Use Economics to Balance Our Budget and Encourage Growth
Our state’s economy continues to lag that of our neighbors, and it’s time we took action to bring prosperity back to Illinois. With our natural advantages and educated workforce, there is no excuse for our economic woes. As an economics teacher, I will return the focus in Springfield to sound decision-making based on economic principles.
Illinois has a structural deficit which can’t be fixed by twiddling at the corners. The long trend says this level of taxation and this level of spending are always going to result in a deficit. We have a constitutional requirement to have a balanced budget, and yet we keep papering over it. The first step is to stop papering over it and recognize that the problem exists.
You cannot decrease spending enough in Illinois by acting as an accountant and cutting line items. Instead, you have to think like an economist and change the way people qualify for programs and receive benefits by changing the formulas.
Economics teaches that if someone is doing something you don’t want them to do, it’s because there is an incentive to do it, so take away that inventive or give them a better incentive. The incentive structures we’ve developed in Illinois are contributing to our problems; we need to develop better incentives.
We need to return the focus to growth. We will never be able to truly balance our budget with cuts or even revenue increases. The only way we will get back on solid financial footing is through growth. You can only cut a shrinking pie in so many sections. Better is a bigger pie with bigger slices for everyone, which leads to a virtuous cycle of more jobs, which means more spending, which means even more jobs, which means even more spending.
To encourage growth, we need to get government out of the way of business, because whenever government tries to affect the economy it usually does more harm than good. When government is acting at its best, it’s not regulating, but rather encouraging growth. Right now, we are both over-regulating businesses and over-subsidizing them, which is completely contradictory. By scaling back certain regulations, we give businesses more freedom to grow. And by no longer subsidizing businesses, we stop picking winners and losers and level the playing field, removing uncertainty and ending this constant extortion of government for handouts.
We also need to be more intentional about business taxes. The best thing we’ve done for businesses was roll back the business tax increase, which was accidental. We should be purposely setting the rates where they should be to encourage business and entrepreneurship, and then budgeting accordingly, not setting our rates to make our budget work and then making businesses deal with the aftermath.
One of the biggest challenges we face is our pension funding deficit. We got into this mess because, unlike those of us serving in local government who funded our pensions, the state repeatedly shorted the pension system. In addition, they put in place pension policies where the person getting the benefit isn’t the person paying for the benefit, so those setting pension levels aren’t the ones paying and therefore have little incentive to ensure those benefits are affordable.
The first step to solving this crisis is to stop compounding the problem. We need to put the curtain down and push everyone who is hired from this day forward into Tier 2. The next step is to pass laws that allow us to make arguments in court in favor of reforming the system by bringing things back to the baseline, which doesn’t diminish benefits. Finally, we need to consolidate pension funds and achieve economies of scale, which would help solve local pension problems.
Another immediate issue facing us in Illinois is taxation. There are some advocating for a progressive income tax, which is not truly progressive but rather a way to soak the rich. Instead, I will advocate for making the first portion of all income tax-free, which will help poor people by lowering their taxes and achieve a graduated tax system without raising taxes on middle- and upper-income Illinoisans. I will also support broadening our sales tax on services to modernize our tax system and generate more revenue for the state. We have been a service economy since the 1970s, yet we’re still taxing like we’re a goods economy.