Minnesota Government shutdown suspends childcare assistance

Note: If you closely follow politics in Minnesota go ahead and skip the next two paragraphs.  If not, tune in and I'll explain some of the shenanigans that have been going on in this frozen, god-forsaken state...

In Minnesota's last election, Republicans took control of both the state House and Senate, while the Democratic candidate Mark Dayton was elected Governor - somewhat similar to the US's national government, but with the Republicans controlling the Senate as well as the house.  Unlike Obama, Mark Dayton came out with a strong budget proposal that would balance the state's budget with two thirds spending cuts and one third tax increases on the wealthiest 2% of Minnesotans (click here for excellent op-ed by Dayton explaining his position).  Republicans rejected this of course, though one would think they had already won with over half of the budget being balanced with spending cuts. The problem with that sentence is the word "think" - there's been altogether too little of that by anyone lately.

Anyway, Dayton and Republican leaders couldn't agree on a budget before the deadline, so the state government has shut down!  Governor Mark Dayton named a list of services that are considered "essential" that would continue during the shutdown, and all other state government functions would stop(which begs the question: If something is not "essential" then why do it in the first place?  But again, pretty much nothing in this whole mess makes SENSE.)  Child care assistance was not on the list of essential services.

Some background is in order on the Childcare Assistance Program, for those who are not in the know.  The Minnesota Department of Human Services' Child Care Assistance Program (commonly referred to as CCAP) pays tuition for over 100,000 low-income children in Minnesota.  These families rely on the program to pay for childcare so that they can go to work.  Without these payments, many families will not be able to afford high-quality childcare (which as I have mentioned here, here and here is extremely important!).  They will be forced to either get unlicensed childcare, which is at best less educational and structured than licensed programs, and at worst dangerous and neglectful of children, [Note: See comments for discussion of this sentence] or quit going to work - a terrible choice that no one should have to make.

In addition, family child care providers and childcare centers are both left not knowing what will happen with their CCAP families.  Many do not have the cash on hand to withstand a prolonged shutdown, and will have to close if there is not a compromise soon.  I personally have worked with providers that have a majority of their children on CCAP, and some childcare centers are almost all CCAP children.  Click here for an article from the Saint Cloud times (hat tip to Anna for the link) about what family childcare providers are going through.

There's some hope on the horizon, as Dayton has now asked that childcare be added to the list of essential services, but no one knows what the Judge will rule (link here).  The Republicans refuse to raise anymore money from at all from millionaires and billionaires, no matter who is hurt.  Sometimes I feel like Will Ferrell in Zoolander:

Around the blogs: Is econ. a discipline?, Tim Pawlenty is an idiot, and the bystander effect

First, check out this blog post by UC Berkeley economist J. Bradford Delong about the Chicago School of Economics.  Neoclassical / "Chicago School" economists believe that the economy is in a long-term equilibrium, with any unemployment simply the result of a shock that hasn't been adjusted to.  No government action is required to manage the economy.  Keynesian economists believe that as people's spending habits change, the economy will have natural peaks and valleys, and that government action is needed to help the economy out of recessions.

You might think that the The Great Depression and the current recession alone would be enough to prove the Chicago School wrong, and they would have long faded into the background.  In a sane world, they would have!  But as the book Zombie Economics details, some ideas just won't die...

Next, go on over to my favorite columnist Paul Krugman's post here.  Tim Pawlenty, former MN governor, is running for president and decided recently that he'd talk some shit about monetary policy.  Paul Krugman takes him to task - here's the money quote:

Now, it’s perfectly clear, even from that small bit, that Pawlenty has absolutely no idea what he’s talking about

Love it.

Finally, click here for a sweet video about the bystander effect over on the Nudge blog (expanded from the book Nudge, which is a great read).  The bystander effect basically states that no one offers help during an emergency when lots of other people are present.  Interesting that it could also apply to things other than emergency help, such as picking up litter.  By the way, if they did that experiment in my neighborhood, all those people might have to wait a couple decades for their trash to get picked up...

Education and Transportation, or lack thereof

Warren Buffett makes it rain!  Read on to see why I posted a picture of  Buffett...

I was reading the Star Tribune, and I saw a few articles that caught my attention.  On the same page of the paper, there was an article about how the Republican-dominated MN Legislature wants to cut the state's higher education budget and the K-12 and Pre-kindergarten budget. (Sidenote: The higher ed bill is sponsored by Michelle Fishbach, no relation to Michelle Bachman.  What is it with this state and people named Michelle bach-something?)  Now, this was not in today's people, but these same Republicans also also want to cut funding for public transportation.

