Tuesday, March 13, 2007

Republicans ignore Wall Street warning, still insist on cuts alone to solve budget crisis

It appears we are headed for a showdown.

Standard & Poor's (reg req) threw a little gasoline on the fire yesterday with an ominous but hardly unforeseen report that our credit rating will be downgraded if we don't get our act together soon.

Time is of the essence for Michigan, currently the only state with a negative credit outlook, to address its budget woes, Standard & Poor's Ratings Services says today in an article titled "Credit FAQ: Prompt Action Is Key To Improving Michigan’s Credit Outlook."


"From a credit perspective, this is probably the most important legislative session in more than a decade," says Managing Director James Wiemken, who adds that "Michigan's credit outlook could be revised to stable if the legislature passes a tax reform package and addresses the remainder of the structural imbalance in the fiscal 2008 budget."

Basically, Wall Street wants our finances on stable footing. Right now. They see a brighter future, but only if we address the uncertainty of the revenue stream. "Growth" alone, that magical thing promised by the Republicans if we just throw those folks off of Medicaid and give more tax cuts to the rich, won't do it.

Observing that "Michigan's economy remains soft," the article notes that "long-term forecasts for the state remain stable to somewhat encouraging."

"Michigan cannot simply grow its way out of this fiscal crisis," says Mr. Wiemken.

Granholm's proposal is the only thing keeping us from being downgraded right now, according to the AP.

It notes that the ratings company has not downgraded the state even further in the face of a $900 million shortfall in the current budget and a $1 billion deficit in the next because the Granholm proposal addresses the state's structural deficit in the next budget year and "moves the state's revenue base over a broader and more stable part of the economy."

"If the state passes a tax reform and budget package that addresses the current imbalance in a timely manner, the outlook could return to stable," the report said. "By failing to place the service tax (or some other measure that creates sustainable balance) in working order by June 1, the state could render substantial parts of the two-year recovery plan insufficient."

Get some money coming in. By June. Or face the consequences.

Everyone get that? How about you, Mr. Bishop?

"This Standard & Poor's report is a reminder that the governor should take very seriously our idea that 2007 should be balanced with cuts, and then we can turn our attention to 2008," the budget year that starts Oct. 1, Marsden said. "It's another reminder that we need to act now and that every day further jeopardizes our bond rating."

Perhaps Bishop's mouthpiece Matt Marsden can't read. The report clearly said "sustainable balance". According to the Detroit News, the report says that cuts alone won't turn the trick.

The report says if Granholm's tax increase plan isn't adopted soon, substantial budget cuts would be necessary.


If such a large amount of cuts that late in the year is even possible, they aren't likely to be very palatable and they may not be sustainable," according to the report.

"Cutting taxes or providing economic incentives for businesses is not going to create revenue to address the current shortfall."

Republicans are misrepresenting this report as they still insist on cuts, even in the face of their own big business allies, that being Wall Street, telling them otherwise.

At this point it starts to look like purposeful obstruction, obstruction that will cost the state an untold amount of money. How else can you explain it? They know what needs to be done, they refuse to do it, even in the face having to spend more money, something they claim they are trying to prevent.

The state borrows slightly more than $1 billion each year because of cash flow difficulties that usually crop up in late summer. Treasury officials said they can't estimate how much a credit downgrade would drive up borrowing costs.

So, let's add up the Republican response to our very real crisis.

They ignore the warnings of Wall Street, which might cost us a fortune. They are afraid to produce this list of cuts which might have a catastrophic impact on schools, health care or public safety. Apparently they will not compromise on these cuts, insisting they happen before they even consider the budget for 2008. The Michigan Chamber of Commerce and the Michigan Realtors are running a commercial that looks like it came straight out of the leftovers from the DeVos campaign; childish graphics and the same 'ol out of context clips of Granholm speeches, so eerie that it might produce flashbacks among the people who were traumatized by all the advertising last year. (Ed. note- like me)

And to top it all off, Craig DeRoche is going to try a little stunt in the House.

The tax plan may get its first test today in the Legislature, where House Republicans hope to force a vote on whether it should be taken up immediately. Minority Leader Craig DeRoche, R-Novi, said he doesn't believe it has enough support from Democrats to be approved.

Dan Farough, a spokesman for majority Democrats in the House, said DeRoche's move was "political theater designed to cover the fact that they don't have a plan."

Apparently the only plan they have is to delay, deny, play games and obstruct any progress that we might hope to achieve.

Hope the Governor and the Democrats stand tough and start calling them out. Republicans are running around trashing this plan, trashing the Democrats, trashing our very future while refusing to take any responsibility for the mess they created or present any of their own plans for solving this crisis.

It's time to point that out. If we let them get away with this behavior this time, they will keep pulling this trick and it will be a very long four years indeed.