businesses understand this.

Iowa can make the playing field better, and restore squandered revenue, by plugging tax loopholes that are costing the state $60 million to $100 million a year. Several states already do this, including four of the six states that border Iowa: Illinois (home of Deere & Co.), Wisconsin, Minnesota and Nebraska. But Iowa lawmakers have refused to defy the big corporate lobbyists that have stood in the way of this important reform, known as “combined reporting.”

You can learn more about that and other inequitable, unaccountable tax breaks in Iowa at the Iowa Fiscal Partnership website, www.iowafiscal.org.

Posted by Mike Owen, Assistant Director

Score one for economic reality: Public jobs matter

Public-sector spending feeds private industry, and creates new jobs in the private sector. To pretend otherwise is foolish.

Mike Owen
Mike Owen

Today’s New York Times editorial, “The Myth of Job Creation,” takes both President Obama and challenger Mitt Romney to task for their comments in the second debate about the importance of public-sector (government) jobs.

As the Times noted:

Public-sector job loss means trouble for everyone. Government jobs are crucial to education, public health and safety, environmental protection, defense, homeland security and myriad other functions that the private sector cannot fulfill. They are also critical for private-sector job growth in … fundamental ways.

At the Iowa Policy Project, we have made this case repeatedly in Iowa over the last few years, both in response to cutbacks in Iowa budgets and to misinformed political assaults on federal stimulus spending, which did a good job bridging revenue gaps in Iowa to prevent worse cutbacks in public-sector spending. See our latest “Iowa JobWatch.”

In Iowa, 1 in 6 jobs is a government job, at the local, state or national level. How is it possible that roughly a quarter-million jobs in our state do not have an important impact on our economy? The answer of course is that they do. The lion’s share of those jobs are in local government, so they are scattered across the state. They are filled by our neighbors, buying goods and services from local businesses and keeping kids in our schools. As the Times notes, regarding comments by both presidential candidates suggesting that “government does not create jobs”:

Except that it does, millions of them — including teachers, police officers, firefighters, soldiers, sailors, astronauts, epidemiologists, antiterrorism agents, park rangers, diplomats, governors (Mr. Romney’s old job) and congressmen (like Paul Ryan).

As with shortsighted approaches in budgeting that attempt to resolve all deficit issues with spending cuts, instead of taking a balanced approach to both the spending and revenue sides of the budget ledger, our leaders make a mistake when they think all new jobs have to be in the private sector or they don’t matter. Public-sector spending feeds private industry, and creates new jobs in the private sector. To pretend otherwise is foolish.

It’s always good when a dose of fiscal and economic reality hits the public debate. But it is unfortunate that it doesn’t happen more often.

Posted by Mike Owen, Assistant Director

Nonsense from the Far Right

Fortunately, the discerning Iowan can find the facts about the federal budget by looking for them, and not buying into Dick Morris’ spin.

Political consultant Dick Morris slipped into Iowa last week, and the Spin-O-Meter was in overdrive.

Now, rather than repeat Mr. Morris’ misinformation, here is a link to a Des Moines Register story about his appearance at a rally orchestrated by the national right-wing organization Americans for Prosperity.

What Iowans need to know is that (1) Morris is wrong about what is driving the federal budget deficits, and (2) the causes are clear: You can’t cut taxes and fight two wars at the same time without digging a big budget hole.

Center on Budget and Policy Priorities graph
Center on Budget and Policy Priorities

As shown in the graph at right from the Center on Budget and Policy Priorities, the economic downturn, President Bush’s tax cuts and the wars in Afghanistan and Iraq explain the vast majority of the deficit through 2019. One thing folks must recognize is that deficits caused by those factors cause more debt down the road, because we have to keep paying interest. Even after the Iraq war ended, we have to keep paying for it.

As we deal with these self-inflicted budget problems, we must maintain the fundamental and long-accepted responsibilities of our nation — to care for the most vulnerable and put them on their feet to get work and succeed in our economy.

