Tuesday, October 31, 2017

The Road to Egalitarian Serfdom

Update: As it happens, my good friend Dan Mitchell today published a piece on his blog that is highly relevant for this article. See inserted link below.
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I appreciate all the inquiries about subjects for this blog that I get from all you readers out there! I do my very best to keep up with them and work them into my own schedule of topics to write about. Please keep your suggestions coming.

Today's article addresses one of those reader suggestions. Some leftist activist has put together a video about "trickle down tax cuts" that apparently has gotten a lot of attention in Wyoming news media. The video, which you can see here, is almost humorous in its unashamed bias and lack of substance, but we obviously cannot respond to it at that level. Unfortunately, bad information is sometimes elevated to a point where it is taken seriously. 

The overall message in this video is two-fold:

Sunday, October 29, 2017

The Spendoholics Strike Back

Never bark at the Big Dog. The Big Dog is always right.

How many times have I warned that the tax-and-spend welfare statists are not going to give up? How many times have I said that stopping tax hikes, and reckless spending ideas like WyoFlot, is merely the end of the beginning?

Beware. Be vigilant. The big spenders are back.

All it took for the spendoholics to cork up another bottle of taxpayers' money is the latest CREG assessment of state government revenue. Reports WMOT Roots Radio:

Friday, October 27, 2017

Another Piece on Tax Foundation Rankings

Behold my latest article for the American Institute for Economic Research:

Economic Growth Defies Tax Foundation Ranking

Tax Hikes or Spending Cuts: The Big Picture

There are many reasons why we need to stop habitually cry for higher taxes as soon as a budget deficit opens up. For one, a few hundred million dollars of higher taxes would throw us straight into a new depression - the serious downturn we have just been through would be mild compared to what $400 million in higher taxes would do to us.

Thursday, October 26, 2017

Wyoming Jobs: Big Government, New Normal

As a follow-up on yesterday's article, here is a review of the latest employment numbers from the Bureau of Labor Statistics (BLS). The overall picture is not very surprising: we are in a weak state of stability that can go either way, depending on what the legislature does in the upcoming session. 

Aside the points I made yesterday about the economic forecast for our state, there is one important piece of information in the latest BLS numbers that I would like to draw attention to. It is not something sensationally new, but rather the reinforcement of a trend that has been going on for a bit too long in our state.

Wednesday, October 25, 2017

CREG Confirms New Economic Stability

Friend: "Do you watch 'The Walking Dead'?"
Me: "No, but I want term limits for them."

I don't know how we got on the topic of horror shows on TV, but we started out discussing the Wyoming economy. Yesterday the Wyoming Tribune Eagle spent half its A2 page on that particular topic. The article was surprisingly sober, almost somber, in its realism and messaging.

Tuesday, October 24, 2017

Another Useless Tax Index Ranking

The Tax Foundation has released its latest issue of the State Business Tax Climate Index. This is the annual product that Governor Mead loves to quote, because it raises Wyoming to the skies as the best of all 50 states for businesses. 

Over the years I have repeatedly criticized this index, pointing in particular to the fact that there is no correlation whatsoever between a state scoring high on this index, and that state's economic performance.

Monday, October 23, 2017

WyoFlot Is Grounded

Today, I drove up to Casper to testify before the Minerals and Economic Development Committee. Five hours on the road, round trip, for a quick public comment on the WyoFlot bill that was supposed to go to the legislature as a committee bill.

It was worth it. After supportive testimonies from Mr. Swelbar, the consultant, and the Aeronautics Division of the Wyoming Department of Transportation, a couple of more supportive voices were heard in the public comments section. I was the only critic.

Friday, October 20, 2017

Laramie County GOP Says No New Taxes

The only way we are going to win the fight for our state's economic future is by means of grassroots activism. There is a lot of it going on around the state, and it is having an effect. We need more of it, though; most welfare statists who say they don't want to raise taxes are just waiting for the grassroots to get tired and go do something else. 

