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SEIFFE:  Blago Lost More Than Keno

Wednesday, January 25, 2006

By Ralf Seiffe

The governor’s foolish plan to jump-start of Illinois ’ economy with Keno has been roundly rejected by nearly everyone who has looked at it.  In addition to relying on skyhook economics, the governor has again revealed his contempt for representative democracy.  Like the stem cell funding caper, Blagojevich floated the idea that he didn’t need the General Assembly’s consent to introduce the game at your local McDonald’s.  According to newspaper reports this delusion was based on the notion that Keno would simply be an extension of the Lottery.  

Even Lisa Madigan took a dim view of the governor’s premise.  So, before she slammed the final torpedo into the scheme, the governor got out in front of the problem. In a stunning demonstration of imagination, he blamed the Republicans.  

What’s more, he dared Republicans to come up with an alternative to his stillborn plan.  It was the sort of challenge one might expect Phil Donahue to offer Hillary Clinton and by making it, the governor has handed his adversaries the initiative in this election year.  

Unfamiliar as Republicans are with such softball opportunities (and with taking political advantage of them), this is a break our side needs to rip the cover off.  Here’s one suggestion for those on our side who are stuck for an answer: simply tell the governor to quit and go back to Chicago .  Scratch that---tell him to stay in Chicago .  

Telling the governor to quit is supported by this simple logic:  Blagojevich’s anti-business plans have cost the state existing jobs and squelched new ones.  Without the governor’s neo-socialist policies, we’d have as many as 50,000 jobs that have moved to other states.  20,000 of these are explained just by truckers who have already voted on the governor’s policies.  They’ve driven to other states and set up shop.  The remainder is a conservative estimate of other employment that has disappeared during the same period.  

What’s worse, Illinois’ political overhead, its tax bite and the regulatory environment so increase business costs here that job creators do not consider Illinois a good bet---despite the baloney in the State of the State speech.  The growth of nearby states shows job creation is not a “Rustbelt” problem, it’s an Illinois problem.  

Had those jobs not left Illinois and had our state enjoyed the same growth as our neighbors, we would probably be up 250-300,000 jobs.  The taxes those jobs produced would have solved the governor’s funding dilemma.  

Here’s why: assume each job averaged $40,000.  Income taxes would probably produce at least $750 after deductions and, if the person consumed two-thirds of his gross, the job would generate about $1,600 in sales taxes.  Add a $75 net for a license plate and let’s not forget the politician’s new best friend: smokers.  According to the Illinois Department of Public Health, 22.3% of adults in Illinois smoke.  Assuming they each go through a pack and a half per day, the state’s 98 cent per pack tax would bring in another $119.65 per job.   

One more thing.  Each of these folks would probably work for a company in business to make a profit.  If each job generated as little as a $1,000 in taxable business income, the state would get at least another $50 per job.  

What this simple analysis shows is that each lost job costs the state $2594.65 in taxes it would have otherwise collected..  Extend that to 300,000 lost or never-were jobs, and the state’s a net loser of about $800,000,000 annually.   Now, add the additional 238,000 jobs the governor plans to create fixing roads and other proper state pursuits and voila another $605 million comes back to the state’s coffers.  This totals $1.4 billion in additional state taxes.  This means the governor could “pay” for the $3.2 billion in long-term infrastructure improvements in just 27 months.  After that, the state would have an additional $800 million available every year.  

In other words, Illinois ’ cash flow would support the governor’s plan if he’d never been governor.  

Blagojevich’s challenge is a gift to Republicans---and even Mr. Eisendrath---that shows he’s run out of ideas and that he lacks the intellectual horsepower to pilot the state through difficult times.  Republican challengers cannot help but recognize this opportunity; each and every time they appear in front of voters or editorial boards they should remind their audience of the governor’s shortcomings.  To be credible however, they must have a credible plan to grow Illinois ’s jobs.  Here’s a hint: Larry Kudlow just studied the same problem in New York State .  He recommended slashing taxes and regulations, a strategy that would be just as effective in Illinois .  If that’s too tough an assignme nt, get a dictionary and look up “Reaganomics”.   

© 2006 Ralf Seiffe

Ralf Seiffe advises business start-ups and product launches from Chicago, Illinois and is a political analyst and columnist for the Illinois Leader and Illinois Review.