Category ArchiveFiscal Policy
Fiscal Policy Richard Falknor on 26 Jan 2013
Long-time Virginia conservative GOP activist Mike Giere wrote (click here) this afternoon to all Virginia GOP delegates and state senators –
“to express my deep concern over the current proposal by the Governor to replace the gas tax with a higher general sales tax.
I believe that this proposal is wrong for Virginia, wrong for taxpayers and wrong for our Party.
It fundamentally breaks a bond of fiscal responsibility that has been at the core of conservative politics for generations. It confounds a public that is looking for leadership – not gimmicks. And it will hurt a fragile economy by shifting a significantly higher tax burden to average Virginia families who can afford it least.” (Emphasis in original.)
Former Reagan appointee Giere “challenged” the state lawmakers –
“…to look at ‘out of the box’ answers to grow the economy of our Commonwealth. The empirical evidence is very clear; if we did away with the individual income tax and replaced the revenue with a higher general sales tax, and did away with business income and licensing taxes replacing them with a business ‘asset’ tax — we could dominate the mid-Atlantic economically, providing the rich soil of freedom and responsibility for job and income growth, and economic expansion for a new generation. “ (Emphasis in original.)
Even More Thoughts Outside The Box
Some two weeks ago, we wrote in our McDonnell Tax Scheme: Too Many Moving Parts, Open Questions?
“Instead of advancing tax proposals to make Virginia more competitive — such as eliminating the state corporate tax [click on foregoing link] and thereby bring more real prosperity and consequently tax revenue to the Commonwealth — we are this week given a meretricious package that advertises no gas tax, but increases the state sales tax and adds an additional tax (‘fee increase’) for car owners.“
and pointed to –
Richard Falknor@highblueridge “Two Governors Propose Radical Tax Reform” to eliminate their state personal, corporate incomes taxes. Steve Malanga (MI) http://tinyurl.com/a9dlmt3
In the end, of course, Virginia GOP lawmakers must decide whether they are business-friendly or market-friendly.
James Pethokoukis (Reuters) defined the difference –
“Yet while a pro-business agenda may intersect at points with a pro-market one, they are not the same thing. Pro-market public policies make markets function fairer and more efficiently for everyone. They encourage competition and ‘creative destruction’ and entrepreneurial capitalism. Pro-business policies often shift taxpayer money and other government goodies to favored companies, raise barriers to entry and otherwise defend the status quo.” (Highlighting Forum’s.)
Fiscal Policy Richard Falknor on 16 Oct 2012
Writes author Edwards –
“The recovery from the recent recession has been very sluggish, and the nation’s governors have struggled with the resulting budget deficits, unemployment, and other economic problems in their states. Many reform-minded governors elected in 2010 have championed tax reforms and spending restraint to get their states back on track. Other governors have expanded government with old-fashioned tax-and-spend policies.
That is the backdrop to this year’s 11th biennial fiscal report card on the governors, which examines state budget actions since 2010. It uses statistical data to grade the governors on their taxing and spending records—governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.
Four governors were awarded an “A” in this report card—Sam Brownback of Kansas, Rick Scott of Florida, Paul LePage of Maine, and Tom Corbett of Pennsylvania. Five governors were awarded an “F”—Pat Quinn of Illinois, Dan Malloy of Connecticut, Mark Dayton of Minnesota, Neil Abercrombie of Hawaii, and Chris Gregoire of Washington.” (Highlighting Forum’s.)
Readers are encouraged to review the entire report — but here are Cato vignettes on Maryland governor Martin O’Malley and Virginia governor Bob McDonnell –
“Maryland Martin O’Malley, Democrat — Legislature: Democratic.
Took Office: January 2007
Martin O’Malley has been in politics his entire career, and he has long supported an expansionary approach to government. In his first year as governor, O’Malley signed a $1.4 billion package of tax increases. It included increases in corporate taxes, personal income taxes, sales taxes, and cigarette taxes. O’Malley has been at it again recently, approving increases in income taxes, alcohol taxes, hospital taxes, and tobacco taxes during 2011 and 2012. For singles earning more than $100,000 and couples earning more than $150,000, the top income tax rate was raised to 5.75 percent. Local taxes in Maryland bring the total top income tax rate to 8.95 percent. O’Malley’s legislation also reduced personal exemptions under the income tax. Higher taxes are fueling higher spending in Maryland. The general fund budget jumped more than 13 percent in fiscal 2012.” (Highlighting Forum’s.)
Bob McDonnell, Republican — Legislature: Divided [No longer divided but Republican -- Senate became effectively Republican in 2012]
Grade: C Took Office: January 2010
Governor McDonnell has a conservative reputation, but he hasn’t taken any major actions to shrink the Virginia government. McDonnell has signed into law a smattering of small tax increases and tax cuts, but he hasn’t proposed any major tax reforms. McDonnell hasn’t been very conservative on spending either. The Virginia general fund budget increased from $14.8 billion in the governor’s first year of fiscal 2010 to an estimated $17.2 billion in fiscal 2013, which is a 16 percent expansion. To his credit, McDonnell pushed to privatize the government’s liquor stores, but he couldn’t get his own party in the legislature to go along with the plan.” (Highlighting Forum’s.)
