THE IRON TRIANGLE

CHARLES J. SYKES

f there was one they are about to unmistakable man- run up against one Idate from the of the state’s most November election it entrenched institu- was: don’t raise taxes. tions: the Iron Triangle. won the governor’s chair back The Iron Triangle for the Democrats by The Iron Triangle saying that he would explains why spend- not raise any state ing and taxes are so taxes to close the high and so difficult state’s $2.8 billion bud- to cut here in get deficit. The public . apparently believed him. The other 55 per- One side of the cent who voted for Triangle consists of Scott McCallum and advocacy groups also and activists who voted for candidates have a vested inter- who said they wouldn’t raise taxes. And in the est in spending programs; the second side, legislature, the GOP racked up big majorities in government bureaucracies that run the pro- both the Assembly and the Senate, running on grams; and the third, the friendly news media a no-tax platform. that can be counted on for sympathetic stories about the victims of budget cuts. Underlining the anti-tax mood, a Wispolitics.com poll in late November found Here’s an example of how it works. that 83 percent of Wisconsinites say they are Legislators propose a 5 percent cut in an somewhat opposed or strongly opposed to agency’s budget. The bureaucrats select a high- raising taxes — 66 percent saying they “strong- ly visible, popular program to cut; the advoca- ly” opposed tax hikes. Eighty four percent said cy groups raise alarms about the damage the they were strongly supportive or somewhat cuts will cause, mobilizing supporters for hear- supportive of cuts in state spending. ings, letters to legislators, and rallies, often fea- turing people in wheelchairs; and the newspa- So are tax increases dead on arrival? pers and television stations highlight the Hardly.

Indeed, it will take an extraordinary act of Charles J. Sykes is the editor of WI:Wisconsin Interest political will for the new governor and legis- and a Senior Fellow of the Wisconsin Policy Research Institute. He also hosts a talk-radio show on AM 620 WTMJ in lature to deliver on their promises, because Milwaukee.

Wisconsin Interest 9 impending disaster, preferably with affecting Pommer then describes how the Iron stories of hungry senior citizens who will have Triangle will react to spending cuts: to sleep in the snow. Politicians back off. [BadgerCare] costs are running about $70 Cut school aid? The teachers union mobi- million higher than the current year's bud- lizes, threatening job actions; the educational get anticipated. . . . Any plan to significant- bureaucracy issues dire warnings; and the ly reduce Medicaid services would seem to guarantee demonstrations. Those demon- papers are filled with stories of children who strations certainly will include people in will have to learn math in storm sewers. wheelchairs and those using walkers. This Now multiply that by hundreds of pro- is the stuff of which TV crews dream. Few grams that will face cuts. members of the new Legislature have experienced this kind of lobbying effort. The University of Wisconsin system, for Arrayed against the wheelchair-bound example, found the money to grant a $91,000 a budget victims are “the lobbyists for the rich year raise to system president Katherine Lyall, and powerful who contend Wisconsin is a 'tax and it spends six figures a year for free hous- hell' based on the percentage of income being ing for UW chancellors. But when it is faced levied through taxes." with — as yet unspecified — budget cuts, the system reacts by targeting . . . students. Similarly, the operation of the Triangle was apparent in the Milwaukee Journal-Sentinel Even before Doyle came out with his bud- in December — in an article that began with a get UW’s administrators were warning of litany of pain and suffering: “larger class sizes, fewer programs and reduced services,” and several campuses Up to 4,400 disabled residents who qualify announced cuts in the number of students for job-training programs will be on wait- admitted. (UW-Whitewater and UW-Eau ing lists. Money to rent out-of-state prison Claire said they would cut the number of beds and provide health care for inmates is running out. The program that pays for freshmen admitted, while UW-LaCrosse health insurance for the working poor is warned many applicants that it wouldn’t $10 million short. The Natural Resources decide whether to admit them until they got Department needs $1.7 million to fight their budget numbers.) The plight of the vic- chronic wasting disease in the deer herd. tim-students made front-page headlines across the state, even as Doyle was picking his budget The media’s role in the Triangle will also team. be reflected in the Editorial Dance. Early sup- port for spending cuts will be followed by edi- The rule here is that the so-called “adver- torials decrying specific actual cuts in pro- sarial” press is seldom skeptical of the claims grams and services. Watch for the word “dra- of the budget “victims,” and can be counted on conian” to describe those cuts in the state bud- to portray their complaints in the most sympa- get. Not surprisingly, Republicans will come thetic light. An early example of the media’s under special fire for their “partisanship” and role in the Iron Triangle was Capitol Times their “mean-spirited spending cuts.” columnist/purveyor of conventional wisdom Matt Pommer who wrote darkly: By March, the “leadership” editorials will appear, calling on Governor Doyle and the In 2003 many in the Capitol will think that Republicans to recognize that their promises “forward” means slashing government not to raise taxes during the campaign were spending and absolutely not raising any “unrealistic” and “ill-considered” in light of fees or taxes. That will certainly be popular the magnitude of the fiscal crisis. among those who in the 21st century “are far from want.” The editorials will call on the governor and (Translation: Only the rich want politicians legislature to show “leadership” by breaking to keep their promise not to raise taxes.) those promises and raising taxes (which are