Never mind that the wage gap between educated and uneducated workers is increasing.  Never mind that education in schools is supposed to prepare the next generation of workers.  Never mind that early education provides the highest return on investment of any public spending.  Never mind that the University of Minnesota's research helped create Minnesota's thriving Medical devices industry.  Never mind that public transportation system allows people to get to work and contribute to the economy - and is in fact supported by businesses!  No, these things aren't important, right?

Republicans say that cuts such as these are necessary to close the state's $5.1 Billion deficit.  Horse shit.  What we need to do is reform the tax code so that the wealthy pay their fair share.  By his own admission, Warren Buffett pays a lower percentage of his income in taxes than his secretary does.  Buffett even bet $1 MILLION that no Fortune 500 CEO pays a higher percent of their income in taxes than their receptionist.  So far no one's taken his bet.  And over in New York, billionaire residents of a luxury building pay more than their janitors.

Why does this happen, you ask?  Well for starters, much of wealthy people's income is capital gains, which is taxed at 15% no matter how much money they make.  In addition, hedge fund managers are often allowed to defer their income, allowing them to earn compound interest on his money before paying taxes.  Don't ask me why on that one.  Rich people like Buffett also can take advantage of all the deductions in our tax code - mortgage interest, business travel, etc.  In addition, though Federal Income tax is generally progressive, state and local taxes are heavily regressive - the poor pay a much higher % of their income on sales and other local taxes.

Well, that was a long post, but if you're confused just remember this:

We can afford and must provide good public education and transport services - we just need billionaires to pay their fair share of taxes!

Economics in the News: Early Education bill is introduced in MN Legislature

I was surprised to see this article in the normally conservative Twin Cities paper the Star Tribune the other day.  The Minnesota Legislature is introducing an bill that plans to restructure how the state spends its $400 million early education funds.  Impressively, the bill has bipartisan support and will likely pass.

The article does a good job stating the need for this money - in Minnesota, half of children are not ready for kindergarten at age 5, and like I mentioned in this post, preschool/head start programs generate a 16 to 1 return on investment over time.  Just think about that!  16 to 1!  As in every $1 that we invest eventually earns $16.

So how much of the state's budget is devoted to early education spending?  Less than one percent.  And this bill, though it does help increase quality child care programs and access to childcare for poor people, does not increase the amount of spending.  In Kurt Vonnegut's words, So it goes...


PS. I am doing my taxes, and it looks like I'll be getting $300 as part of the extension of the "Bush Tax Cuts" / Bush Spending on Rich Motherfuckers and Corporations (BSRMC).  Yeah, that's right, I just made that an acronym.  So I should be happy I get this $300, right?  Well, seeing as the BSRMC will cost $3.7 TRILLION over the next 10 years and there are 300 million people in the US, 3.7Trillion/300 million/10 years = $1,233.  The way I see it, W. owes me about $900.  I accept personal checks and/or cash.  Oh, and the BSRMC did not stimulate the economy, either.

Lil wayne says it best:

Mark Dayton's Minnesota budget: Taxes

Several days ago, Minnesota Governor Mark Dayton, (who did NOT take six months to be sworn in, - I'm looking at you, Al Franken!)  released his proposed budget for the state of Minnesota.  Here's a summary of his budget:

• Through increased income tax and property taxes, the richest 5% of Minnesotans will pay an additional $4 billion
• Education: Increased funding for K-12 education by $37 million, mostly to fund more full-day Kindergartens
• Early Education: Funds a quality rating system for early child educators
• Health Care: Eliminate eligibility for MinnesotaCare for people making over $20,000 and raise the surcharge on health care providers
• State Agencies: Reduces state workforce by 6%
• This is not a part of the budget, but Dayton is also proposing $1 billion for new public works and construction spending.

Keep in mind that Minnesota currently is $6 billion in debt, and Republicans currently control both houses of the Minnesota legislature.  Since it's getting late, tonight I'm only going to talk taxes.  I'll try to make some more posts in the coming days about the other parts of the budget.  So here goes:

I have to give credit to Dayton for having the guts to raise taxes, which is never a politically popular move.  Despite what republican politicians say, lowering taxes is among the least effective ways to stimulate the economy.  For proof, check out this table from the nonpartisan Congressional Budget Office!

As you can see, tax cuts to lower/middle income people come in with a multiplier of .6 to 1.5, tax cuts to high-income people have a multiplier of .2 to .6, while on the high end "Purchases of Goods and Services by the Federal Government" has a multiplier of 1 to 2.5.

So what do all these multipliers mean?  Basically, if you want to stimulate the economy in the short run (which god knows we need right now...), a tax cut is among the least effective ways to do it, while increasing government spending is the best!  In addition, it's hard to argue that the richest 5% of Minnesotans will be seriously hurt by a tax increase.  Cry me a river, and buy one less yacht.......