Lewis Black lays it out in Madtown

Isthmus has an interview with the always-great Lewis Black in advance of his stand-up performance at the Barrymore later this month.

Here’s Black’s version of the State of the Union.

Is it tough to find new things to yell about?
Oh, not anymore. If anger was fuel, I could power China. Every time you think there's nothing left to talk about, there are six more things. We have all the trappings of a goddamned banana republic. In the midst of discussions of racism and torture, you get a half-assed budget, so the government can survive that somehow makes things worse.

And here’s Lewis Black sizing up our fair Governor.

I'm not angry at Scott Walker. I'm angry at the person who told Walker that he should run for president. A lot of idiots think they should be president. It's the people who support the idiots and say "yes, you should!" that really concern me.

Exactly. I don’t blame politicians and paid hacks for peddling their well-debunked bullshit (although I do hate their cynicism), I blame the gutless rubes that actually keep voting for it!

And it’s never a complete discussion on Lewis Black discussing the "quiet charms of Wisconsin" without giving you this classic bit (language NSFW).

Who pays in Wisconsin? The middle and lower classes

Thanks goes out to the Wisconsin Budget Project for tipping me off about the annual release of the Institute on Taxation and Economic Policy’s “Who Pays” report. ITEP’s report breaks down the various state and local taxes for all 50 states, and identifies which income levels pay the largest burdens, and why.

Taking a look at the “Who Pays” report for Wisconsin, you’ll find that it’s the middle and lower classes that are paying the highest percentage of state and local taxes, while the richest Wisconsinites are paying less.



So why does Wisconsin's taxes work out this way? A big culprit is property, sales and excise taxes, which hit middle and lower income Wisconsinites much harder than the richest Cheeseheads. Only the top 1% of Wisconsinites pay an average property tax that is less than 3% of income (all the other income levels pay property tax rates between 3.0% and 3.5%) which makes sense when you think about it, because it is unlikely that a 1%er making 10 times the income of a middle-class family will own a house that is worth 10 times as much.

And the sales and excise tax ends up being completely regressive in Wisconsin, with the burdens consistently lowering as you go from the poor to the rich.

Sales and excise taxes as % of income, Wisconsin
Bottom 20% of income- 6.0%
Middle 20% of income- 3.9%
Top 20%- top 5% of income- 2.4%
Top 1% of income-0.8%

Some of these regressive differences are made up by Wisconsin’s income tax structure, where the rich do pay more than others (5.1% for 1%ers vs 3.2% for middle incomes and a refund of 0.2% for the poorest 20%). But even then, this “penalty” on the rich at the state level masks the advantages that rich people get from the federal tax code, including not having to pay Social Security tax after $118,500 of income, and the reality that the rich and connected have the time and resources to do activities that give themselves more deductions and tax breaks than most of us can ever get.

Included in those advantages in the federal tax code is another item that makes state and local taxes in Wisconsin more regressive than it may seem at first glance. When people pay property taxes and state income taxes, those numbers can be written off on their federal taxes, lowering the total amount of net taxes that you pay. Obviously, richer people have more of these taxes to write off, and at a higher federal tax rate, so it’s a double-bonus for them. In property and income tax-reliant Wisconsin, this is an extra boost for those who make the most money.

State/local “tax cut” due to federal offset, Wisconsin
Top 1% of income 1.5%
Top 20%- top 5% of income 1.3%
Middle 20% of income 0.4%
Bottom 20% of income 0.1%

Interestingly, ITEP places this somewhat regressive system in Wisconsin is in the top third of the least unfair state and local tax system of all of the United States. In fact, ITEP ranks two of Wisconsin’s Midwestern bretheren in the “top 10” for unfair taxes, led by a certain state I profiled earlier this week for its flat income tax and budget problems caused by….not taxing for what it needed to pay.

ITEP rankings on tax unfairness, Midwest
Illinois (5th)
Indiana (10th)
Ohio (18th)
Iowa (27th)
Michigan (29th)
Wisconsin (37th)
Minnesota (45th)

Minnesota is a clear outlier when it comes to taxing the rich- the 1%ers pay 7.5% of their income there, while not paying anything more than Wisconsin’s 6.2% in any other Midwestern state (in Illinois, it’s 4.6%). And yet Minnesota keeps adding jobs at a faster rate than almost any other state in this group, while low-tax-for-the-rich Illinois is battling with Wisconsin to stay out of the basement for job growth over the last 4 years. Funny how that works.

So keep these numbers in mind when you hear discussions of tax policy in Wisconsin over the upcoming budget debate, as it looks like the rich are already getting a pretty good deal in the state when it comes to how heavy a burden they have to pay.

Wisconsin K-12 "reform" heads back to the drawing board

The big news yesterday in Wisconsin was the public hearing (that gave little time for the public to be heard) for the Assembly's education deform reform proposal, and it ended up turning into a massive farce, with the bill having to be pulled back for of fiscal information and likely having the proposed Academic Review Board be unconstitutional. I'll forward you to Andy at the Wisconsin Soapbox for a thorough rundown of yesterday's events.

I watched some of the testimony yesterday, and the bottom line kept coming back to this, which was summed up by Journal-Sentinel education writer Erin Richards, and comes as no surprise to anyone who has spent five minutes in a low-income classroom or community.

Convoluted #AB1 hearing keeps coming back to: There's no magic bullet or magic law to guarantee low-performing schools get better.

— Erin Richards (@emrichards) January 14, 2015

And until you start investing in low-income communities, and start giving pathways to success for both adults and school-aged children, you won't change academic achievement. And our GOP Legislature and Governor don't seem the least bit interested in that. In fact, the 262-driven Wisconsin GOP seems to want poor neighborhoods to stay second-class, so their mediocre selves can stay above someone.

Krugman notes some things aren't considered so dynamic

Economist Paul Krugman has a great blog post out today that not only discusses the one-sidedness of dynamic scoring (i.e., making the Congressional Budget Office literally change the laws of math to argue tax cuts have bigger effects than they do), but also noting that some scoring is apparently more dynamic than others. I’ll also include the links that Professor Krugman is referencing, so you can check those out.

A good piece in yesterday’s [New York Times] Upshot reports on a recent study of the effects of Medicaid for children; it shows that children who received the aid were not just healthier but more productive as adults, and as a result paid more taxes. So Medicaid for kids may largely if not completely pay for itself. It’s a good guess that the Affordable Care Act, by expanding Medicaid and in general by ensuring that more families have adequate health care, will similarly generate significant extra growth and revenue in the long run. Do you think the GOP will be interested in revising down estimates of the cost of Obamacare to reflect these effects?

And what about the damage to potential output caused by cutting spending in a depressed economy? The evidence that austerity reduces output and raises unemployment is overwhelming — and there’s now pretty good evidence that sustained high unemployment inflicts long-term damage on the economy’s potential. So will CBO now be instructed to include these effects in its estimates?

The point is that we’re not just looking at a possible mandate for using voodoo in budget estimates, we’re talking about selective voodoo, which incorporates some supposed dynamic effects while ignoring others for which there is if anything stronger evidence. Tax cuts for the rich: good! Spending that makes ordinary workers more productive? Bad!

But when did right-wingers ever care about what the real-world effects of policies were anyway? Their M-O is all about creating an alternate reality where you can argue that Obamacare hasn’t significantly reduced the uninsured rate (even though it has) and where the US budget deficit hasn’t shrunk by 2/3 in the last 5 years (even though it has).

The oligarchs and their GOP puppets know better than the BS they try to peddle, but they count on your ignorance to keep their Big Lies going. Always remember that.

Illinois fiscal hole illustrates future of Fitzwalkerstan

Apparently we are not the only state that’s got exploding fiscal troubles to deal with in the next few months. Our neighbors to the south have perennial budgets problems, but Illinois is looking at a fiscal squeeze that is likely to become much worse starting on July 1 .

Illinois’ new governor, Bruce Rauner, will begin tackling perhaps the biggest fiscal mess in the nation, and the worst his state has seen in decades, when he is sworn in Monday.

The Land of Lincoln is buckling under a chronic structural budget deficit and the lowest credit ratings and worst-funded pension system among the 50 states.

Pension payments are projected to jump to nearly $7.6 billion in fiscal 2016 from $6.8 billion this fiscal year. And outgoing Democrat Governor Pat Quinn's budget office recently estimated Illinois' pile of unpaid bills will climb to $9.8 billion at the end of fiscal 2016, from $4 billion this year.

"In the modern era ... the state has never been in this poor of financial condition," said Laurence Msall, president of the Civic Federation, a Chicago-based government finance watchdog group.

So how did the already-big hole that the FIBs were in get even larger? One of the biggest reasons Illinois’ structural budget deficit was already large was due to the state’s past choices to underfund its pensions in favor of tax cuts and spending in other areas. In later years, those pensions had to be paid for with current-year expenses, and the state almost never raised taxes or reduced other expenses, choosing to delay payments of bills and borrow the money instead. This cycle has continued for decades, and they’ve never seemed to be able to break their way out of it.

Former Governor Pat Quinn finally tried to slow down the spiral by putting in a temporary income tax increase from 3% from 5% in January 2011, and an increase in the corporate income tax, which raised the amount of money coming in, due to an act known as TABSA. As a result, Illinois essentially had a balanced budget in Fiscal Year 2014, and is on track for a relatively minor imbalance of $322 million this fiscal year (less than 1% of all expenses).

However, Quinn and the Dem-run Illinois Legislature reversed those moves in front of the 2014 elections, essentially cutting taxes starting this year, and now the budget hole is exploding again.

This paper from the Chicago-based Center for Tax and Budget Accountability (CTBA) is a good primer on why these 2015 income tax cuts and future mandatory spending means a massive fiscal crunch for the Land of Lincoln starting this summer. We’ll start with the income tax cuts first.

Under TABSA, the personal income tax rate will automatically decline from 5 percent to 3.75 percent, and the corporate income tax rate will automatically drop from 7 percent to 5.25 percent, on January 1, 2015. While those reduced income tax rates resulted in a significant FY2014-FY2015 revenue loss, its impact was somewhat mitigated, because the reduced income tax rates only pertain for six months of FY2015. Things will be worse in FY2016, because those reduced income tax rates will be in effect for the full fiscal year.

Indeed, the recurring revenue loss caused by the phase down of the temporary income tax increases under TABSA will be quite significant. According to the non-partisan Commission on Government Forecasting and Accountability (COGFA), recurring General Fund revenue in FY2015 will be some $2 billion less than it was in the immediately preceding fiscal year, FY2014. In FY2016, however, when the full effect of the reduced income tax rates will be felt, General Fund revenue is projected to be nearly $3 billion less than in FY2015.

The state of Illinois also borrowed $650 million from other state funds to balance its books for this fiscal year, much like how the Wisconsin GOP and Gov Walker are using one-time transfers of hundreds of millions of dollars of General Fund revenue to balance the Transportation Fund’s budget, the difference is that the FIBs are planning to pay back the transferred funds. Illinois will not have that luxury of borrowing from other funds for FY 2016 (or at least is not assumed to do so).

Those two issues explain $3.64 billion of Illinois’ shortfall on the revenue side for FY 2016, but they also have problems on the spending side, particularly involving the pension situation. Gov Quinn and the Legislature tried to cut payments to pensioners to slow down the expenses going into the fund, and recently got a big stiff arm from the courts (the court basically said “a deal is a deal”), which means that money has to go out for the foreseeable future.

