In the St. Paul Legal Ledger, Dane Smith, President of the progressive think tank Growth and Justice, chops at some trees without realizing he is in a forest. He uses Gov. Pawlenty’s statement that he (Pawlenty) didn’t know of any economists who favored raising taxes during a recession as the take-off point for a column advocating tax increases front and center for resolving the current budget crisis.

Smith tells us he took “a few minutes” to search the Internet, for support rather than illumination it turns out, and consequently he comes up with a number of economists – “credentialed and even celebrated” – who favor raising taxes during a recession. Take that Gov. Pawlenty!

Unfortunately, Smith’s random chopping away at the governor doesn’t create much of a path through the forest of implications growing from the current budget crisis. Smith’s short-term focus precludes any discussion of reform necessary for long-term financial stability of the state budget – the more important question.

Take for example Smith’s analysis, or rather lack thereof, of Nobel Prize-winning economist Joseph Stiglitz’s opinion regarding reduced spending versus tax increases as means to solving state budget problems. Stiglitz writes (emphasis mine) ““Tax increases would not in general be more harmful to the economy than spending reductions … The conclusion is that, if anything, tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run. Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”

Let’s look at the assumptions in that paragraph, which Smith ignores.

Painfully missing is the question of how we got into this budget mess in the first place. How can we solve a problem if we ignore its genesis? The poor economy is the spark that ignited the budget deficit, true, but the powder was a progressive governing philosophy that consistently expanded both the scope of government and the number of Minnesotans eligible for government programs.

The first question for policymakers, one which was ignored resolving the 2003 budget shortfall (and for which the governor can be justly criticized), is whether the objective is simply to solve a current budget deficit in the short term, or is the objective to make systemic reforms that increase the stability of the state budget in the long term.

In that context, Stiglitz may well be correct about the relative harm to the economy from tax increases compared to spending cuts in the short term, but that opinion contributes nothing to the question of whether the short-term strategy is the best approach to the budget crisis. Note Stiglitz’s language choice — both tax increases and spending reductions are described in negative terms (emphasis mine). “Tax increases would not in general be more harmful to the economy than spending reductions,” but both would be harmful.

It would seem if one finds oneself in a position where one must choose the lesser of two evils, one might want to give some consideration to correcting the situation in the long term rather than just opting for a short term fix. Better to cure one’s addiction than simply securing the next hit.

A second assumption, or rather an impression that Smith creates, is that “lower-income families” means the “poor and the destitute.” Not necessarily the case: The deficit we face today results from not just the expanding scope of government; it is also exacerbated by the expanding breadth of existing programs from “safety net” to “entitlement” status.

For example, under a special waiver, the federal government funnels funding for its health care programs to the state  – the State Children’s Health Insurance Program (SCHIP), Medicare and Medicaid) — through MinnesotaCare. Minnesota officials reallocate those funds. Minnesota has used consolidated funds to extend SCHIP coverage to families with higher incomes than SCHIP requirements allow. When federal officials balked at that plan, state officials agreed to abide by SCHIP funding requirements but shift the ineligible adults to the state’s Medicaid program – in effect extending Medicaid eligibility to people who don’t qualify for the program.

The rationale for SCHIP is that it serves people with incomes too high to qualify for Medicaid. Essentially, Minnesota has extended the “safety net” to people ineligible for either SCHIP or Medicaid. As Smith no doubt does, one may see conversion of targeted safety net programs to entitlement status as a humane societal response to economic conditions. However, that governing philosophy also has a cost, and it is contributory to the state’s current deficit problems.

The point is, whether a health care or an education or other government program, much of government expansion has resulted in expanding the notion of entitlement and increasing the number of people dependent on government programs. Certainly, cuts to those entitlements would be painful to individuals and possibly retard the economy in the short term as family budgets are adjusted. But long term, is it in the best interests of Minnesota (not just the DFL party) to continue to expand the number of people dependent on government assistance (paid by taxpayers)? Is it creating a class of people dependent on others to pay for a better Minnesota a sustainable strategy?

Smith goes on in his opinion to quote other economists favoring a “balance” of tax increases and spending cuts to resolve the budget shortfall with the same disregard for analysis of the assumptions underlying their positions. “Balance” has a nice ring to it, but as I have written before and will write again, before we can have any discussion of “balance,” we must understand the kind of governing process we want to have going forward.

Do Minnesotans want to trade their disposal income and freedom of choice for a plethora of monopolistic but “free” government services? Or do they want to retain the freedom of choice, manage their own lives at their own risk and cost but reap and retain the rewards of their efforts?

Answering that question requires a little less Googling and a little more analysis that Smith expends in his column.