Governor for the Day? The problem of over-simplification

Earlier today I came across a very interesting resource: an interactive model of the Illinois state budget. In case you have been living under a rock, Illinois is about as well-run as gymnasium managed by chimpanzees (and I fear that I give that state’s legislators too much credit in the comparison). The extent of Illinois’ debt troubles are almost absurd. The state has a lower rating than all other states in America except California. When something becomes so absurdly ill-managed, it becomes hard to imagine to the average citizen.

As an educator, the budget calculator immediately got me super-excited. Here was an interactive visual that described each component of the budget and how when put together they lead to such a negative result.  And so…I began mapping out the Governor Andrew’s budget. Coming from the education and non-profit world, I decided to take a stand for public welfare by not slashing programs. Instead, I focused on revenues. Without hesitation, I raised liquor and cigarette taxes heavily. Sin taxes are the best because they lead to the least repercussions politically.

Next came taxes on services. Illinois does not currently tax services but this gives them an unfair advantage relative to goods which are taxed in the state. Sadly the calculator did not allow for subgroups. A corporate lawyer or investment banker wont even notice a few bills missing from their piles of money, a small business would. In the real world, politics would probably work in reverse with the service tax being applied to the middle class and some how exempted from wealthy special interests.

Finally, the hardest of the hard was raising corporate and personal tax rates to 8%. I took a pretty harsh stand by increasing both rates. As an Illinois tax payer, I hate the very thought of it. But, I wanted to see if such a drastic step would not just balance the budget but be enough to start refunding the state’s pensions. The state legislature has made many promises to its public employees. Educators, firefighters, and other bureaucrats made their payments for decades. Why should they get faulted for the state not paying their half?

The result:

As you see my budget increases revenue while keeping costs about the same. The result is a huge surplus – one that in a perfect world would be used to better fund the pension system. YAY! That was simple right?!

Yet, I must caveat my optimism. While the budget is a wonderful tool for me to teach my students about the basics of a government budget, it makes this a little too easy. For one, I have already addressed how political realities would often make common sense reforms challenging, heck near impossible. But the bigger issue goes beyond the borders of Illinois, off-the-books pension and medical care obligations have become a drag on governments even if they don’t include them on their budgets throughout much of the developing world. It is so hard to catch up in system that demography is working against. Every day, more and more of our parents, neighbors, or even yourselves are retiring and asking for their money back.  The federal government swears that it will be able to cover social security for decades to come; however, medicare already doesn’t cover all medical expenses. With medical costs continuing to rise quicker than inflation, the coverage might lessen to next to nothing before the system ever goes broke.