In an effort to reduce the debt owed to the pension systems, the General Assembly passed and Governor Quinn signed into law Public Act (PA) 98-599 in December of 2013. That law implemented sweeping changes to Illinois’ state-funded public retirement systems. At its core, PA 98-599 cut pension benefits for current employees and retirees, and those benefit cuts were meant to reduce the state’s required annual contributions to the pension systems, thereby lessening Hard [mandatory] Costs. FY2016 was supposed to be the first fiscal year during which the state’s total pension contribution would be reduced by PA 98-599. However, on November 21, 2014, Sangamon County Circuit Court Judge John Belz ruled that PA 98-599 was unconstitutional, and put a permanentstay on the law’s implementation. While the state will appeal Judge Belz’s ruling to the Illinois Supreme Court, the benefit cuts designed to reduce the state’s pension contributions cannot be implemented for the duration of the stay. Because of Judge Belz’s ruling, the state’s contributions to the pension systems for FY2016 will have to be calculated in accordance with the pension funding laws and benefit levels that existed prior to the passage of PA 98-599.

Moreover, the three largest state pension systems recently reduced their investment rate assumptions. This means the pension systems now project that their assets will generate a lesser return over time than what was previously anticipated. This in turn will cause the annual pension contributions required of the state to increase from what was initially scheduled, to make up for the difference between the higher returns previously projected for the pension systems’ assets, and the new lower growth projection.

As a result of the stay on PA 98-599’s implementation and the reduced investment rate assumptions, the state’s FY2016 General Fund contribution to the pension systems will be some $630 million —or 10 percent — more than in FY2015, rather than declining from year-to-year as previously anticipated.

The underfunding and borrowing for Illinois' pensions fund is a major difference between them and Wisconsin. Wisconsin's pension fund has been fully funded for years, and adjusts payments to retirees in case the markets don't grow as much as needed. You may remember that Gov Walker ordered a study of the Wisconsin Retirement System in 2011, and the report came back in 2012 saying that not only was Wisconsin's pension fund 100% funded, but that you'd have to be crazy to mess with the way it is funded. This got Walker to quickly back off any scheme to funnel money away from the WRS in the short term, but that doesn't mean he might not try in the future.

But I digress- in Illinois, when you combine the need to pay off more debt for all funds in FY 2016, along with the added required pension contributions and having to pay back the $650 million that was borrowed from other funds in this fiscal year, and you now have a one-year increase in mandatory [Hard] costs of $1.93 billion. Add in the revenue shortfall, and here's what you get for the Illinois budget deficit for Fiscal Year 2015-16, (which is on top of the $6.48 billion in unpaid/underpaid bills that they had as of July 1, 2014).

Illinois budget issues, FY 2016
Budget deficit, FY 2015 $322 million
Revenue reduction, FY 2016 $3.64 billion
Mandatory spending increases FY 2016 $1.93 billion
BUDGET DEFICIT, FY 2016 $5.90 BILLION

These problems show why Illinois is the prime example of how continually relying on one-time gimmicks of borrowing and underfunding of mandatory payments leads to long-term budget disaster. And now the combination of 2015's tax cuts with increased required spending is making a this year’s 1% deficit explode into a 15.66% deficit for next year.

What’s instructive to note as a Wisconsinite is that this is the same path our state is under with Gov Walker and the WisGOP Legislature. We have also cut taxes in the last couple of years, and the lower revenue is a big culprit in the $2 billion + budget deficit we are facing today. We have also expanded our spending on road projects and raided other funds to do so as a short-term fix. And do not doubt that skipping pension contributions and expanding borrowing further is something the Walker Administration is considering as a means to “balance” this upcoming budget, much as Quinn and other Illinois elected officials did for decades, always hoping to kick the can down the road into another time when it could be fixed with less pain.

