Monday, August 8, 2016

Political Amnesia

Gubernatorial aspirant Greg Gianforte, whose only discernable and dubious claim to political fame is that he will do miracles for Montana’s economy, has a problem.

It turns out that during most of the time that Steve Bullock, his opponent, has been governor, the Montana economy has done pretty well. Employment growth has been robust, the unemployment rate is well below the rest of the country’s, and the state’s budget has been managed sensibly. More people than ever have health insurance. Child welfare has improved significantly. And we lead the nation in business startups. With Bullock’s record looking like that, there’s really not much for Gianforte and the Republican Party to hang their hat on when they say they’re going to make things all better.*

So it was no surprise when the Billings Gazette reported last week that a couple of Republican legislative bigwigs – Sen. Fred Thomas and Rep. Jeff Essmann – seized on the news that the state’s economy had shrunk over the past six months** to go after Bullock. The downturn in the economy, which resulted mostly from declines in energy production, agriculture, and transportation, also means that tax collections are lower than expected, that the state is spending more than it takes it, and that we’re going to have less money in the bank than we thought when we close the books next June.

And all of this, according to Thomas and Essmann, is Steve Bullock’s fault.

Yep. According to Thomas, whose economic theorizing is always inventive (to put it charitably), “over the last 12 years, the environmentalists have occupied the governor’s office and the chickens are coming home to roost.” Exactly how the “environmentalists” managed to drive the world price of oil from $100 to $40 a barrel, or produce the cheap natural gas that’s pushing coal out of the market, or depress grain prices, or strengthen the dollar and weaken exports, Thomas, if he knows, isn’t saying.

Thomas claims that "if we’re going to have a natural resource state, we need new leadership at the helm.” But the new leader in question is obviously Greg Gianforte, whose economic strategy so far appears to consist exclusively of big tax cuts for big businesses and wealthy taxpayers. That has even Thomas hemming and hawing a bit: given the current decline in tax revenue, Thomas tells us that he has cautioned Gianforte that he needs to show some “flexibility” in implementing tax cuts. The only problem with that is once he’s been flexible on tax cuts, Gianforte’s got nothing.

Thomas’ take on how the economy works and what Gianforte can do about it may suffer from incoherence, but when it comes to budgeting, Essmann appears to suffer from flat out politically inspired amnesia. According to the Gazette, Essmann “singled out spending based on ‘overly optimistic’ governor’s office revenue projections” as the reason the state has a deficit and is running through its cash reserves.

Well, no, not really.

When the legislature sets the level of spending and builds a budget, it develops its own revenue estimate; it doesn’t rely on the governor’s. And in 2015, when the legislative staff and the governor’s budget guys were coming up with wildly different numbers for revenue, we set up a special joint subcommittee (full disclosure: I was a member) of the House and Senate Tax committees to reconcile the differences and come up with an estimate of our own. We hammered away at it and in the end we – not the governor - created the revenue number that drove the level of spending. And the chair of that special joint subcommittee was none other than -  wait for it! - Sen. Fred Thomas! It’s astonishing that Essmann seems to have forgotten how that all happened.

And if that's not ironic enough for you, consider that throughout budget deliberations the governor kept insisting that whatever the revenue estimate, we needed to limit spending enough to keep $350 million on hand, just in case anything went wrong. Well, something has gone wrong, we’ve needed the money, and we should be glad we have it. Bullock was pushing fiscal responsibility. Without it, by now we’d be slashing programs, laying people off, and making a bad situation worse. And there were a whole bunch of Republicans running around the Capitol in 2015 saying that keeping that much cash on hand was a bad thing – that we should give it back, a la Gianforte, or spend it on infrastructure.

Thomas and Essmann should thank their lucky stars – and Steve Bullock - that that didn’t happen.

*Well, there’s always Donald Trump. Oh wait…

**To be precise, the decline in gross state product occurred in the last quarter of 2015 and the first quarter of 2016. The data are not yet in to tell us what has happened since March of this year.