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Governor Pawlenty, You're No President Obama

February 13, 2009 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

No one is surprised that Governor Pawlenty is opposing any increase in state taxes to address the state's whopping $5.5 billion revenue shortfall. However, what is surprising is that the Governor is attempting to wrap himself in the mantle of President Obama's new administration in doing so.

It is certainly true that President Obama has temporarily refrained from significant tax increases while the nation is in the depths of the worst recession in recent memory.  However, in comparing his policies to those of our new president, Governor Pawlenty is overlooking a crucial distinction between the federal and state budget situation.  Unlike the federal government, the state of Minnesota cannot run up huge deficits.  The only option available to the state is to cut spending or increase revenue.

As previously noted, many prominent economists, including Nobel prize laureate Joseph Stiglitz, have argued that cuts in direct government spending are more damaging to a state's economy than tax increases.  Given the choice between direct spending cuts and tax increases, the route that is least damaging to a state's economy are tax increases, particularly if those tax hikes are concentrated on high income households.

Since Governor Pawlenty is fond of emulating President Obama, he should note that the president is not cutting government spending, since that would lead to even more job losses and deepen the economic pit we are in.

A massive increase in government investment here in Minnesota is not a feasible option given the requirement to balance the state's budget.  However, the Governor can and should avoid the flawed strategy of emphasizing spending cuts to the exclusion of tax increases.

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