What’s funny (or pathetic, depending on how you choose to view it) is that we can expect Gov Walker to drop some line in tomorrow’s State of the State address about “Well, we’re not Illinois.” In fact, the elected officials in charge of things in Wisconsin have acted very similar to FIBs in the last four years, and not just due to the increase in corruption and machine politics. Walker/WisGOP fiscal madness has us well on the road to having our state government and budget be just as screwed up as Illinois’ is today, but unlike our neighbors to the south, with the WisGOP crew, that’s likely a feature of their policies and not just a bad side effect.

A wild Sunday in these parts

That was a wild range of emotions to watch that Packer game, but it was still amazing to see the Pack pull it out over South America's team (with officiating karma coming back to bite the Boys, which kind of makes it even cooler). And then as a former Indianapolis resident, I saw the Colts defense dominate Peyton Manning to upset the Broncos. Seemed like a great Sunday from a sports element.

And then Bucky can't stop Rutgers (NEW JERSEY U? REALLY?) and gets massively upset. That'll blunt the buzz of the day (well, that and time after having a couple of Brother Theloniouses and other top-notch beers consumed out of nerves).

So now it's time to watch some of the Golden Globes, which frankly is more legit and fun to watch than the Oscars, and I just saw one my favorite scenes get referenced with "Fargo"'s big win for mini-series. Given the temps of the last week and the greedhead direction of this state, this scene seems even more timely than it usually is, especially when you hear certain people accept the corruption and our exploding budget deficits because they got a few dollars shaved off their property taxes for this year.

Puncturing right-wing bubble BS on Obama's record

I got a comment on an older post where I pointed out the absurdity of Scott Walker's administration trying to take credit for Wisconsin job growth while conveniently leaving out the (bigger) job gains the rest of the nation is seeing from the Obama Recovery (bizarrely, the original post is from August 2013). This person disagreed with my assessment of it being the "Obama Recovery", so I'll address these questions and concerns in this post. Naturally, this rightie chose to remain Anonymous, like most bubble-boys do, because having the guts to put your name behind a claim means we can check your track record and see how right (or likely wrong) you have been over time. But let's go over the claims by one by one.

"The Obama recovery? WTF?
You mean the Republican Recovery, which started after they took control of Congress in 2010 and ended the failed runaway deficit spending of the Democrats by enacting the Budget Control Act of 2011 and creating the Oil Shale Boom."

Uhh, I wouldn't be talking much about the "oil shale boom": these days, with oil crashing like it is, and it's equally silly to claim that any change in policy has happened in the last 4 years that led to this (as far as I know, there's been no new policy at all). But we certainly can check the claim of "runaway deficit spending of the Democrats" with the actual numbers from the CBO. These numbers come from Page 156 and 157, giving historical data on the federal budget, and we'll start with fiscal year 2007, which is when the economy began to stall out. We'll start by going through Fiscal Year 2011, which started on October 1, 2010, so it will include all of the "out-of-control spending" when Dems controlled Congress.

Nominal federal spending, FY 2007-2011
2007- $2.729 trillion
2008- $2.983 trillion (+9.3%)

Obama becomes president
2009- $3.518 trillion (TARP, stimulus passed during here +17.9%)
2010- $3.457 trillion (-1.7%)
2011- $3.603 trillion (+4.2%)

Given that a sizable amount of FY 2009 is the result of policies passed while George Bush was still president, and because of the increase in stabilizers and other actions that were taken as a result of Bush's Great Recession, I don't know how you charge a lot of that increase to Obama. You see that total spending in the final Dem-controlled budget in FY 2011 is barely any different than the amount in FY 2009 (up a total of 2.4%, less than the cumulative rate of inflation for those two years).

Now let's see what's happened with spending in the last 4 fiscal years (including the current FY 2015).

