It's against the nature of journalists to substitute a seven-letter word for a shorter version but if that's what it takes, we're on board to increase revenue, in Kentucky and nationally.
Arguments about cutting spending versus rasing taxes — oops, revenue! — will never end. But that's about the future. The money we're talking about has already been spent, or at least firmly obligated. We owe it.
Nationally, there's the $16 trillion, and growing, debt that piled up through two wars fought on credit while cutting taxes, combined with a recession and slow recovery.
In Kentucky, where ostensibly the budget is balanced every year, there's a $30 billion unfunded pension obligation for public retirees.
Those are real obligations that aren't going away.
Spending reform is essential to avoid repeating these scenarios. Doubling down on health care cost control is critical to the future viability of Medicare and Medicaid.
As for Kentucky's pensions, first steps must include eliminating double-dipping and the shameful special benefits legislators have enacted for themselves. Equally important is increasing transparency — so taxpayers can actually see what retired public employees receive in benefits.
Policy makers cannot ask for more revenue without making these and other changes. But cutting future costs alone will not pay the bills. And there is no mainstream support for the kind of pervasive, deep spending cuts that might make it possible to do that without increasing revenue. Regardless, those kinds of cuts would probably do so much damage to the economy that revenues would fall sharply anyway. That's why so many business leaders are pleading with Washington to avoid going over the so-callled fiscal cliff.
The most common argument for not increasing taxes, or even cutting them, is that it puts more money into the hands of people who spend it, spurring economic activity and with it revenue. This idea is so appealing — it's like inventing money and that's a lot more attractive than raising taxes — that it became law under former President George W. Bush. But, given the experiences of the decade since, it's very hard to make a case that more tax cuts, or maintaining all those now in place, will create a vibrant economy and a sound federal balance sheet.
Kentucky played its own game of wishful thinking with the pension funds. Year after year the governor and the General Assembly balanced the budget in part by ignoring the state's obligation to the pension fund. Now, remarkably, a legislative task force created to address this shortfall says the state needs to ante up $327 million a year to make up for lost payments but offers no suggestions on where to get that money.
We don't pretend to have a comprehensive plan to raise that revenue but offer some suggestions.
Nationally, allowing the tax cuts on income above $250,000 to expire is common sense. Polls and election results show broad support for this, including among those who would pay the taxes. We're all for closing loopholes but there's no evidence that will raise enough money, and certainly not in the short term.
In Kentucky, the critical thing is that new revenue designed to shore up the pension system must be dedicated to that purpose only, and not be used to plug other budget holes during last minute negotiations.
Paying these debts will require discipline, bipartisanship and revenue — you spell that t-a-x.