Concerns to watch: Virginia conservatives should examine closely what Cato experts call the “Tax Incentive Disease” (start here on p. 8)–
“Unfortunately, most governors support tax incentives. Republican governors often claim allegiance to free markets, but their support of tax incentives amounts to support of central planning. As for Democrats, they often support broad-based tax increases that harm businesses, but then they also offer narrow breaks to favored businesses and claim that they are creating jobs.” (Highlighting Forum’s.)
Readers might visit James A. Bacon’s (Bacon’s Rebellion) “Do Incentives Buy More Investment… or Better Rankings?” here.
Maryland conservatives should pay special attention to unfunded but overpromised state and local pension schemes (start here on p. 13)–
“Cato’s pension expert, Jagadeesh Gokhale, estimated that the funding gap for accrued benefits plus future accruals is about $10 trillion. On top of that, state and local retirement health plans have huge funding gaps as well. What all this means is that policymakers in many states have created a big fiscal mess that may spawn large tax increases down the road. This report card focuses on short-term taxing and spending, but a fuller assessment would also include how the actions of each governor affected the long-term fiscal health of his or her state.” (Highlighting Forum’s.)
An unexpected near tie: governor Jerry Brown of California received a score of 49 (D), governor Bob McDonnell a score of 50 (C).
Some of our related posts – -
Fiscal Policy Richard Falknor on 07 Oct 2012
(Scroll all the way to the bottom for additional perspectives and resources.)
The Maryland Public Policy Institute (MPPI) has just performed a vital service with its publication here of “ Maryland Pension Map Breaks Down Retirement System Debt by County: Interactive map reveals the staggering amounts counties spend on public employee retirement packages.”
The MPPI related last Monday –
“The picture painted by the map is not a particularly pretty one. Average unfunded liabilities for pensions and OPEB hover around 50 percent, and counties are spending hundreds of millions of dollars each and every year just to keep treading water. Downloading the spreadsheet containing the full data – much more than is displayed on the map – only darkens the image by revealing the exact percentages each county is contributing towards their obligations.
‘When you really drill down like this, you see that the real issue that faces Maryland counties is the rapidly increasing cost of benefits, specifically healthcare,” said Christopher B. Summers, president of the Maryland Public Policy Institute. ‘County pensions are funded, on average, to 76 percent. That’s not great, but it’s nowhere near as catastrophic as being 91 percent unfunded, which is where the average county finds its OPEB liabilities.’” (Highlighting Forum’s.)
Local property owners will (among others) be on the hook for recklessly undertaken county pension obligations.
Here is MPPI’s “Maryland Pension Map” which compares Maryland counties.
But we suggest you first “click here to learn about the abbreviations on the map.”
Six County Illustrations
Here are the Actuarial Accrued Liabilities(AAL) –‘total predicted costs of these promises’– just for Other Post-Employment Benefits (OPEB) which are typically health care and life insurance for six Maryland counties: Baltimore City, $2.498 billion; Baltimore County, $2.002 billion; Anne Arundel County, $1.159 billion; Montgomery County, $1.737 billion; Frederick County, $212 million; Carroll County, $133 million.
County By County
To find the public-employee retirement-related burdens for a specific county displayed in useful charts, click here. (Toggle tabs at bottom of spread sheet to see different charts.)
Local property owners will (among others) be on the hook for recklessly undertaken county pension promises.
Faithful readers will recall our post of nearly four months ago –Maryland & Virginia: GOP County Pols Going Wild With Taxpayer Money?
Perhaps conservatives can use the MPPI study to shame GOP county-level spenders to return to fiscal prudence, then prompt fiscal reform.
Below are some of our earlier public-employee pension-reform posts –
ANOTHER PERSPECTIVE! Josh Barro in “How Congress Can Help State Pension Reform” (National Affairs) writes “While conservatives tend to bristle at federal interference in state fiscal matters, the option to underfund pensions simply creates opportunities for irresponsibility at the state level. It is a way for politicians to take a ‘buy now, pay later’ approach to government spending. And the federal government does have an important interest in state-pension solvency: Allowing states to underfund creates the risk that a state will exhaust a major pension fund and look to federal taxpayers for a bailout. If state lawmakers knew that pension promises had to be honored and, more important, had to be funded, they would be less likely to make irresponsible promises. And one obvious way to convey such knowledge is through binding federal law. Conservatives should accordingly embrace an ERISA-style funding requirement for states, both to encourage fiscally responsible pension policy and to help build state-level political support for pension reform.” (Highlighting Forum’s.)
PENSION SUNAMI! (Click on foregoing ‘hotlink’.) Readers may wish to get on the mailing list of this invaluable blog (and accompanying website) which, though focussing primarily on California, also covers significant developments in other states. Of special interest to our conservatives are this website’s searchable data bases of payments to highly-paid public retirees here, here, and here. These searchable data bases should be a model for pension-reformers in Maryland and Virginia.
“There are those – many on the right, but many more on the left – who govern from a perspective confident that the assemblage of experts really do know what’s best for the sheepish, meandering people.” (Highlighting Forum’s) – today’s Transom
Liz Essley (Examiner) revealed Tuesday – -
“Virginia Gov. Bob McDonnell urged fellow Republicans in Loudoun County to join in the second phase of the $6 billion Silver Line on Tuesday, just days before the county’s deadline to decide.
‘It’s something we have to do. It’s one of America’s most critical infrastructure projects,’ McDonnell told a group of developers, engineers and politicians Tuesday night. ‘This is the gateway to the nation’s capital.’”. . . .
