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Capital Eyes: Tax and Spin

The Legislature gets ready to grapple with the T word



State Sen. Steve Doherty, a Great Falls Democrat, is blunt in his assessment of the state of the state when he says, “The fairy tale is over. ...We are waking from the dream.” What the good senator means, of course, is that the excrement has encountered the oscillating unit at the Legislature, big time. A failed political strategy, combined with a lack of leadership at the highest level, has now come home to roost. As George Bush Sr. would say, “We are in deep doo-doo.” There’s only one thing wrong: When the diametrically-opposed policies of tax cuts and spending overruns engineered by Republican politicians finally converged, they expected that Mark O’Keefe would be the governor—not Judy Martz.

O’Keefe’s long-held gubernatorial ambitions were no great secret from Republican strategists—or anyone else, for that matter. For eight years, O’Keefe assembled “the big guns” of the Democrat campaign world and gave them jobs in the virtually unknown office of state auditor. And there they went to work—building a public image of Mark O’Keefe as a consumer advocate and using insurance settlement money to make TV ads so Montanans wouldn’t miss the point. His personal drive and commitment and the power and depth of his team would ensure a hard-fought in campaign in 2000. When his access to enormous wealth was factored in, is it any wonder Repubs figured the guy would win?

During this eight years, knowing that they would face—and likely lose to—the O’Keefe political juggernaut, Republican legislators laid their trap. OK, they figured, we’re gonna lose the governor’s seat to this guy, so lets paint him into a box from which the only escape will be to raise taxes—which fits in nicely with the tax and spend image the Repubs so handily used to repeatedly club the Dems.

Conservative Republicans, the kind that have controlled overwhelming legislative majorities for most of the last decade, knew that Racicot was a big spender—the massive influx of capital into the prison program alone was a budget buster—and they knew that most of Racicot’s building boom in prisons and government offices was on borrowed money that future taxpayers would have to repay.

Unable to curtail Racicot’s government spending proclivities, conservative legislators had to abandon their campaign promises to shrink government spending. But they could keep their other promise—they could give tax cuts. And that they did. Utility taxes, business taxes, even property taxes were cut. That corporations, many of them out-of-state, and wealthy individuals benefited disproportionately from those tax cuts is to be expected. They are, after all, Republicans; they do have their loyalties.

What seasoned legislators called “the train wreck” began to take shape as the tax base was eroded while the spending grew. But who cared? The wreck would happen on O’Keefe’s watch! Remember last spring’s much-hyped special legislative session called by Racicot to “jump start the economy”? As a parting gift to O’Keefe the R’s tossed out a couple ballot referendums to eliminate the inheritance tax and flat-rate license plates. Given the state of Montana’s terminal economy, the citizens jumped at any chance to reduce their tax burden and approved the measures. Whack! went another few million a year. Oh, but it was gonna be funny watching O’Keefe deal with this.

As the campaign wore on, everything went as expected. O’Keefe worked hard, put his tuned campaign team to work and, when the time came, reached into the deep pockets for “the mother’s milk” of campaigns—money—and lots of it. The TV ads were continuous, the mailings never ending, all well done, all tuned through focus groups, all O’Keefe, all the time.

But then Judy won.

Now, in a political irony worthy of Shakespeare, she has inherited the scorched-earth policy that was expected to fall into O’Keefe’s hapless lap. It is Martz and the Republicans who are now in the box with no way out. To make things worse, toss in the complete disaster of electricity deregulation. Instead of producing competition and cheaper electric rates, the much-lauded “free market forces” have inflated energy costs exponentially. Hundreds of high-paying jobs have already been lost, many hundreds more are at risk, and major industrial sectors are on the ropes. The “growing economy” Repubs predicted as they gave away the tax base and sacrificed the environment didn’t happen. In fact, just the opposite has occurred as dereg has taken out more industrial jobs than any environmental laws. As Budget Director Chuck Swysgood said while trying to explain why it was necessary to cut $43 million from the Racicot budget and rip off the tobacco settlement for the general fund: “The economy isn’t looking too rosy right now.”

The scary part is that those responsible for this mess are still mouthing the same hollow promises of economic development: if only we cut a few more taxes and environmental regulations, “embrace commerce,” do a little lap-dance for industry. But the numbers tell the hard truth and these folks are worried. They should be. The Day of Reckoning has come and cute rhetoric must yield to the ugly reality of reaping what they have sown. As Sen. Doherty would say, “The fairy tale is over.”
George Ochenski has lobbied the Montana Legislature since 1985. He is currently lobbying on tribal issues in this session.

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