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Aggression in the Midwest

Aggression in the Midwest

By Patrick McIlheran - January 21, 2011

Here's what "aggressive" looks like in the upper Midwest. Wisconsin having switched governors, the signs at its border that bear the old guy's name are being replaced. Rather than saying that now Gov. Scott Walker welcomes you, the new signs read simply, "Open for business."

Wow. Release the Kraken.

Though under this smiley-aggressive move, there is actual steel: Comparisons between states do not generally turn out well for a certain model of government, the high-tax, high-service one. It is, coincidentally, the model embraced by Democrats nationally in recent years, which is why this goes further than one Midwestern state annoying its neighbors.

The details are telling. Illinois' Legislature this month raised taxes sharply -- the personal income tax rate rose from 3% to 5%. The corporate rate leaps from 4.8% to 7%, but Illinois also levies another 2.5% atop that, meaning its corporate rate is actually higher than that of the infamous tax hell to its north.

Republican Walker, meanwhile, a tax-averse skinflint in his previous gig running Wisconsin's largest county, enrages unions by saying he'll change laws to cut payrolls. He proposes reining in regulators, and he's already got tort reform through the Legislature. He means to lure businesses from Illinois and Minnesota.

This kind of competition is regularly denounced by progressives as a "race to the bottom." They see it as governments pandering to plutocrats by undertaxing their earnings and underregulating their businesses. When for years Wisconsin was on the losing end of such comparisons, its citizens were routinely assured by liberals that such cutting would leave their state as wretched as Tennessee or Texas.

Oddly, progressives then offered this claim as well: That some optimal balance of taxes and services makes a state more attractive to business. Usually, the claim goes, the optimal balance is heavier on taxes and more provident on services than wherever we are right now. But either way, the claim is explicitly that business digs an expensive state, a sort of American Sweden.

The two claims are incompatible, even in theory. Either business buys the left's high-cost, high-service deal -- or, on the margins, it can be lured away on price. Reality, in the form of such natural experiments as Illinois is about to provide, suggest it's the latter.

The high-tax, high-service model is pitched by liberals as universally beneficial, the economically sustainable successor to class warfare. But sooner or later, the drivers of economies, those who are good at producing wealth, realize they're always the payers, and they opt out. Thus economies in Tennessee and Texas have boomed while those in high-cost Great Lakes states have stagnated. Comparisons between states and the liberty to choose a more favorable deal allow the permanent patsies to escape.

This is also why, as conservatives aim to replace Obamacare with something more workable, liberals will fight desperately to avoid a state-by-state approach. If they are to have the system they want -- directed by government, not markets, and divorcing the matter of who gets from who pays -- they cannot permit comparisons and options.

There was an abortive move in 2006, involving conservative and liberal congressmen, to set up state-by-state experiments in "universal" health care. It soon faded. Individual states tried things, too. Massachusetts had its faux-market "exchange" idea, a costly failure. Indiana covered the poor by giving them individual accounts and discretion. All of this has given way to Obamacare's single national template.

Intentionally so: Obamacare milks money from those deemed capable of paying. The young, for instance, must overpay to subsidize everyone else. Taxpayers subsidize premiums. The problem isn't that the plan has winners and losers, it is that these roles are predictable and more or less permanent.

If a state's health care experiment tried this, the losers could flee, just as they do now from high-tax, high-service states. It would demonstrate the bankruptcy of government-dominated health care, just as Canada's single-payer regime is weakened when its citizens flock to Cleveland for routine knee repairs.

Or just as states' fiscal irresponsibility is revealed now by something so innocuous as a sign on the neighbors' border promising a marginally more clement tax climate. Competition is always an act of aggression toward systems that can survive only by coercion.

Patrick McIlheran is a Milwaukee Journal Sentinel editorial columnist who blogs at jsonline.com/blogs/mcilheran. E-mail pmcilheran@journalsentinel.com

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