“’It’s one of the most expensive infrastructure projects in the country. Two hundred and fifty million dollars a mile — that’s real money,’ he said.”
Indeed. That’s real pork. No wimpy Bridge to Nowhere up among the ice cubes.
Those who know best?
And the Commonwealth governor preaches straight to the choir: “developers, engineers and politicians.”
Maybe Mr. McDonnell is a little light on content – - “this is the gateway to the nation’s capital” – - but the Old Dominion’s own vice-presidential aspirant certainly knows how to turn a fancy phrase.
Is the Northern Virginia Tea Party AWOL?
We have asked the good Mr. Ron Wilcox twice about his own Tea Partiers stand on Metrorail to Loudoun.
But organizer Wilcox must have missed the picture the Virginia governor paints of a very costly future even as Mr. McDonnell pretends we are approaching –in Winston Churchill’s famous phrase — “broad, smiling uplands”.
“Two hundred and fifty million dollars a mile — that’s real money.”
Surely that is “fiscal” enough for even this GOP-tame Tea Party to address.
More Loudoun GOP Flight From Robust Debate
Reportedly Ryan Nichols, the head of the Loudoun County Young Republicans, last Monday evening suggested that the Loudoun County Republican Committee (LCRC) develop a resolution addressing Metrorail to Loudoun. Before Nichol’s recommendation could ripen at the meeting, LCRC chairman Mark Sell accepted a motion to adjourn.
Opponents of Mr. Nichol’s recommendation, we are told, declared it was divisive at a crucial time.
Of course, conservatives believe that the LCRC should hold elected officials accountable when they wander from the right path.
Long-time Loudoun GOP operatives, on the other hand, believe that the sole function of the LCRC is that of a cheering section for GOP incumbents and nominees, and a source of campaign volunteers and money.
Their maxim: No policy questions, please! They are to be decided by your betters.
What is to be done to stop the Metrorail Leviathan?
As we have long feared, the current balance of political forces has favored Loudoun County government approval of Metrorail to Loudoun.
Extensive sound analyses and the national debt crisis are apparently not proving persuasive with the majority of the Loudoun County Supervisors.
At this late date, can the opponents of this Leviathan credibly convince enough supervisors now favoring Metrorail to Loudoun that they will be strongly opposed in their next primary if they do not come to a better mind before the vote?
The Achievements of Loudoun Opt-Out
Whatever the supervisors’ vote on Metrorail to Loudoun expected next Tuesday, opponents have already done a Herculean job in a polity not much given to citizen reversal of the local Establishment.
In particular, conservatives should be grateful to David LaRock for putting together such a well-focussed citizen organization as Loudoun Opt-Out in the Loudoun GOP culture albeit one with a promise for movement in a genuinely conservative direction.
A “Shadow Cabinet” To Track Impaired Supervisors?
Our suggestion would be to build on the fine work Mr. LaRock and many other opponents have already done, and put together a “shadow cabinet” with its own website and credible Loudoun citizens as “shadow supervisors” of those incumbents who vote for Metrorail to Loudoun.
Those erring politicians will need close monitoring throughout the balance of their term.
This is because “crony capitalism” is a hard addiction for many GOP politicians to kick.
UPDATE JUNE 24! Loudoun Opt-Out declares “$600 Million Bonus If Loudoun Opts Out of Metro – Pay $0… Risk 0…” Click here.
Last evening a Washington Examiner editorial declared –
“Metro — which already has a $13.5 billion maintenance and capital replacement backlog — still refuses to provide even basic ridership, revenue and operating cost projections. According to an April 12 memo to Loudoun County officials from consulting firm Desman Associates obtained by The Washington Examiner, ‘detailed daily boardings projections — which are critical to forecasting parking demand — [were] not available’ from either MWAA or WMATA. The only forecasts available were from 2004.
The lack of updated information should send shivers down the spines of Loudoun County supervisors, who must decide by July 4 whether to opt in or out of Phase 2. So should contingency plans to slash local payrolls currently being made by top federal contractors in the event that the federal sequestration goes into effect in January. Supervisors would likely find better odds in Vegas.”
As we pointed out in our Dulles Metrorail: Is Loudoun Losing Control of Its Future? the whole Dulles Rail scheme is one of the offspring of the Beltway GOP.
Think the Beltway GOP has learned fiscal prudence?
RedState’s Erick Erickson asks today (click here) –
“Did you know that House Republicans are still defeating amendment after amendment to cut spending — even relatively small amounts?”
Editor-in-chief Erickson explains – -
“You probably didn’t realize this because, for some reason, no one is reporting it. So here are just a few of the amendments the House defeated last week. If you’re not happy with this record House Republicans are compiling this election year, let them know now!” (Underscoring Forum’s.)
Counter-intuitive: of those 20 members who scored 90% or more, fewer than half — arguably only nine — are Tea Party freshman.
A Bi-partisan Explosion in Government Spending?
Today Arthur Laffer and Stephen Moore (Wall Street Journal) reveal in their “Obama’s Real Spending Record: There’s no way around the facts. Under Presidents Bush and Obama, government exploded as a share of the economy”- -
“Sadly for fiscal conservatives, the biggest surge in government spending came during the last two years of President George W. Bush’s eight years in office (2007-2008). A weakened Republican president dealing with a strident Democratic Congress, led by then-House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, resulted in an orgy of spending.
