Winners, losers and collaborators

The Minneapolis Star Tribune Web site carries a breaking news AP story that Minnesota’s budget impasse and partial government shutdown ended overnight. The dead tree version of this morning’s Star Tribune carries a story by Dane Smith and Patricia Lopez with additional details predating the deal covered in the AP story.
Total state spending will apparently increase eight percent over the two-year budget biennium covered by the deal. The deal includes a 75-cent per pack tax increase on cigarettes and other tobacco products sold at the wholesale level that is projected to raise $400 million. Governor Pawlenty has advocated this particular tax increase as part of his budget proposal, but he has labeled it (bite your cheeks to keep from laughing) a “Health Impact Fee” rather than a tax. Why? Because he signed the Taxpayers League pledge not to raise taxes during his campaign for the Republican gubernatorial nomination in 2002 and wants to argue that he has kept his promise.
But here’s the beauty part. Smith and Lopez report that “in a departure from past practice, [DFL Senate Majority Leader Dean] Johnson refrained from calling it a tax. In his last written offer, Pawlenty stipulated that the Health Impact Fee must be referenced in law as a fee.” The Democrats in the legislature are apparently willing to collaborate with the governor in his Alice-in-Wonderland venture in linguistic manipulation, all of course for the public good. Governor Pawlenty’s critics and opponents outside the legislature will most assuredly not be so constrained, nor should they be.
Calling the cigarette tax increase a “Health Impact Fee” is fraudulent on two counts. First, it is of course a tax increase rather than a fee. Second, according to every serious analysis I have seen — preeminently those by Harvard Professor Kip Viscusi — cigarette taxes already vastly overtax smokers relative to their consumpstion of government-paid health care services. They are net contributors to the government in part because they die early and avoid Medicare, Social Security, and nursing home costs for which taxpayers would otherwise foot the bill. The Taxpayers League has compiled a handy fact sheet on the subject here.
You can read the news accounts for details on what the increased spending is going for, and what elements may be claimed by either side to justify the compromises. One element leaps out at me — an increase in the state-subsidized MinnesotaCare insurance program. According to the AP story, “no one who is currently eligible for the MinnesotaCare insurance program will lose those benefits, and a $5,000 annual cap on outpatient treatment will be repealed.” Higher taxes and more welfare would seem to be earmarks of victory for Democrats on issues about which they care most deeply.
John and I may disagree slightly on the political winners and losers here, but I think that Governor Pawlenty has sustained a significant loss in which his own preemptive surrender on the tax issue played a role. He appears to be demoralized and dispirited for reasons that are not entirely apparent to me. He also appears to be worn down from trying to hold together the tenuous Republican majority in the state House of Representatives as well as by the regular beatings administered by the Star Tribune.
As for the collaboration among the political class in its ludicrous denomination of the tax increase as a “Health Impact Fee,” the losers include the state as a whole, the language, and the truth, but the total cost has most assuredly yet to be tabulated.
JOHN adds: I haven’t had time to study the details of the agreement, and I don’t have any idea how it will play out politically. I would just make this observation: Two years ago, the state was faced with a multi-billion dollar budget deficit. Newly-elected Governor Pawlenty pledged to resolve the budgetary issues without a tax increase, and did so. In the end, the Democrats were pleading with the Republicans to increase a tax–any tax–simply so they could say that Pawlenty failed to live up to his pledge. But Pawlenty and the Republican House held the line.
This year, the state’s budgetary issues were trivial compared to what was faced two years ago. The difference lay in the political landscape. In 2003, Minnesota’s Republicans were still riding a rising tide. Not only had Pawlenty won an easy victory, but the Republican margin in the House was steadily growing and everyone thought it would take only an election or two for the Republicans to gain control of the Senate. The Democrats were reeling. Last November, however, the Dems made a comeback. Because (in my opinion) MoveOn.org and ACT fueled a turnout campaign that shook an amazing number of Democratic voters out of the bushes, the Dems gained, as I recall, 13 seats in the House, bringing them into a virtual tie with the Republicans. This left Pawlenty in a tenuous position. Inasmuch as he is only the state’s Governor, not its dictator, he felt that he had no alternative but to compromise with the Democrats. Arguably the resulting deal lowers Pawlenty’s grade as a fiscal conservative from an A+ to an A. But Pawlenty is very much one of us, and, I think, deserves strong support from conservatives notwithstanding our occasional disagreements on subjects like drug reimportation and gambling.
SCOTT responds: Governor Pawlenty is certainly not a dictator, and much more could certainly be said about the circumstances that have led him to break his promise. But broken it he has. For the moment, I would add only that the renaming rights Governor Pawlenty has exercised with respect to the cigarette tax increase are a comedic variation of the kind that dictators freely exercise, as George Orwell pointed out to great effect in 1984 and elsewhere.