10 Winter 2003 never, ever referred to as “draconian”). ters at an Eminem concert. In 2000, Wisconsin Reneging on the no-tax pledge will be a sign of received about $181 per worker in investment maturity and “responsibility.” Generally, edi- capital, compared to the national per worker torial writers don’t applaud lying politicians, average of $2,613. but breaking one’s word on raising taxes is Despite that, the chorus urging Doyle to applauded as “courage,” and an indication of raise taxes is already getting louder. “growth” — words never applied to the much more difficult task of cutting spending and Capitol insiders sneer at the notion that the eliminating popular programs. budget deficit can be closed by spending cuts. Of course, many of those insiders have a vest- Tax Hell ed interest in maintaining current levels of This political/media dynamic helps spending, but they also shape conventional explain — at least in part — why Wisconsin has wisdom, which is slavishly repeated by pun- the nation’s third highest state and local tax dits, editorial writers and other commentators. burden. According to the Wisconsin Taxpayers Lobbyists, pols, and pundits-in-the know scoff Alliance, Wisconsin spends 29.5 percent more at the notion that Doyle really meant what he than the national average said, and sophisticated on higher education, near- opinion increasingly ly 20 percent more on ele- regards tax hikes as mentary and secondary inevitable — a “given.” schools, and 25.9 percent The Tax Drumbeat more than the national Capitol insiders sneer at average on transportation. Even before the elec- tion, a bipartisan group of During the 1990s, the notion that the insiders, including top spending did not simply budget aides to rise — it exploded. If state budget deficit can be and , politicians had simply closed by spending cuts. had begun lecturing the kept the increases to candidates that the bud- twice the rate of inflation, get could simply not be the state wouldn’t have a cut enough to close the budget problem at all. deficit. The group pro- Not only did they not posed $3.6 billion in new hold the line, they blew it taxes. Hailed in media away. accounts as the “grownups,” many of the At the same time the ability of Wisconsin authors had played key roles in the spending taxpayers to pay has been falling. Despite the increases of the last two decades, including above-average rate of spending, state wages Mark Bugher, former revenue boss in the are now 13.3 percent below the national aver- Thompson administration, Mike Ley, revenue age, and they have been falling relative to the secretary under Earl, former state auditor Dale rest of the country for more than 30 years. Cattanach, and several other high-level veter- ans of state government. Their plan would According to the IRS, Wisconsin’s per have trimmed the state income tax, but the capita wealth of $13,862 per person ranks us a reductions would have been more than offset pathetic 41st in the nation. We are, quite sim- by increasing the sales tax to 6% and scrapping ply, no longer the prosperous state we have many exemptions. long imagined ourselves to be. Every year, tens of thousands of college graduates leave the Their “insider” endorsement of new taxes state, joined by a growing number of retirees. has been echoed in an ongoing media/political Investment capital avoids us like Baptist minis- drumbeat:

