Search This Blog


Blanco likely to emphasize politics in veto choices

Is there really much doubt that Democrat Gov. Kathleen Blanco will veto few, if any, tax break bills passed by the Louisiana Legislature that go into effect before or after Dec. 31, 2007? Because for her it is all about a “legacy” first, her party’s fortunes second, and the state’s fiscal health last.

In the waning days, even hours, of the just-concluded regular session, a number of bills were passed grating tax breaks that would take effect only after Blanco was out of office. Why don’t they take effect for 2007, if they are so laudable? Because Blanco decreed that she would wield a veto pen to prevent more being taken than $150 million in tax cuts, out of a budgetary surplus of $3.5 billion in a budget that ended up spending about $32 billion. She later averred that she would accept about $180 million and the best estimate that exists for the actual amount applied for this year is $189 million.

But including all tax cuts puts the amount closer to $500 million. If she vetoes none, this implies she expects state revenues to grow by $300 million or so above and beyond inflationary increases at current service levels. It may or may not happen. While tax cuts to a certain point generally eventually provide more government revenue, targeted tax cuts such as these are less effective and it does take time for the economy, spurred by the cuts, to grow. This is why Blanco needed not to spend so much of the surplus on recurring items of dubious need.

Without a great deal of certainty that such revenue increases will materialize (and at this point the best guess is that they are not likely to do so), the prudent thing for Blanco to do would be to disallow them in order to prevent a future fiscal crisis hampering the state’s next governor and legislators. However, she has three incentives to disregard that course of action.

First, to be charitable, Blanco has had a dismal record as governor. She faltered badly in handling the 2005 hurricane disasters and their aftermath, and more generally has done little to improve Louisiana’s quality of life. Going out with a bunch of tax cutting to her credit will raise people’s opinion of her and might cause historians to look more kindly on her reign of error.

Second, the overwhelming favorite to succeed her is Republican Rep. Bobby Jindal and it is at least an even-money proposition that the state House of Representatives will get captured by the GOP. Making a state government mainly led for the first time ever after Reconstruction by Republicans deal with any fiscal crisis that would occur – ironically caused by the party that previously monopolized power, the Democrats – would damage politically the GOP in the state, something about which Blanco will not shed many tears.

Third, and most obvious, Blanco believes in some of the items given her political liberalism. Chief among these is a measure making the state give money to tax filers of lower incomes who don’t even owe any state income taxes.

Blanco’s inability to accept she is at the root of many policy failures in the state, her past partisan posturing as well as her insistence that others, not her, are to blame for problems during her governorship that will cause an inordinate focusing on a “legacy,” are disturbing indicators that her veto decisions at least in part will be made on these kinds of political considerations, and not primarily on the basis of what is good for the state’s fiscal picture after she has left office.

No comments: