Schafer Column: North Dakota’s Lesson For Solving The Deficit Problem

budget-deficit-us

North Dakota was just rated as the “Best Run State in America”, and there are lessons to be learned as we approach our financial problems in the federal government.

President Obama pushes tax increases to solve the outrageous deficit problem facing our country and says “the majority of Americans agree with my approach.” David Axlerod joins in by telling us that the President has a tax increase mandate. But my experience as Governor of North Dakota tells me that they are completely wrong to take this approach.

It is clear that people are looking for a more efficient, less costly and less intrusive government guiding their lives. But anyone can take five minutes and discover where hard earned tax dollars are being spent on something that is unnecessary and unwanted.

It is also perfectly clear that if we give more revenues, the legislative branch will not do the hard and unappealing work to prioritize our expenditures and eliminate or consolidate programs that will save us money and help solve the deficit spending that our government is hooked on these days. The legislative process simply does not have the discipline to eliminate expenditures unless they are absolutely forced to. No one wants to go home and tell their constituents that a coveted program is not affordable anymore.

Anyone who has operated a business knows, when faced with a budget that doesn’t balance, that a 10% cut in spending can be found when necessary. And a 5% cut is easy to find without harming operations. The federal budget is currently $3.8T trillion and a 10% decrease would generate $380 billion to help solve the $1.1 trillion deficit problem. Even if we forced a 5% reduction a $190 billion reduction in expenditures dwarfs the President’s tax increase proposal that finds about $80B per year.

When we approached the budget disasters in North Dakota in the 1990s with the concept of priority spending, it was necessary to commit to no tax and revenue increases to force the legislature to seek the efficiencies in the face of things they didn’t want to do. By making it a “no choice” option, we were able to reduce budgets and provide a lower cost of government for our citizens. Confidence was restored which spurred our economy, and today ND stands as a testament to forcing efficiencies with the best economy in the USA!

I challenge President Obama to show us an example when increased revenues led to even one elimination of an existing expenditure. The President is wants to trim the fat in our diets, trim the fat in our bellies and trim the fat in our corporations, but his policies will never, never, never allow us to trim the fat in our government.

People don’t mind paying taxes if they feel the revenue is being spent efficiently. And our history is replete with commitments by both the legislative and executive branches of our government to reduce expenditures and increase revenues to solve budget problems. But history also shows us that the revenue increases come, but the efficiencies in our Government are never produced.

I agree that everyone should pay their fair share, and if the President wants to increases taxes on millionaires in our country there is a time to do so. But if we really want to solve the deficit problem the time to raise taxes is AFTER we trim up the budgets! Otherwise, we leave $380 billion on the table that our citizens are paying for unnecessarily!

Ed Schafer is the former Governor of North Dakota and served as Secretary of Agriculture in the George W. Bush administration.

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  • camsaure

    Unfortunatly, Dalrymple and Hoeven do not believe this one bit.

  • NDConservative2011

    Governor Ed has hit the nail on the head. The nation cannot continue to operate by spending more than it takes in. Higher taxation on the successfull is not the answer as the successfull will not continue to expand and hire new workers. Also, the successfull will cease to be successfull under Obama’s administration. Less folks in the workplace simply means less growth and a continuance of a poor economy. A 5% cut across the board is very reasonable and everyone takes a shared responsibility. I only hope that Governor Ed’s insight will be recognized by Governor Dalrymple, and that Dalrymple will finally see that the huge increases in spending in North Dakota cannot be sustained. I’m afraid that I’m a hopeless optimist and Governor Dalrymple will continue to govern as Governor “Spendrymple”.

  • Mike

    I remember when Schafer presented his budgets requiring cuts in every state agency. They HATED it! Agency and Department officials complained, cried, kicked, screamed, but they did it. Lesson: These officials have become accustomed to getting more and more tax money. They hate to be put on a limited budget.

    • http://sayanythingblog.com Rob

      The reverse was true under John Hoeven. He’d pull this maneuver where he’d make a big show of asking for “across the board” reductions in agency spending. But by the time his budget would reach the legislature, they’d be getting increases.

      Sigh…

  • Game

    Comparing state spending
    to government spending is like comparing an apple to a Buick. State government spending is mostly on
    programing, and Federal government spending is monthly on Defense, entitlement
    programs, and health care. When the state sets a budget, it is projecting
    future spending. The federal government is making up for past obligations. Let’s look at what it would mean to cut defense,
    entitlement programs, and health care.

    OK, so let’s say 10%. That means that the average person who is on Social
    Security now gets $1476 a year less. The average retired military member now
    gets $1680 less per year. The average active duty enlisted military member now
    gets $3314. Now in order to assist with all of this, we are going to have to
    greatly increase the out of pocket costs for health care for each of these
    groups by around 20-25% in order to both cut the amount paid by 10% and adjust
    for medical inflation.

    That would be a huge savings to the government. Now you would be taking
    trillions out of our economy, but I am sure that would have not affected at
    all.

    Great plan republicans.

    • Game

      err.. MOSTLY on Defense

    • http://sayanythingblog.com Rob

      federal government spending is monthly on Defense

      Well that’s not true at all. Federal spending is mostly on entitlements, with Social Security, Medicare and Medicaid being the biggest parts.