Mr. Bush and Republicans in Congress capitulated to and even promoted each and every government bailout and populist redistribution canard put before them. It’s a long list, starting with the 2003 trillion-dollar Medicare prescription drug benefit and culminating with the actions taken to stem the 2008 financial meltdown—the $700 billion Troubled Asset Relief Program, the bailout of insurance giant AIG and government-sponsored lenders Fannie Mae and Freddie Mac, the ill-advised 2008 $600-per-person tax rebate, the stimulus add-ons to 2007′s housing and farm bills, etc.”
So much for the Bush “legacy.”
And this spending orgy undoubtedly played midwife to Dulles Metrorail.
Fiscal Policy Richard Falknor on 27 Jan 2012
Reports economist Robyn –
“New Jersey scores at the bottom by having the third-worst individual income tax, the fifth-worst sales tax, the 13th-worst corporate tax, and the second-worst property tax. Rhode Island has improved from 47th to 46th by implementing a modest individual income tax reform, but still has the worst unemployment tax system and fifth-worst property tax system. Maryland improved from 44th to 42nd this year due mostly to the expiration of the state’s ‘millionaire’s tax’ on high-income earners. The states in the bottom 10 suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.” (Underscoring Forum’s.)
Of course, the problem in Maryland lies deep in its political culture. As Steve Hanke and Stephen Walters wrote in 2006 –
“Over 150,000 Marylanders . . . are on the federal (nonmilitary) payroll; they are concentrated in central Maryland, near the nation’s capital. Nearly 268,000 more Marylanders draw checks from state and local government. With so many workers in a sector where revenues appear to arrive automatically and inefficiency never leads to bankruptcy, our state’s resulting political culture is quite predictable. Many Marylanders are simply unmindful of the necessities of survival in the private sector: pleasing customers, controlling costs and satisfying shareholders. Thanks to the federal tax dollars collected from the rest of the country and spent in Maryland, the prevailing view of economic reality is inverted: The public sector is seen as the engine of prosperity, with the private one along for the ride. Reflecting this culture, our legislators often behave as if business is a problem to be solved.” (Underscoring Forum’s.)
The Old Dominion
The Tax Foundation report suggests some answers to this question –
“The 10 best states in this year’s Tax Climate Index are:
2. South Dakota
6. New Hampshire
Explains Mark Robyn –
“It is obvious that the absence of a major tax is a dominant factor in vaulting many of these 10 states to the top of the rankings. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate tax, the individual income tax, or the sales tax. Wyoming, Nevada and South Dakota have no corporate or individual income tax; Alaska has no individual income or state-level sales tax; Florida has no individual income tax; and New Hampshire and Montana have no sales tax. The lesson is simple: a state that raises sufficient revenue without one of the major taxes will, all things being equal, have an advantage over those states that levy every tax in the state tax collector’s arsenal.” (Underscoring Forum’s.)
Virginia had a chance to try this approach with the 2010 proposal of Richmond’s Bob Marcellus “Ending the Corporate Tax Will Create Jobs” (Richmond Times-Dispatch), which apparently went nowhere in the McDonnell Administration.
Marcellus had written –
“Abolishing this tax, with a date certain 12 to 24 months in the future, creates a ‘wow’ factor for growth while still building tax revenue until the actual implementation. This window buffers state revenue while building the base that culminates in a sustained growth of revenue created by an ensuing 0.5 percentage point to 1 percentage point expansion in the annual growth rate of Virginia’s GDP. This roughly translates (on the low end of expectations) to creating new jobs for the entire city of Bristol — population 17,000 — every year. The Congressional Budget Office reported in 2006 that more than 70 percent of the burden of corporate income taxes falls on labor. A European Union study of 50,000 businesses found an even stronger connection to wages — a 1 percent increase in corporate income tax rates leads to a 0.92 percent decrease in real wages.”
And as Marcellus pointed out –
“I note that this stimulus to a state or nation’s economy does not discriminate as to industry or interest group. Eliminating the corporate income tax will offer a true stimulus that requires no bias — you do not have to have a stake in a government-subsidized industry to benefit. The current federal ‘stimulus’ initiatives — in the form of expanded government spending and income redistribution — ignore the important difference between market investments of private capital on the one hand and government programs that usurp markets and drain away private investment capital — or dilute our currency — on the other.” (Underscoring Forum’s.)
Readers should try at least to eyeball the entire 2012 State Business Tax Climate Index here. They will find it full of useful data and insights.
UPDATE! Scroll to end — “Thirty Problems with the ‘Gang of Six’ Proposal“
As what is becoming an historic struggle over bringing Federal spending — and thus Federal power — under control, northern Virginia Representative Frank Wolf (and Tennessee Democrat Jim Cooper) on Tuesday wrote to House Speaker John Boehner and Democrat leader Nancy Pelosi —
“The Gang of Six plan is bitter medicine and, while not perfect, could restore our fiscal health. There is never a convenient time to make tough decisions, but the longer we put off fixing the problem, the worse the medicine will be. We believe this approach deserves the full and immediate attention of the House of Representatives.” (Underscoring Forum’s.)
Ben Pershing in his Washington Post piece of yesterday “Frank Wolf backs ‘Gang of Six’ plan” even claimed “Wolf has long been an advocate for fiscal discipline” citing as evidence Mr. Wolf’s own website.
