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How well did Obama-style tax hikes on the rich work for Illinois?

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Central United States
Central United States

From the Wall Street Journal.

Excerpt:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

Though too few noticed, this month Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. The state’s cost of borrowing for $800 million of new 10-year general obligation bonds rose to 3.1%—which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially secure states.

This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating.

So much for that. In its downgrade statement, Moody’s panned Illinois lawmakers for “a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.” An analysis by Bloomberg finds that the assets in the pension fund will only cover “45% of projected liabilities, the least of any state.” And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

It’s worth contrasting this grim picture with that of Wisconsin north of the border. Last winter Madison was occupied by thousands of union protesters trying to bully legislators to defeat Republican Governor Scott Walker’s plan to require government workers to pay a larger share of their health-plan costs, and to shore up the pension system by trimming future retirement liabilities. The reforms passed anyway.

In contrast to the Illinois downgrade, Moody’s has praised Mr. Walker’s budget as “credit positive for Wisconsin,” adding that the money-saving reforms bring “the state’s finances closer to a structural budgetary balance.” As a result, Wisconsin jumped in Chief Executive magazine’s 2011 ranking of each state’s business climate—moving to 17th from 41st. Illinois dropped to 48th from 45th as ranked by the nation’s top CEOs.

And in Ohio, Republican Governor John Kasich also saw success.

Excerpt:

Ohio’s new fiscal responsibility is getting noticed and rewarded.

Standard & Poor’s upgraded the state’s credit forecast from “negative” to “stable,” in time for a $417 million bond sale last week to refinance at a lower interest rate and restructure debt.

Ohio’s lean budget will pay off with lower costs for borrowing, saving taxpayers as much as $1 million or more over the course of a year, according to the state’s Office of Budget and Management. It’s like having a credit-card company lower its annual percentage rate: The borrower can either accelerate the payoff or spend the savings elsewhere.

So essentially, cutting state programs spared money for state programs.

This is vindication for the Kasich administration. When Gov. John Kasich took office this year, the state was $8 billion in the hole and its rainy-day fund totaled $1.78. That’s not a typo; Ohio barely had enough in the bank to buy itself a cup of coffee. A small one.

[…]Investors pay attention to these ratings, especially since Ohio stands out as other states continue to struggle. “There are a lot of jitters in the credit market; I can’t imagine it won’t be helpful,” said Robin Prunty, primary credit analyst with Standard & Poor’s.

[…]Most states still are struggling with the economic recovery and phasing out one-time money from the federal stimulus program that Kasich’s predecessor used to paper over the deficit. S&P’s revised outlook reflects its view that Ohio’s economy “is steadily recovering.”

“The outlook revision reflects the state’s progress in moving toward structural budget balance through fiscal 2013 and the modest economic recovery under way,” its report says.

Republican tax policies work, and Democrat policies don’t. Taxing the rich sounds good, but it doesn’t help the poor. To help the poor, we need to encourage people with capital to risk it by engaging in enterprises for profit. That is what causes workers to be hired and wealth to be created – forming valuable products and services through ingenuity and labor.  Workers who build skills and experience while working have more confidence and can be more productive, making them more free because they can succeed independently of government handouts.

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Republicans pushing to rescind Democrats’ $100 billion EU bailout fund

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Here’s a shocking story from Matthew Boyle of the Daily Caller.

Excerpt:

When California Democratic Rep. Nancy Pelosi was the Speaker of the House in 2009, President Barack Obama and congressional Democrats authorized $100 billion in spending as a line of credit for the International Monetary Fund to be used in times of emergency — funds that could now be used to bail out European banks.

As the Eurozone takes a turn for the worse and chatter heats up about more European Union and IMF bailouts across the continent, Republicans in Congress are pushing to rescind the $100 billion set-aside.

That $100 billion is an addition to the $64.4 billion the U.S. Treasury will provide in quotas to the IMF this year. That new funding has not been formally appropriated, but the IMF could request the money whenever it pleases.

[…]McMorris Rodgers is leading the charge, with more than 80 House Republicans, to rescind that line of credit before the IMF takes any more of it. She told TheDC that IMF officials confirmed to her that about $6 billion of the $100 billion has been used to help bail out Portugal, as well as St. Kitts and Nevis, a small Caribbean country.

[…]Europe has fallen into dire financial straits as of late. Just last week, the continent saw several of its countries hit with credit downgrades. Though Greece has received the most attention, McMorris Rodgers warns that Greece is just the beginning of what could be a larger and more out-of-control downward European spiral.

“I think it’s important to recognize that Greece — all the eyes have been on Greece — Greece is a relatively small country,” she said. “You’re talking two percent of the European Union, 11 million people, and yet there’s already been over $300 billion in bailout funds made available to Greece through the European Union and the IMF. That’s more than their entire GDP.

