Several months ago, Governor Pawlenty called the federal government’s finances a “Ponzi scheme on the Potomac.”
In a piece in Politico, the Governor defined a Ponzi scheme as follows:
In a Ponzi scheme, organizers create the illusion of profit for early investors by siphoning money from later participants. It works until there is not enough income to pay the promised dividends, exposing the fraud and leaving everyone broke.
Over the last eight years, the Governor's no new taxes pledge has required more and more elaborate budget gimmicks to keep the ship of state afloat. Raiding rainy day funds, delaying payments, swiping cash from future budget streams, ignoring the effects of inflation on only one side of the income and expense statement, counting on income that hasn't (and might not ever) materialize, etc. You name it, the creative minds in Minnesota's executive branch have used it.
But every Ponzi scheme eventually collapses under its own weight. An alert investor, a corporate whistle blower, an aggressive regulatory agency -- something usually causes the house of cards to collapse. Here in Minnesota, that moment came when the state Supreme Court cried foul on the Governor's unallotment scheme.
Even now in the waning days of the last legislative session of his administration, the Governor can't seem to wake up and see that this game is finished. He continues to veto the solutions presented to him. Although he's desperately tried to convince legislators to sign on to the last trick to keep things intact before he leaves, they have wisely declined.
As the negotiations continue over the weekend (as much as they can with the Governor again absent from Saint Paul), let's look at the parting words of the Governor in his Politico piece:
Ponzi schemes succeed because people want to believe in a free lunch as long as the easy money is rolling in. But a day of reckoning always arrives, and ours is right around the corner. The sooner we open our eyes, the sooner we can clean up this mess.
Open your eyes, Governor. Not even the federal government made the massive tax cuts of ten years ago permanent, but Minnesota did.
(Photograph: Charles Ponzi upon the occasion of his arrest, but he looks more gubernatorial in this image)