‘Trickle down,’ ‘shared sacrifice’ and governing styles

Bill Knight column for Thurs., Fri., or Sat., April 2, 3 or 4

Illinois’ jobless rate is 6.1 percent, state government faced a $1.6 billion budget shortfall by an across-the-board cut of 2.25 percent (and still has a $111 billion pension deficit), and billionaire Republican Gov. Bruce Rauner must work with a legislature dominated by Democrats.

As the new governor attacks unions and jeopardizes social services, he seems to be saying there’s no alternative to helping business remain in Illinois and attracting new employers besides lowering labor costs through local Right To Work zones, a variation of the long-disproven “trickle-down” economics theory that enriches the wealthy because they’re the “job creators” whose affluence eventually falls to the rest of us.

But there is an alternative.

“Trickle-down economics is bunk,” says Carl Gibson, co-founder of US Uncut, which lobbies against cutting social spending and corporate tax avoidance. “Minnesota has proven it.”

There, Gov. Mark Dayton took office in 2011 with a 7-percent jobless rate, a $6 billion budget shortfall, and a legislature controlled by the other party. Rather than continue the policies of his forerunner, conservative Tim Pawlenty (much less Rauner’s anti-union strategy), Dayton took progressive steps.

Since his swearing-in, Dayton hiked the minimum wage (to $9.50/hour by 2018) and raised income taxes on people making more than $150,000 a year by 2 percent (to 9.85 percent). Instead of driving employers away and killing jobs, Dayton added more than 170,000 jobs, generated $2 billion in new revenues, and reduced the jobless rate to 3.6 percent – contradicting Doomsday predictions from the GOP.

“It’s been said that money talks, but money walks also,” warned state Rep. Mark Uglem (R-Champlin) during debate over the income-tax increase. “The job creators, the big corporations, the small corporations, they will leave.”

They didn’t, and it turns out that better-paid workers are good for business.

Since the 1970s, there’s been an “erosion of the norms, institutions and practices that maintain fairness in the U.S. job market,” says economist Alan Krueger, who cites declines in organized labor, globalization and ideological shifts in both Republican and Democratic positions. Consequences include a record-breaking Wall Street, increased profits, higher executive compensation but a dramatic rise in income inequality, all derived from a corporate mindset that embraces the notion of paying employees as little as possible – echoed today in approaches by Rauner and like-minded governors like Kansas’ Sam Brownback.

In fact, the prosperous 1950s had a robust labor movement and also a business attitude that companies should serve workers, consumers and communities as well as executives and stockholders. (Management guru Peter Drucker once wrote that heads of companies shouldn’t receive more than 20 times what their average worker earned. Today CEOs get more than 300 times their average workers, according to the AFL-CIO’s Executive Paywatch.)

Workers who earn more are likely to stay longer and work harder, one reason that companies including Aetna, Costco, Trader Joe’s and Walmart pay comparably decent wages or have recently raised pay.

In the book “The Good Jobs Strategy,” M.I.T. business professor Zeynep Ton wrote, “Increases in wages to, in fact, pay for themselves.”

On Huffington Post, Gibson wrote, “Between 2011 and 2015, Gov. Dayton added 172,000 new jobs to Minnesota's economy. Minnesota's top income tax rate is the 4th-highest in the country [but] it has the 5th-lowest unemployment rate in the country, 3.6 percent.”

Further, Minnesota is now Number 19 in Business Insider’s ranking of state economies. (Illinois is No. 34 – better than No. 39 Wisconsin, where Rauner cohort Gov. Scott Walker reigns.) Gallup polls show that Minnesota has the nation’s top economic confidence rating, while Illinois is about average.

Also, Minnesota has a $1 billion budget surplus, and Dayton plans to spend a third of that on education.

Dayton is no class warrior. A member of the Democratic–Farmer–Labor Party (again, working with a legislature controlled by the other party), he’s a billionaire, too, a member of the family that founded Dayton’s department stores, which became Target.

“The reason Gov. Dayton was able to radically transform Minnesota's economy into one of the best in the nation is simple arithmetic,” Gibson said. “Raising taxes on those who can afford to pay more will turn a deficit into a surplus. Raising the minimum wage will increase the median income. And in a state where education is a budget priority and economic growth is one of the highest in the nation, it only makes sense that more businesses would stay.”

Would Illinoisans support such policies? Sure. After all, in the November election, 63.6 percent of us voted in favor of the “millionaires-tax” advisory question: “Should the Illinois Constitution be amended to require that each school district receive additional revenue, based on their number of students, from an additional 3% tax on income greater than one million dollars?”

Only grassroots pressure is needed to force Rauner to be reasonable.

[PICTURED: Illustration from thechristianleftblog.org.]