Dick Morris has a big megaphone to try to instill something other than a factual presentation about what’s causing our deficits and debt. Fortunately, the discerning Iowan can find the facts by looking for them, and not buying into the conventional spin he delivers in his traveling medicine show.

Posted by Mike Owen, Assistant Director

Why the federal budget debate matters in the states

Want clean water? Good and safe schools and bridges? You get what you pay for.

There’s doggone near nobody who isn’t concerned about dealing with the nation’s long-term budget challenges of deficit and debt.

What not enough people will recognize, however, is the danger of diving headlong into a deficit-cutting approach that just digs a deeper hole, both for the economy and for the critical services that federal, state and local government spending supports.

Ryan budget impacts
Center on Budget and Policy Priorities

And that’s the problem with the so-called “Ryan Budget,” named for Congressman Paul Ryan. That approach, passed by the House, makes cuts to funding for state and local services that are far deeper than the cuts many expect to happen with sequestration, the automatic cut process demanded by last year’s Budget Control Act compromise.

A new report from the Center on Budget and Policy Priorities outlines the challenge for states generally with the Ryan approach:

  • Federal cuts of 34 percent by 2022 to Medicaid compared to current law, and by steadily larger amounts after that.
  • Federal cuts of 22 percent in 2014 and in later years to non-defense “discretionary” spending — which leaves Medicare and Social Security alone but hits local and state services in education, infrastructure such as roads and bridges, and public health and safety including law enforcement.

For Iowa, the non-defense “discretionary” cuts are projected at $237 million in 2014 alone, and $2.1 billion from 2013 through 2021.

Want clean water? If you live in Iowa, where the state routinely shortchanges environmental enforcement, how bad do you think things might get when the federal funds are cut as well? Concerned about the quality of your food? Or your kids’ schools? Maybe the safety of the bridge you’re approaching on the way to work?

Well, folks, you get what you pay for.

Posted by Mike Owen, Assistant Director

Policy and pollution: We have options

“It’s not like we don’t have options. We do. Public policy can make a difference in protecting the environment.”

Iowa’s deteriorating water quality is a lingering problem that never seems to make it to the front burner of political campaigns or elected leaders’ agendas in the State Capitol. The Des Moines Register’s editorial today asks — and answers — the fundamental questions:

Why is our water so dirty? The state’s agricultural businesses, including 7,000 animal feeding operations, is a significant reason. Why do they do so much damage to the environment? Elected officials let them.

David Osterberg
David Osterberg

It’s not like we don’t have options. We do. Public policy can make a difference in protecting the environment, through tough and effective regulations that recognize the air and water belong to all of us, and by helping folks do a better job with targeted incentives.

Unfortunately, as the Register suggests, elected officials in Iowa have passed up opportunities in both the regulatory and incentive arenas to enhance Iowa’s water quality. The Iowa Policy Project through the years has noted many of the issues and presented constructive policy options. Here is a selection of those reports:

IPP also showed this year how environmental protection funding has waned in Iowa — even when voters specifically told lawmakers with a referendum in 2010 that environmental protection is an area where they want to see funding directed. As we found:

While legislators and other elected officials will always proclaim their commitment to clean water, they have not over the past decade demonstrated that commitment through the state budget. In fact, once inflation is taken into account, funding for many programs the state relies upon to monitor, protect and improve waterways has dropped by 25 percent or more. …

Over time, this slow erosion in the purchasing power of these programs is likely to contribute to deteriorating Iowa water quality, if it has not already done so. When funding is scaled to FY13 appropriations, the slow decline in spending on water programs becomes more evident.

Posted by David Osterberg, Executive Director

Tax-cutters’ unbalanced focus undermines self-government

What we have in Des Moines is a leadership problem and a governing problem.

David Osterberg
David Osterberg

Cut taxes, starve schools. Cut taxes, starve environmental protection. Cut taxes, … well, I think you’re getting the idea.

“The-tax-cuts-are-my-only-priority” legislators now have enough power to keep eroding our ability to meet our needs.