Let’s see how conservatives view the Gang of Six “plan” which Mr. Wolf endorses. They estimate tax hikes ranging from $1 trillion to $3 trillion.
Today the editors of National Review on Line in their “Government by Platitude” declared–
“Some Republicans are getting desperate over the debt-ceiling debate, but we hope not desperate enough to embrace the Gang of Six proposal. It may be the worst of the debt-ceiling compromises placed before them to date.” . . . . “The main deficit-reduction instruments would be a $1.2 trillion tax hike and deep cuts to defense spending”. . . . “If the tax side is contradictory, the spending side is simply fuzzy — it depends on the vaguest of generalities. It calls for the government to ‘encourage greater economic growth’ and ‘spend health-care dollars more efficiently.’ That is government by platitude.”(Underscoring Forum’s.)
The American Enterprise Institute’s Marc Thiessen in today’s Washington Post reveals “The Gang of Six’s $3 Trillion Tax Hike” –
“When normal people judge what constitutes a tax increase, they compare what they will pay tomorrow to what they are paying today. If that number goes up, it’s a tax increase. That is not how the Gang of Six did its tax calculations. The Gang of Six’s assumptions are based on current law, not current policy. Big difference. Current policy assumes Americans will continue to pay what they are paying right now. Current law assumes that, over the next decade, taxes will go up by some $4.5 trillion dollars because of tax cut expirations. The Gang of Six reduces this $4.5 trillion tax increase by $1.5 trillion — and calls it a tax cut. But the practical result is really a $3 trillion tax increase over what Americans pay today.”
And for those who would prefer to get their analysis from a Republican pillar, here (video) is senator Jeff Sessions, ranking Republican on the Senate Budget Committee-
“The Tea Party People: Why Shouldn’t They Be Angry?”
“The myth that the Gang of Six outline is a concrete plan with $4 trillion in deficit reduction: ‘My staff on the Budget Committee, taking the summary pages that they’ve produced for us, can only find $1.2 trillion in reduced spending in that outline, along with what is clearly a $1 trillion tax increase. Where does the other $1.5 trillion in deficit reduction claimed in the outline come from?’”
What did Alabama Senator Jeff Sessions say about our fiscal fix?
“When this kind of leadership has occurred in the Congress of the United States of America, it is utterly, totally indefensible — it should never, ever have happened.”
Conservatives should hear the entire Sessions video.
But the good Mr. Wolf is a big-government Republican, and he is — and has been — a part of the Beltway GOP Establishment.
In our May 14 post “Does Appropriator Frank Wolf Seek A Taxing Bargain?” we summarized–
“Some Highlights of the Wolf Spending Record”
“We vividly recall Dan Mitchell’s warning in 2003 that the House-of-Representatives-embellished Medicare Prescription Drug Act would jeopardize the Bush tax cuts. Mr. Wolf along with most (but not all, Mike Pence for example) Republicans supported that measure. (To apportion paternity equitably for the Medicare Prescription Drug Act, Mr. Norquist’s Americans for Tax Reform failed to put a spoke in the wheel of that major entitlement expansion so important to the Bush White House.) Frank Wolf also voted for an expansion of the costly SCHIP program during the opening days of the Obama Administration; he had earlier voted to override then president George Bush’s veto. (See our A Rush to Government Medicine: SCHIP and the ‘Stimulus.’ ) Mr. Wolf also voted for No Child Left Behind. He voted for the TARP bill in 2008, although one wouldn’t know it from his current anti-deficit rhetoric. Just last month, he voted against the tougher (even than Ryan) Republican Study Committee (Garrett) version of the FY2012 Budget Resolution.”
“Mr. Wolf expresses concern about the supposed Grover Norquist opposition to getting rid of the ‘ethanol subsidy’ in his Thursday Washington Post op-ed. But in 2007 Wolf voted for the final version of the Energy Independence and Security Act of 2007 which mandates ethanol use. In fairness, Wolf’s op-ed was referring to a dispute over what constitutes a tax hike. But he is using the properly criticized ethanol program as a sympathetic back drop. Consequently readers should be aware of Wolf’s vote for the ethanol mandate. Here are the final 2007 Senate and House votes. Here is our take from 2008: Senate Energy Expert: ‘Dramatic’ Action to Fix Ethanol Mess, where GOP Senator James Inhofe slams the 2007 ethanol mandate.”
Mr. Wolf’s positions were rarely if ever publicly questioned by the local GOP Establishment. He can accurately say that he spoke for the movers and shakers of Loudoun County. Consequently they now share responsibility for the actions he took in expanding the Federal (and by derivation) the local role of government.
The only remaining question is whether any grass-roots conservative groups in his Congressional district have emerged with sufficient grit and wit effectively to call Mr. Wolf to account and bring him to a better mind.
* * * * *
UPDATE! Michael Hammond, former General Counsel of the Senate Steering Committee, spells out “Thirty Problems with the ‘Gang of Six’ Proposal.”
Fiscal Policy Richard Falknor on 13 Jun 2011
SCROLL TO BOTTOM FOR ALL UPDATES!
Blue Ridge Forum has always understood that “ethanol” owns Washington, D. C. as “slots” own Annapolis.
But tomorrow the ethanol cartel may prove not quite so fireproof — at least in the U.S. Senate.
Politico’s Darren Goode reported last Thursday in his “Coburn forces Tuesday ethanol vote” that –
“Sen. Tom Coburn has pulled the trigger and is forcing a long-sought vote on an amendment repealing billions in annual tax incentives for ethanol.