Wisconsin Interest 11 Drumbeat: Journal Sentinel business colum- University of Wisconsin and other programs. nist Avrum Lank wrote that Doyle should deal “Yes, we're going to have to raise taxes, and with the budget in an “adult” manner and everybody knows it.” work with legislative leaders. Such an D r u m b e a t: Former Republican State approach,” Lank wrote, “will make it easier for Senator Joe Leean, a former co-chair of Joint all concerned when the final decisions on the Finance and member of Tommy Thompson's budget must be made: how taxes will be cabinet writing in the raised. Yes, raised.” says: Of course Doyle and the Republicans d i d Now that the election is over, political promise over and over again not to raise taxes, leaders can stop making promises that can- but Lank brushes off such trivialities. This was not be fulfilled. Both Republicans and boob bait for the bubbas. Smart people know Democrats in Wisconsin government have better. Even as the politicians were promising insisted the current budget crisis can be not to raise taxes, he wrote, “There was a resolved without tax increases for the next growing consensus among most of Wisconsin's two years. No way! leaders that, when all is said and done on the D r u m b e a t: Ignoring their own parties’ spending side, some tax increase will be neces- promises not to raise taxes, Democrat State sary to balance the next state budget.” In the Representative Wayne Wood and Republican end, Lank predicted, the only real contest State Representative Michael Lehman pro- between Doyle and the Legislature “will be posed raising the state sales tax from 5 percent over how taxes are increased.” to 7.75 percent (effectively raising tax to 8.25 D r u m b e a t: Pommer — again — in the percent for residents of counties with a .5 per- Madison Capital Times, writing that state offi- cent county tax) as a way of reducing school cials were expecting bad news on the size of property taxes. One catch is that this massive the state budget deficit, points out the real vil- tax shift would have been accompanied by lift- lains of the piece: ing the spending caps on local school districts, as well as the QEO. The self-styled right-wing radio hosts will be hovering like buzzards to see Doyle's D r u m b e a t: The Wisconsin Counties reaction to the bad news. Some of them Association has also chimed in with a proposal may suggest that a 15 percent budget prob- to raise the sales tax by $745 million by remov- lem could be easily solved by cutting all ing dozens of exemptions to the sales tax. A programs by 15 percent. Of course, the spokesman for the group even provided the state won't reduce its prison population by spin: “The governor can talk about this as a tax 15 percent or cut Medicaid, facing large growth, by 15 percent, etc. etc. increase, but we see it in terms of tax fairness.” In other words, the problem here is not D r u m b e a t: John Huebscher, the executive that politicians may renege on their promises, director of the Wisconsin Catholic Conference, but that nasty talk shows hosts may actually insists that spending in the state is not too try to hold them to their word. high, nor are taxes. D r u m b e a t: Democratic State Senator Bob If a Catholic was asked to cite an example of a parish that sets a good example for the Jauch, D-Poplar, did not even wait until the rest of the diocese, one might point to a numbers were out to declare that they were a parish community whose members, clear sign that taxes had to be raised. "I think though not blessed with as many financial reality sets in (today),'' Jauch said. “The worse or material resources as other places, give the news is the more justification there is to freely of their gifts to make the parish a take dramatic action.” Jauch says a tax boost is vibrant community where the total is more the only alternative to what he says are “stag- than the sum of the parts. gering” cuts in corrections, Medicaid, the

12 Winter 2003 “Not unlike our state of Wisconsin,” he tively) for inflation.” It goes without saying, added. (Except for the giving “freely” and the Kraus insists, that “fees — particularly user "vibrant community" part, of course.) fees — are not taxes.” (Wink.) Temptations Everyone knows that the cost of things for which fees are collected has gone up over As pressure builds on policymakers, they the years. The cost of services and goods will be tempted to finesse the budget/tax issue sold and provided by the private sector go in two ways: spin and budgetary gimmickry. up due to inflation alone. Why not public There is, of course, no shortage of options. sector goods and services too? Obviously this is not a tax increase; it's simply re-pric- Some of the most plausible — and cynical ing fees and services to compensate for the advice — on rhetorical sleight-of-hand comes ravages of inflation. from former gubernatorial aide Bill Kraus. A member of the board of Common Cause, No increases here. Just “repricing.” (Wink.) Kraus was an aide to former Governor Lee Kraus paints a semantic roadmap for Dreyfus, and represents a certain wing of the politicians who want to weasel out of their Republican Party. commitments. “Other Kraus suggests that words will creep into our state politicians get vocabulary as the winners around their silly promis- of the 2002 election begin es not to raise taxes simply As pressure builds on to find their way out of by using what he calls, policymakers, they will the ‘no-tax-increase’ cor- “semantic gymnastics.” ner they painted them- selves into. ‘Loophole “Start with the theory be tempted to finesse the closing’ is one which that revenues can be budget/tax issue in two brings our sense of fair- e n h a n c e d without taxes ness into play. A less being raised,” he sug- ways: spin and well-known word and gests. concept is ‘holiday,’” by An example of some- budgetary gimmickry. which the former aide thing that would means raiding the pen- “enhance” revenues is sion fund. an extension of the sales And last, but far from tax to transactions and items that are not presently subject to that least, is “tax transfer- tax. Maybe the un-sales-taxed accountants, ence,” simply shifting taxes to local units of lawyers, advertisers, and other service government. Even though taxpayers would providers or their customers would “pay end up paying more taxes, Kraus notes that more taxes.” politicians can plausibly deny that the But, Kraus hastens to add, this is not really increased taxes are actually tax increases. a tax increase. Indeed, “for most of us, this is “The sum total of all of these semantically merely a long overdue extension of something correct revisions,” concludes the guru of politi- that a lot of us have been paying for years.” cal virtue, “could get rid of the deficit, reform Another Krausian scheme: make the prop- the tax system, keep Wisconsin services at erty tax that goes to the schools a state instead Wisconsin, as contrasted to Mississippi, levels of a local tax. “This is definitely not a tax and all without a ‘tax increase.’” increase. This merely reroutes an existing tax.” Smoke and Mirrors And how about fees? Surely, Kraus writes, Another alternative to actually cutting “they should be indexed (maybe even retroac- spending is budgetary smoke and mirrors.