“So, if they [the EU and the IMF] were to continue down that trend, the amount of money we could be talking about is just off the charts.”

As vice chair of the House Republican Caucus, McMorris Rodgers is the highest-ranking Republican woman in Congress. She has sponsored a bill that would rescind the extra bailout funds and use them for deficit reduction. South Carolina Republican Sen. Jim DeMint has already gathered more than 20 co-sponsors for the Senate’s version of the legislation.

The U.S. Treasury ordinarily has about $65 billion set aside for international banking emergencies, an IMF credit line that’s already been tapped. Without any approval from Congress, Geithner promised the IMF in an official statement that he plans to double that $65 billion quota.

“Our current quota is about $65 billion and now, so, that raises the question: ‘How are you going to pay for that [doubled quota], Mr. Secretary?’” McMorris Rodgers said.

Bailing out the EU? But we have our own debts to worry about.

Thanks to Obama’s trillion-dollar deficits in 2009, 2010 and 2011, the United States’ gross debt is now more than our GDP. After Obama gets his $1.2 trillion debt limit extension approved, our new credit limit will be $16.3 trillion – which is 107% of our annual GDP. When Obama took office, our debt was at $8 trillion.

How bad is bad?

Greece’s debt to GDP ratio is about 160%, which is higher than America’s 107% ratio – but ours is rising. We can look at Greece and see what is in our future if we don’t fix things now.

USA Today explains how this debt crisis is affecting ordinary Greek citizens.

Excerpt:

Unable to pay off its loans, Greece has been forced to slash its spending and public benefits, raise taxes and rely on bailouts from the wealthier EU nations. Though its new prime minister says the country has a pathway to recovery, Greeks say they aren’t hopeful about a change in their lives anytime soon.

Higher taxes, high unemployment and little economic growth added to reductions in services and pensions that have been part of the attempted solution to Greece’s financial ills have forced people to the brink who have never been there. Greeks have been taking to the streets to protest the changes. The government this week said that 1,580 demonstrations had been held in Athens this year.

“After 34 years of work, I can’t get a pension; I need at least four more years of work,” Katsikadakos said. “Plus, I have to pay 450 euros every month to the state for health insurance and social security, just because I own a company, even when I have zero income.”

About 183,000 businesses will shut down by summer, according to a new study from the General Confederation of Professional Craftsmen. The study expects that 100,000 of those will close in the next month or two, leaving hundreds of thousands of people jobless.

One out of four small- and medium-size-business owners say it’s possible they’ll declare bankruptcy in the next year, according to a recent state survey. If true, it would mean 320,000 lost jobs.

[…]Taxes to pay for the public sector and an expensive pension system have been high. Three new taxes have been added since 2009: a self-employment tax of 300 to 500 euros, a solidarity tax of about 1% to 5% of one’s income and a real estate tax.

This is bad, but what is worse is the effect of this debt crisis on young people in Greece – they are the real victims of their parents’ pattern of voting for the Greek socialist party over and over and over again – with predictable results. Youth unemployment in Greece is now near 50%. The young people are the ones who are having their futures ruined because of the voting choices of their parents.

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Why are gas prices so high? 11 more Solyndras in Obama’s energy program

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Hans Bader reviews Obama’s energy plan.

Excerpt: (links removed)

A liberal Congress must share the blame for this fiasco, since the massive $800 billion stimulus package it passed in 2009 funded these boondoggles. As a Solyndra stakeholder exulted, “there’s never been more money shoved out the government’s door in world history.”  But as the Washington Post noted, energy programs were “infused with politics at every level” under Obama.  His Administration hastily approved subsidies for Solyndra, whose executives are now pleading the 5th Amendment, despite obvious danger signs and warnings about the company’s likely collapse. (Later, federal officials successfully pressured Solyndra to delay its announcement about upcoming layoffs until just after the 2010 election, to avoid embarrassing the Obama Administration).

The Obama Administration also used green-jobs money from the stimulus package to outsource American jobs to countries like China: “Despite all the talk of green jobs, the overwhelming majority of stimulus money spent on wind power has gone to foreign companies, according to a new report by the Investigative Reporting Workshop at the American University’s School of Communication in Washington, D.C.”   As the Investigative Reporting Workshop noted, “79 percent” of all green-jobs funding “went to companies based overseas . . .In fact, the largest grant made under the program so far, a $178 million payment on Dec. 29, went to Babcock & Brown, a bankrupt Australian company.” (The stimulus package also funnelled money to left-wing community organizers and liberal lobbying groups.)

What does it mean to you when Obama takes money from consumers and business owners in order to spend, spend, spennd on his campaign fundraisers and other beneficiaries of “green energy”?

Click here to see a graph of gas prices from January 2009.