      • Game

        As I said (albeit with a grammatical error) monthly (mostly) on Defense, entitlement programs, and health care….

    • http://sayanythingblog.com Rob

      So, the Democrat plan is to keep spending on things we can’t afford, because we don’t want to push old people off a cliff.

      Good plan, liberals!

    • http://sayanythingblog.com Rob

      And it will work, too, because we can just had the problem off to our grandkids.

      No sweat!

    • sbark

      so a govt cutting spending……..would take trillions out of the economy?
      Where does a govt get their money in the 1st place?…………….isnt it by taking it out of the economy?……….or are you fully satisfied with QE 1,2,3,4 to infinity?
      Then that begats the question…….who is more efficient at spending that money?

  • Captjohn

    Sorry Ed but I take some umbrage with your article. To say the legislature couldn’t make cuts while you were governor isn’t true. Check and you will find the legislature from 1995 on left bigger ending fund balances then you had proposed in your budget presentations.
    We did that while leaving more money in the Bank of North Dakota then you proposed in one budget message. We put money in the rainy day fund and still had a bigger ending fund balance then you proposed. We actually cut state employment rather then add as you proposed during one session.
    As far as taxes it is true you never supported any increase. It is also true that the house and senate killed every tax bill introduced before the cross over dead line.
    While I appreciate your conservative stance it isn’t fair for you to insinuate that the majority of Republican legislators who served during that time didn’t contribute to North Dakota’s success. I personally witnessed legislators voting for real cuts in appropriations when thet knew they would take political heat for it in their districts.
    If Congress were to be as fiscally conservative as the North Dakota legislature was for those three legislative sessions this country might see the light at the end of the tunnel.

    • camsaure

      It still takes a leader to get them tyo do it. And how about the current legislature? Are some of the same people still in the legislature? If so what are they doing about spending?

  • Captjohn

    Who do you think the leaders were? The governor who proposed budgets with ending fund balances between 10and 15 million or the legislators that saved money in the Bank of North Dakota or the rainy day fund and left town with ending fund balances exceeding 50 or more million.

    • http://www.facebook.com/ed.schafer Ed Schafer

      Hi John. I can appreciate that you and I have a different memory about the facts during our budget process when I was Governor, but importantly working together we produced a lower cost of government for the people of North Dakota. But by picking your point ofreference starting with the 1995 session you skip over the real starting pointand how I learned that legislators will spend all the money you allow them to have. My first budget proposal included a $40mm ending fund balance and thelegislature spent that down to $10mm. I signed the budget including thatfigure, but I learned a valuable lesson. The budgets submitted in the three sessions you talk about suggested ending fund balances in the $10mm range because I knew that is where legislators would end up anyway. By submitting thebudget the way I did, it forced legislators, if they wanted to spend money on other programs or increase spending over what I suggested, to remove money from one program to put into another, that way not increasing total spending. I rememberwell that you thought that was taking away too much power from the legislative branch, but I felt that our expenditures had to be tightly controlled. And you are also aware that we increased the footings in the Bank of North Dakota dramatically before presenting the budget to the legislature trying to hide the money so it was not spent. Same thing with the rainy day fund so when you talk about the ending fund balance you created you should only use the amount you actually increased the funds by. I appreciate that your efforts added a little bit more to what I had proposed! If you check the historical figures you see that the final legislative budgets were so close to my suggested budgets you could barely define a margin of difference. And for the tax issue John, in one session alone I vetoed three tax increases that were passed by your Republican majority
      controlled legislature. I sure couldn’t figure out why legislators would pass
      tax increases when we didn’t need the money, especially a Republican
      legislature. Needed more money to spend perhaps? The main point is the
      interaction between the Executive Branch and Legislative Branch of our state
      government during the 1990s produced a government that was less costly, less
      intrusive and more efficient. That spurred the economy and revenues increased which allowed us to put more money into education, health and safety programs for our citizens. It was that foundation that led to North Dakota’s prosperity today and I thank you for your leadership to help make that happen!

  • Captjohn

    As I have said all along it was a good experience working with Governor Shafer. We could count on his conservative approach and he was a man of his word. What he is forgetting is that in 1993 the Republican House leader was Rep. Martinson and for the Senate Democrats the leader was Sen. Dan Wogsland. Neither of the two would be considered conservative. I well remember that session as I describe in my book at the end I stepped in to finish it off. The problem was that by the end of the 1993 session the horses were all ready out of the barn so to speak. Sorry Ed but you came away with a distorted vision of how the legislature would work once the Senate came under Republican control with Sen. Nelson as leader and I assumed the leadership of the house. You vetoed tax bills that came out of the 1993 session.
    It isn’t necessary to go through all of the numbers unless some of the readers would like to. Suffice it to say I stand by my earlier remarks. Governor you started out with a tough hand dealt you for the 1993 session but that is no reason for you to paint subsequent sessions with the same brush.
    As I point out in my book the legislators who served in those years deserve as much credit for North Dakota’s enviable position today as anyone. I wrote the book to make sure the citizens of North Dakota get the real picture. If the citizens have an understanding of how it should work they will have a better chance of getting the goverment thet deserve.

    • http://www.facebook.com/ed.schafer Ed Schafer

      Actually John, the session I was referring to when I vetoed three tax increases was the 1999 session when you were the leader in the House! :<)

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