Wisconsin Interest 13 One iron law of politics is that anytime there is helped the governor and legislature appear to a pile of cash left lying around in the reach of present a balanced budget, but it also saddled politicians, they will try to grab it and use it for taxpayers with massive new obligations. At their own benefit. A case in point was the the time, the tradeoff seemed safe because the tobacco settlement money. All of those billions stock market had performed so well, but the of dollars may have been intended for health fund’s losses — it’s down $12 billion since 1999 programs, but they were just too much for leg- — have meant that taxpayer exposure has islators to resist. Last year they used every sin- grown exponentially. gle cent to take themselves off the hook. But the larger problem is the politicians’ There is an old story about a frog that near allergy to making hard decisions and gives the scorpion a ride on his back across a their addiction to gimmicks. The pension raid river. Halfway across, the scorpion stings the is being considered for only one reason: politi- frog, assuring that both of them will drown. cians of both parties have no experience of and “But why?” the puzzled frog asks. “It’s my little stomach for reversing state government’s nature,” answers the scorpion. decade-long spending binge. The pension raid would give them an excuse to once again Faced with a massive budget hole, the gov- avoid cutting spending in any meaningful ernor and legislature had to choose either to way. raise taxes or cut spending. Instead they grabbed the cash. It’s their nature. But it’s an idiot’s bargain: the state would keep spending money it will eventually have For a decade or more, Wisconsin’s gover- to pay back with interest. Even so, pressure to nor and legislature have avoided having to pull another gimmick will intensify as opposi- make hard decisions on spending, first relying tion to spending cuts grows. on a booming economy, then by hedging and fudging with similar budget gimmicks. Warnings Even though the faces are new, their Governor Doyle and the legislature have a nature hasn’t changed. So it’s not surprising dual job: they must not only fix the state bud- that some politicians have cast a lean and hun- get, they must also find a way to keep gry eye on the state’s $52 billion pension fund. Wisconsin from slipping to an even lower cir- If the raid of the tobacco settlement was the cle of tax hell. Mother of all Gimmicks, the pension raid In the end, though, the political calculus would be the Father. In fact, they’ve already may trump the economic calculus. Lest they pulled one heist. yield to the editorial blandishments, legislative Back in 1999, the governor and legislature Republicans need to remember the fate of squeezed out some short term savings in George “Read my lips” Bush. Jim Doyle needs return for dramatic increases in benefits to to remember Tony Earl. state and local employees, including elected The stakes for the governor are hard to officials. Those fattened pensions will eventu- overstate. If Jim Doyle manages to close the ally have to be paid for, and local governments deficit without raises taxes (or resorting to are already facing significant property tax gimmicks like a pension fund raid), he will increases just to cover their higher pension probably be governor for a good long time. contributions. If he reneges on his promise, he’ll be a one- The 1999 deal boosted pensions by 8 to 10 term governor, no matter what the chatterers percent in return for letting the state skip mak- say. ing contributions for a couple of years. In return for a two-year “contribution holiday,” the governor and legislature shifted $4 billion to pay for the fat new pension benefits. That

14 Winter 2003