As my final term in the Maine Senate comes to a close, I was rummaging around my old Senate files and came across a letter I received from Maine’s governor just after I was first elected.
The purpose of the note was to point out to me, and others who received the same, that the governor had a plan to help our state’s economy. “My economic plan,” the letter explained, “is to grow jobs, control government spending and reduce taxes.”
It went on to set reducing taxes as the highest priority. “First, we must reduce taxes for all Maine residents,” read the letter, “especially those who need it the most. The citizens of Maine demand that we reduce their overall tax burden while protecting basic services, (and) improving our business climate.”
The rest of this story is a matter of history. In 2011, my colleagues and I passed the largest tax cuts in Maine history and removed 70,000 of Maine’s lowest-income people from the tax rolls altogether. Within two years, Maine led the nation in wage growth, was well on its way to record low unemployment, and had started down a path that saw eight straight years of budget surpluses.
The interesting thing about this letter, however, is that it was written in 2004, not 2011, and by Gov. John Baldacci, who saw an obvious path to prosperity for Mainers. He realized that a stronger economy required a smaller, less costly government and lower tax rates that left more money in the pockets of Mainers who spent it.
As it turned out, Gov. Baldacci’s plan of cutting taxes, growing jobs and reducing the size of government was a winning formula that brought our state into the most prosperous period in its history. This did not happen, however, until voters elected Republicans to control of both houses of the Legislature and the Blaine House.
Baldacci’s plan failed to bear the inevitable fruit when his economic agenda became sidetracked. The following budget raised taxes on incomes, franchises, sales and use, among others. It increased the workers’ compensation assessment and eliminated the federal tax credit for the estate tax. All of these tax increases were used to fund a 10 percent increase in spending. Rather than create jobs, these increases led to a 0.5 percent hike in Maine’s unemployment rate.
Shortly after Gov. Baldacci was elected to his second term, a nationwide recession that was considered the worst economic period since the Great Depression befell the country. One can only wonder how different things might have been had the governor and Legislature followed the original Baldacci plan.
There are some clues, however. In 2010, under newly elected Republican control, the state began its long, steady climb out of the Great Recession and into the greatest period of prosperity that Maine has ever experienced. It did so using the same principles that Baldacci had written about in his letter in 2004: cutting taxes, increasing jobs and wages, and growing the economy.
This walk down the memory lane of my old correspondence is more than just an exercise in nostalgia. It is also a roadmap to the course that the next group of elected officials should adhere in again rebuilding the state’s economy following the current severe and abrupt downturn and returning our economic path to one of prosperity and growth.
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