Nominal federal spending, FY 2012-2015
2012- $3.537 trillion (-1.8%)
2013- $3.454 trillion (-2.3%)
2014- $3.504 trillion (+1.4%)
2015- $3.750 trillion (proj.) (+7.0%)

Looks like the first two years continued the austerity that we saw in the previous two years, but government spending has increased in the last two fiscal years, with a big increase scheduled for this fiscal year. Interestingly, job growth from October 2013 to the present day has been the best in the last 15 years, which sorta shoots down the theory that GOP budget-cutting is what's causing the Obama jobs recovery, doesn't it?

In fact, the decrease in the deficit in recent years is more a function of higher revenues resulting from more people working than any cut in spending.

Federal revenues as % of GDP
2007- 17.9%
2008- 17.1%
2009- 14.6%
2010- 14.6%
2011- 15.0%
2012- 15.2%
2013- 16.7%
2014- 17.5%
2015- 18.3% (proj.)

Yes, spending as a percentage of GDP went higher in FY 2009, from 20.2% to 24.4% (that'll happen when the economy goes into free-fall), but it had declined to 23.4% by FY 2011, and continued to drop over the next 3 years, ending up at 20.3% in 2014- no different than we were 6 years prior to that. Revenues finally recovered past 2008 levels as well, and while spending is projected to expand to 20.9% of GDP for 2015, there will be an even larger jump in revenues, up by 0.8% to 18.3% of GDP. This should be somewhat obvious, but people working and paying taxes tend to do the most damage when it comes to reducing a deficit- a whole lot more than cutting spending and services, and inhibiting economic growth in the process.

And now for Mr, Rightie's other claim.

"Obama & the Dems get credit for 3 years of 10% unemployment and sinking Social Security into the red 5 years ahead of schedule by not collecting 1/2 of the Payroll taxes for two years in the single worst economic policy of the 21st century.

3 years of 10% unemployment? One look at the BLS historical figures (which were just updated yesterday) shows that we had exactly ONE MONTH of 10.0% unemployment, in October 2009. Unemployment had already dropped to 9.2% by January 2011, and the spending cutbacks of 2011-2012 didn't speed that drop too much, as unemployment was still at 8.0% when Obama was sworn in for his second term in January 2013. In the two years since (when Dems cut into GOP majorities in the House and expanded their advantage in the Senate), the unemployment rate has gone down by 2.4%, back to pre-financial crisis levels. Don't think you can credit GOP "budget-cutters" for that one, kid.

Now if this guy didn't like the cut in Social Security tax rates by about from 2011-13, then WELCOME TO THE PARTY, PAL! No, it wasn't by half as this guy implies- it was more like 1/6, since they cut employee-only rates by 1/3 (the 6.2% total stood for employers through this time), but I also believe Social Security should be shored up as a priority. In fact, I think the cap on earnings that Social Security are taxed should be raised if not entirely abolished, to guarantee those earned benefits for the next generation, particularly in a time of fewer pensions from a person's job.

Reducing the Social Security tax rate wasn't what I would have done in late 2010, but it didn't bankrupt the system by any stretch (it still is projected to pay full benefits for the next 18 years with no changes). And reducing that date of the end of full benefits by 4 years (not 5) is far from the worst economic policy of the 21st Century. That "honor" goes to Bush's tax cuts, especially the second ones in 2003 that reduced capital gains and dividends, stretching inequality and encouraging Wall Street gambling that helped lead to the 2008 crash and the huge deficits that resulted.

Lastly, "Obama = failure."

Far from it, basement boy. In fact, if Obama was Republican, you'd be wanting to put him on Mount Rushmore for pulling the nation out of the Great Recession, having a booming stock market, and reducing the deficit. ADMIT IT. Obama's presidency has succeeded in a much larger way at fiscal conservatism than Reagan ever has.

You can argue whether the president did the right thing or not (and I'm not a fan of a few things this guy has done, particularly his friendliness to Wall Street and free traders), but the argument better be based on reality. This guy's argument was not, much like the arguments of most right-wingers, now that I think of it.