As I pointed out Sunday in a guest opinion in The Gazette in Cedar Rapids, this drive to underfund education is the root of recent decisions to close Polk Elementary School in Cedar Rapids and the Price Lab School at the University of Northern Iowa.

What we have in Des Moines is a leadership problem and a governing problem. Leaders find a way of matching revenues to our needs. The rejection of this kind of responsibility by a large enough number of our elected officials is the problem.

And the facts — as we have demonstrated in Iowa Policy Project reports — are clear. Most recently, we showed Iowa’s decline in support for the regents’ universities over the last 10 years. For the University of Iowa alone, it meant 40 percent less in actual spending power than the state provided in 2000, and a shift of costs to tuition-paying students and their parents.

A week before, we showed similar results with water-quality funding.

Even now, there is no greater cry than to cut commercial property taxes — even when most of the cuts would go to firms like WalMart and McDonald’s. It doesn’t matter. It’s a tax cut, period.

Ironically, even those who some elected officials are attempting to appeal to need the services they are cutting. Rockwell Collins needs trained engineers, and can better retain employees when rivers are clean and people have places to recreate.

Voters who want their kids educated and their rivers clean need to recognize that it doesn’t happen without state funding. More tax cuts don’t get us there.

Posted by David Osterberg, Executive Director

Unreasonable fear about ‘one-time’ money

Using stimulus funds bridged a gap in revenues and kept Iowa out of a race to the bottom.

Mike Owen
Mike Owen

You hear about it whenever some Iowa politicians get near a microphone to talk about the budget.

Heard above much wailing and gnashing of teeth is a common complaint that Iowa used “one-time money” to deal with recession-driven budget challenges.

Well, thank goodness for (1) that one-time money and (2) the willingness of state leaders at the time, including then-Governor Chet Culver, to spend it.

The Des Moines Register gets it, and isn’t afraid to say so in today’s editorial:

Yes, Iowa did it by shifting money set aside in savings accounts for other purposes, and it used one-time federal stimulus money. That was the right thing to do. The alternative would have been to lay off police officers, teachers and state workers, making the recession even worse in Iowa.

The state is in better shape financially now. It has the money to pay for essential services it has committed to provide to Iowans. The Legislature and the governor should pay to carry out those commitments.

The Iowa Fiscal Partnership (IFP) has pointed out that the American Recovery and Reinvestment Act, (ARRA), the economic stimulus program passed in 2009, was designed to provide targeted, timely and temporary assistance to Americans in the recession. As IPP’s Andrew Cannon noted in a recent IFP report, “Catching Up: Context for 2012 Budget Decisions in Iowa”:

Andrew Cannon
Andrew Cannon

While there is certainly merit in reducing the use of one-time money for the continuing expenses of the state, one-time-fund critics sometimes let strict adherence to that concept get the best of them. For instance, Recovery Act dollars were used precisely as intended: targeted, timely and temporary relief so that states could continue funding critical services, such as K-12 education and health services to individuals and families. State revenues declined precipitously during the worst of the recession; the Recovery Act bridged that drop-off in revenues until a time when revenues improved as the economy regained strength. The same can be said for use of $38.7 million from one of the rainy-day funds since high unemployment and reduced revenues during the year must constitute the rainy revenue day that the fund was designed to cover.

Had the Legislature and Governor Culver chosen not to use the ARRA funds, it is reasonable to assume that the holes created in recession would be left unfilled in better times. This is because one of the priority pieces of legislation passed in 2011 was the creation of a “Taxpayers Trust Fund” to pay for new tax breaks, the fund to be built from revenues coming in at a faster pace than expected. The priority was not to sustain or restore services, let alone enhance them, but to restrain use of new revenues.

Using the ARRA money when it came, for its intended purpose to bridge a revenue gap caused by recession, kept critical services in place when they were most needed, and kept us off the pace of a race to the bottom. Thank you to The Des Moines Register for reminding its readers of that smart public policy.

Posted by Mike Owen, Assistant Director