The Senate will vote Tuesday afternoon on Coburn’s motion limiting debate on his amendment that would do away with the 45 cent blender tax credit for ethanol — worth about $6 billion this year — and the 54 cent tariff on imported ethanol.
Coburn didn’t inform either Senate Majority Leader Harry Reid or Minority Leader Mitch McConnell before he made his move, appearing to catch both completely off guard.”
Last Saturday, The Hill’s Bernie Becker gave us useful detail in his “Vote to end ethanol subsidies revives Coburn-Norquist tax revenue battle” –
“Both Coburn and Norquist have said they opposed a tax credit that gives refiners and gasoline blenders 45 cents for every gallon of ethanol bought and combined with gasoline – a policy the Government Accountability Office says cost about $5.4 billion in 2010. Coburn, whose measure is set to be voted on as an amendment to legislation reauthorizing the Economic Development Administration, calls it the kind of spending in the tax code that unfairly chooses economic winners and losers.
The amendment is strongly backed by the fiscally conservative Club for Growth, and the proposal has received support in the past from groups like the Heritage Foundation.”
“But [Grover] Norquist has expressed concern that the Oklahoma senator’s measure – which does not offset the revenues from the ethanol subsidy – is a stalking horse for a broader push to find new tax revenue, something Coburn is calling for more and more to help close yawning budget gaps.
‘His goal is to try and say: ‘Ha, ha, see in some cases it’s OK to eliminate credits and deductions and not offset it,’ the Americans for Tax Reform president told The Hill on Friday. ‘And then he’ll come back with $2 trillion in tax increases and try to say that’s somehow not a tax increase. It’s wrong on so many levels.’
The scheduled ethanol vote comes as Coburn and Norquist have sniped at each other consistently in the recent weeks and months, in large part over Coburn’s participation in the Gang of Six.” (Underscoring Forum’s.)
GOP senator Jim DeMint of South Carolina declared Friday through a press release –
“Today [last Friday], U.S. Senator Jim DeMint (R-South Carolina) announced his support for the repeal of subsidies, mandates, and tariffs on ethanol. Senator DeMint will vote in support of an amendment offered by U.S. Senator Tom Coburn (R-Oklahoma) to repeal the ethanol subsidy and the tariff on ethanol imports. Senator Coburn filed a cloture petition on the amendment on Thursday to end debate, which Senator DeMint signed, forcing a vote on Tuesday afternoon. Senator DeMint announced that he also plans to offer an amendment to repeal the renewable fuels standard that requires blenders to use ethanol. (Underscoring Forum’s.)
“Americans for Tax Reform today reiterated its support for full, tax revenue neutral repeal of all government granted advantages and preferences to the ethanol industry. To this end, ATR is pleased to support Senator Jim DeMint’s amendment which repeals the Renewable Fuel Standard (ethanol mandate) and kills the death tax. This amendment fills in the gaps left by Senator Tom Coburn’s ethanol amendment and overwhelms the Coburn tax increase with a more significant tax reduction. The Coburn amendment repeals the ethanol tax credit and tariff but in a way that raises net taxes and grows government spending. The DeMint amendment abolishes the death tax which is a significantly larger tax cut than the Coburn amendment’s $6 billion tax increase. The DeMint amendment also cuts to the heart of the government’s support for ethanol by repealing the mandate that requires American families to purchase ethanol at the gas pump.”(Underscoring Forum’s.)
“Taxpayer Protection Pledge signers should feel free to support the Coburn amendment provided they also vote for the DeMint amendment.”
ADD-ON: Readers may want to re-visit Dan Mitchell’s analysis which we posted (scroll down to middle of article) last May 14 - -
Supply-side economist and tax reformer Dan Mitchell wrote last March in his “Norquist Is Right and Coburn Is Wrong: Tax Increases Will Lead to More Spending, Not Lower Deficits” –
“I’m a huge fan of Senator Coburn, who was in favor of cutting wasteful spending before it became fashionable. His office, for instance, releases a “Pork Report” every couple of days. But you shouldn’t read it if you have high blood pressure, because it will confirm (and reconfirm, and reconfirm, ad nauseum) your worst fears about tax dollars getting wasted. Nonetheless, I’m on Grover’s side on this tax debate for two reasons. First, we have a spending problem, not a revenue problem or a deficit/debt problem. Red ink is undesirable, to be sure, but it is a symptom of the underlying problem of a government that is too big and spending too much.” . . . “The second reason for a firm no-tax increase position is that higher taxes are a very ineffective way of reducing budget deficits. Indeed, tax increases generally backfire and lead to more red ink. To understand why, it’s important to put away the calculator and instead consider the real world of politics and public policy.”
UPDATE JUNE 17! Timothy Carney asked yesterday “Eliminating an ethanol subsidy: Does that count as hiking taxes or as cutting spending?” (Washington Examiner)“After killing a similar measure yesterday, the Senate voted today to scrap the federal ethanol tax credit. This tax credit is one of many subsidies ethanol receives — the most important one is the federal ethanol mandate. The effort to kill the credit is also at the heart of the ugly intra-conservative fight I wrote about in my column today.”
