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Tuesday, November 1, 2016

Making Budget Priorities: The HD11 Debate

Last week, on October 25, the Democrat and Republican candidates for HD 11 met for a debate. The incumbent Democrat, Mary Throne, and her challenger Jared Olsen had a pleasant conversation that, in many ways, was the poster child of civilized Wyoming politics. 

There was one part of this debate that made it especially interesting, namely when Throne and Olsen discussed what to do about the state budget crisis. While it was not possible for them to exhaust the issue in this debate, their answers did pave the way for a more principled discussion about the role that government should - or should not - play in our economy.

Both candidates recognized that we do have a budget crisis. That is an important step in itself; only six months ago it was almost impossible to find either an incumbent or a candidate for the state legislature who was willing to admit to any such thing. Even better: while not presenting actual legislative ideas, both candidates laid out the foundations for how they would like to see the state address its budget crisis. 

Any discussion about how to solve the Wyoming state budget crisis must start at the principled level. This is no normal slack in tax revenue - we are dealing with a permanent loss of tax money that, if ignored, will lead to a runaway deficit over the next four years. Therefore, our solutions must be based on a permanent ambition and be guided by the kind of principles that form legislation for the long term.

Jared Olsen did well on this matter. He repeatedly stated that we have a budget crisis, elevating it above "business as usual". Throne responded accordingly, and - as would be expectable from a person of liberal convictions - challenged not only Olsen but all Republicans in the state legislature by bringing up the often-contested term "the role of government". 

This was, perhaps, the most ideologically charged part of the debate. Throne's point was that she has tried to get the state to spend more money on so called "economic development", a spin term for offering tax subsidies to companies that invest in production or other business activities in Wyoming. 

It is perfectly rational for a person leaning left to propose that state tax revenue be used for "development" purposes. Traditional liberalism believes that government not only can, but should, play an active role in the economy. Giving subsidies and incentives to businesses - also known as corporate welfare - is a natural extension of that belief. 

Throne then said that Republicans have refused to go along with her economic-development plans because they do not see it as the proper role of government. She thereby threw down the ideological gauntlet in what could have been an interesting ideological discussion between the two candidates. Unfortunately, Olsen ignored the challenge, focusing instead on his credentials as a consensus builder. 

I am not faulting Olsen for avoiding the debate. It is a difficult topic that elected officials on the right, conservatives and others, increasingly try to stay away from. However, he could have turned the conversation into something productive by accepting Throne's challenge. There is, namely, a very important point embedded in Throne's criticism of Republicans in the state legislature, a criticism that she did not express but that nevertheless follows logically from her argument on economic development. Republicans in the state legislature accept to spend money right, left, up and down on school buildings, administration-laden K-12 education, projects for the University (which should be able to raise those funds privately), a costly Medicaid system, to mention a few. Yet - according to Throne - they draw the line at economic development. 

It should be embarrassing for a conservative to find himself defending government spending that has given Wyoming one of the biggest governments of all states. It does not matter if the conservative explicitly endorses big government, or tacitly avoids a challenge like the one Throne presented: the result is the same in both cases, namely that conservatives come across as inconsistent and short-sighted in terms of the actual economic role of government in our state. 

A proper conservative response to the kind of challenge that Throne offered would be based on a principled understanding of economic and individual freedom. More than that, though, Throne's challenge can easily be brought down to a practical economic level, even without the involvement of a concerted conservative ideological effort. 

Two questions guide the choice of what government should and should not be doing:

1. Can the free market provide the product in question? If the answer is yes, then government should not spend taxpayers' money on providing it. With the exception of a narrowly defined segment of products called "public goods", it is well established in the economics literature that government invariably does a worse job than the free market. When put into practice, this question leads to a rather limited government.
2. Once a government program passes the test in the first question, does it hurt or help the economy to spend money on that program? Just because there is no private-sector industry for a certain product, it does not mean that government should automatically provide those products. There can be many reasons why a product is not provided by free-market forces, such as unsolved property rights disputes (such as, but not limited to, environmental impact) or insurmountable financial risks (the economy could be in a deep recession).

If our state lawmakers would begin their budget discussion this session with these two questions in mind, we might see a very good outcome of their 2017 deliberations. However, until they get this far, I strongly suggest that Republicans accept the ideological challenge that Mary Throne presented them with in the October 25 debate. 

If you have not seen the debate yet, here is your chance. Enjoy!

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