UPDATE JUNE 14! The Ethanol Cartel triumphs again! Here is this afternoon’s vote denying cloture to senator Tom Coburn’s amendment “to repeal the Volumetric Ethanol Excise Tax Credit,” 40 yeas to 59 nays. (60 yeas were needed for cloture.) 13 Republicans voted for the Dark Side. Perhaps Tea Partyers and grass-roots conservatives should ask all Republican incumbents and candidates whether they are pro-market or just pro-(their favorite)-business. As James Pethokoukis explains: “Pro-market public policies make markets function fairer and more efficiently for everyone. They encourage competition and ‘creative destruction’ and entrepreneurial capitalism. Pro-business policies often shift taxpayer money and other government goodies to favored companies, raise barriers to entry and otherwise defend the status quo.”
Here is ATR’s statement on today’s failure to invoke cloture.
Yesterday evening, by an overwhelming vote, the U S House of Representatives refused to raise the national debt limit without a plan to cut the deficit.
But Maryland Republicans should not expect that yesterday’s House GOP vote will elicit any kind of stop-the-spending, slow the earmarks model from their notables in the General Assembly.
Click here to see the legislative bond bills approved by this year’s General Assembly – - then print the list out for closer study. For readers who want some recent history about these debt-expanding schemes, here, here and here are the lists for 2010, 2009, and 2008.
Early last February, we asked Who Is Jeannie Haddaway-Riccio? – -
“Jeannie Haddaway-Riccio is the GOP whip in the Maryland House of Delegates, officially the number two person in that chamber’s Republican leadership.” . . . . “Last week she and the GOP House of Delegates Republican leader Tony O’Donnell wrote House Speaker Michael Busch –
‘We are writing to inform you that our caucus has taken the official position recommending against the inclusion of legislative bond bills in the FY 2012 budget.
As you know, bond bills increase the state’s capital debt service which is funded through the property tax revenue and supplemented with general fund dollars. According to the Department of Legislative Services, property tax revenue is projected to be $326 million less than debt service costs by FY 2015. With a projected budget deficit in FY 2015 of $1.8 billion, we will be hard pressed to supplement that shortfall through the General Fund. We realize that the bulk of this shortfall is related to debt already issued, but we feel the focus should be on reversing the damage, not making it worse.’ (Underscoring Forum’s.)
But that didn’t keep Jeannie Haddaway-Riccio from continuing to sponsor two and co-sponsoring three such measures.”
Yet she still did not remove her name from sponsoring or co-sponsoring these bond bills. Not surprisingly, she voted against the Maryland capital budget this year. The likelihood was overwhelming that the budget would pass both chambers of the General Assembly.
Significantly, all five of the projects she sponsored or co-sponsored received some taxpayer money via enlarging Maryland indebtedness: four of them from state senate action, one of them from action by both chambers. The details can be found here.
But let’s not overlook the significant spenders among the GOP members of the Maryland state senate. Only four GOP state senators Getty, Reilly, Shank, and Simonaire courageously voted this year against the pork-prone capital budget. The capital budget includes the legislative bond bills – - but also other larger expansions of Maryland public debt.
The state senate Republican leader and all three GOP members of the crucial Budget & Taxation panel voted for the capital budget. Of course, state senate GOP leader Nancy Jacobs has, in earlier years, shown her fiscal acuity by voting (2007) for the Maryland Clean Cars Act which measure (see p. 7 in foregoing link) promised to add to the purchase price of cars sold in Maryland.
What an example these four senior GOP state senators are now setting in such dangerous times by supporting questionable capital expenditures!
“Consider that the total outstanding bond debt of state and local governments is about $2.4 trillion. If one accounts for pension and health-care debts using the figures supplied by Novy-Marx and Rauh (among others), the total outstanding obligations of the states rises to as much as $6.4 trillion—meaning that our sub-national governments are nearly three times further in the red than they appear to be at first glance.” (Underscoring Forum’s.)
Readers may scroll through the final text of HB 71 to make their own judgment about which bond provisions were vital for Maryland infrastructure today, and which ones
- either should not be built with taxpayer money at all;
- are already covered by Federal programs, e.g. hospice; or
- should have to wait until more sober times.
The following caught our eye as meriting much closer scrutiny:
“Baltimore Museum of Art. Provide a grant to the Board of Trustees of the Baltimore Museum of Art for the design, renovation, and reconfiguration of facilities at the Baltimore Museum of Art, subject to the requirement that the grantee provide an equal and matching fund for this purpose (Baltimore City) ….. 2,500,000.”
“East Baltimore Biotechnology Park. Provide a grant to the Mayor and City Council of the City of Baltimore for demolition in the East Baltimore Biotechnology Park area, subject to the requirement that the grantee provide an equal and matching fund for this purpose (Baltimore City) ……………2,500,000.”
“Maryland Hall for the Creative Arts. Provide a grant to the Board of Directors of the Maryland Hall for the Creative Arts for the construction of improvements to the Maryland Hall for the Creative Arts, subject to the requirement that the grantee provide an equal and matching fund for this purpose (Anne Arundel County) ……250,000.”
“UNIVERSITY OF MARYLAND BALTIMORE COUNTY
(Baltimore County) New Performing Arts and Humanities Facility. Provide funds to construct and equip a new Performing Arts and Humanities Facility ……………31,200,000.”
“JEFFERSON PATTERSON PARK AND MUSEUM
(Calvert County) Riverside Interpretive Trails and Exhibit Stations. Provide funds to construct a system of trails and exhibits at the Jefferson Patterson Park and Museum ….. 1,001,000.”
Here is the Department of Legislative Services (DLS) “Capital Budget Fiscal Briefing” of January 2011 for those who wish to plumb the details.
But this political malpractice won’t stop unless the Maryland Tea Partyers and their allies get on the case of individual porkers who sail under the Republican flag.
Fiscal Policy Richard Falknor on 01 Mar 2011
“While the fight over reforming public-employee pensions has only just begun, state coffers are already running perilously low. What we need now are serious reforms—plans that focus on the underlying causes of pensions’ excessive costs and excessive risks. The good news is that the looming pension meltdown is still within our power to avert. The question, then, is whether lawmakers and public workers can muster the discipline and political courage to do it.” – Josh Barro
Via Yuval Levin at NRO yesterday, Josh Barro’s “Dodging the Pension Disaster” (National Affairs) lays out some tough paths that governors and state legislators must follow if our state politicians can plausibly claim to have put their public-pension systems on a sound path.
If Barro is to be believed (and we do believe him), few governors can say they have taken the necessary (if politically unpalatable) steps necessary to reform their state’s pension systems and thereby have saved their state’s financial condition in the long run.
Here are some extracts from Barro’s illuminating article — which might well have been titled “Shooting Niagara” (Underscoring is Forum’s throughout):
Paying Out Over-Promised Benefits Will Squeeze Out Core Services
“Concern about this impending crisis should extend far beyond state capitals, because its consequences will affect much more than state balance sheets. The staggering burden of paying out retirement benefits is increasingly preventing state and local officials from financing all the other services that citizens expect their governments to perform. For example, Camden, New Jersey—one of the most crime-ridden cities in the country—recently had to lay off nearly half its police force because the state’s public-sector unions, including those representing police, were unwilling to cut costly benefits provisions from their contracts.”
Taxpayers Are On the Hook for Very Generous Pension Benefits
” . . . [T]axpayers aren’t even fully aware of the degree to which they are on the hook for state workers’ generous benefits. Indeed, one of the inherent dangers of defined-benefit pensions is that such schemes allow lawmakers to promise future payments to state workers without having to fund those benefits adequately in the here and now. And because the present costs of state workers’ benefits are never transparent to the voting and taxpaying public, politicians enact more expensive benefits provisions than they could get away with otherwise.”
State Debt Grossly Underestimated
“Estimates from the Cato Institute and Credit Suisse put states’ unfunded health-care liabilities alone north of $1 trillion. And economists Robert Novy-Marx (of the University of Chicago) and Joshua Rauh (of Northwestern University) find that pension funds are short by more than $3 trillion. These numbers are enormous, but their true magnitude becomes more clear when they are placed in fuller context. Consider that the total outstanding bond debt of state and local governments is about $2.4 trillion. If one accounts for pension and health-care debts using the figures supplied by Novy-Marx and Rauh (among others), the total outstanding obligations of the states rises to as much as $6.4 trillion—meaning that our sub-national governments are nearly three times further in the red than they appear to be at first glance.”
Cleaning Up The State Pension Mess: A Core Strategy
“. . . [T]here are three general principles that states can follow if they want to enact meaningful reforms with a chance of staving off pension disaster.
First, pension reforms should include all benefits that will be accrued in the future, not just benefits that will be accrued by new hires. As mentioned earlier, most states are limiting their pension reforms to new employees only—which means they are likely dooming their reforms to failure.”
. . . . .
“Second, serious pension-reform plans should abandon the defined-benefit model. Three states—Michigan, Alaska, and Utah—have enacted reforms that will move many employees to defined-contribution retirement plans, or at least to sharply modified defined-benefit plans that shift most investment risk away from taxpayers. In most states, however, pension reform has been a matter of tinkering: increasing employee contributions, adjusting benefit formulas, raising retirement ages, and so on.”
. . . . .
“Third, states should consider voluntary buyouts of existing pension benefits. The two reform principles outlined above address only the costs of pension benefits going forward; they do not help resolve the very real problems associated with states’ existing pension liabilities—those that were incurred by governments as payment for labor that employees provided in the past. Here, there are no easy policy maneuvers: Short of defaulting on these debts, the only way states can eliminate unfunded pension liabilities is to fund them. Unless, that is, employees voluntarily agree to sell their pension benefits back to their employers. Even if governments can be trusted to make pension-benefit payments as scheduled—which, given some states’ current circumstances, is a big ‘if’—many employees would probably accept significantly reduced pension payouts if they could get their benefits in one up-front, lump-sum payment.”
Barro’s is a thoughtful, meaty article, in which we can only point to some highlights.
What does all this mean for Maryland and Virginia. Local Tea Partyers and grass-roots conservatives might consider assembling informal study groups to review the basics of fundamental state pension reform — “working parties” that try to include one management expert with at least some some of the skills of Utah’s state senator Dan Liljenquist, through whose efforts that state “narrowly escaped catastrophe.”
Our grass-roots need to take the time to understand and articulate some essential pension reforms.
Without on-the-ground and savvy support from local, informed citizen groups, will state politicians, to repeat Barro’s phrase, be able to “muster the discipline and political courage” to accomplish these reforms?
And of course, a very tough barrier to overcome will be the political class denying that there is a pension problem that requires serious restructuring. “Not in our state, maybe in some other one” — you can hear it now from elected officials who may, of course, move on before the worst happens.