That is the last thing we can do right now.

Thursday, October 19, 2017

Paid Leave: Trump's Gift to the Left

Never bark at the Big Dog. The Big Dog is always right.

It is not just at the state level we are fighting to turn the tide on big government. Even with Donald Trump in the White House - and overall I think he is a good president - there is a significant risk that the egalitarian welfare state continues to grow. One example of this is the paid family leave program that President Trump included in his budget for fiscal year 2018. Contrary to what seems to be the prevailing opinion, this idea has neither died nor shrunk in fiscal size. My previous warnings about this budget boondoggle stand firm. 

Wednesday, October 18, 2017

WyoFlot: Pervasive Lack of Logic

There is an old saying that you can't turn goat's pee into gasoline. Some people try, though, and one of the bravest examples I have seen recently is the report that the Minerals and Economic Development Committee ordered in support of its WyoFlot plans.

Tuesday, October 17, 2017

WyoFlot: Coming to an Airport Near You

Folks,

AN ACT relating to aeronautics; establishing the Wyoming 2 commercial air service improvement act; providing 3 legislative findings; creating the Wyoming commercial air 4 service improvement council; prescribing duties; 5 authorizing contracting; creating an account; providing an 6 appropriation; and providing for an effective date.
As we have been anticipating... the Minerals and Economic Development Committee has released a draft version of a bill to create a state government airline in Wyoming. 

Monday, October 16, 2017

Instead of Tax Hikes: Parents in Charge

I have more to say about taxes and personal income, but the second part will have to wait a couple of days. Based on an inquiry from a blog reader, I would like to take the opportunity to expand on one of the ideas for spending reform that I put together in A New Chapter for Wyoming.

First of all, let us establish the conditions that spending reforms must meet. They all have to:

Friday, October 13, 2017

Taxes vs. Personal Income

There is some interesting data on its way out in the next couple of weeks, both from the Census Bureau and the Bureau of Economic analysis. With those numbers in hand, we will be able to make more predictions about where the Wyoming economy is heading.

Until then, let us continue the exploration of the relationship between personal income and taxes in Wyoming. We will do this in two steps: today's article looks at how much taxes we really pay in our state, compared to personal income; a second installment will compare our tax burden to other states. 

Thursday, October 12, 2017

An Update on the 2018 Governor's Race

We are just over a year away from one of the most critical elections in our state's recent history. Next year in November we will determine which way the legislature will go: left toward more spending and higher taxes or right toward less government, parent choice in education, health care freedom and private-sector driven prosperity. 

Next year's election is also critical because it will decide who is going to be our next governor.

Wednesday, October 11, 2017

Wage Report Raises Questions

They say there are lies, damned lies and statistics. I don't subscribe to that, but with 12 years as a political economist in public policy, and a total of 17 years as a Ph.D. economist, I also know that people in influential positions often try to twist statistical facts into verifying their particular position. 

Tuesday, October 10, 2017

Fewer States Let Income Be Tax Free

My latest piece for the American Institute for Economic Research:
What do Alaska, Connecticut, and Wyoming have in common? They have all tried to get by without an income tax. Soon, Alaska and Wyoming may do what Connecticut did in 1991: start taxing income.


Government Pay: We Stand Out Again

One of the arguments we often hear for why it is good to raise taxes in Wyoming, is that our state has a relatively low cost of living anyway. After all, compare to California and New York and Wyoming is downright a bargain. 

There is just one problem with this argument: Wyomingites in general do not make that much money. In the private sector, with the exception of the approximately ten percent who work in minerals, an average employee pulls in some $37,000 per year. If that were the average personal income in our state as a whole, we would be one of the three worst-off states in the country.

In fact, even if we adjust for cost of living, that average non-minerals private-sector income would put us among the poorest states in the nation. 

Statistically, though, we do not rank among the poorest. On the contrary, as my good friend and fellow economist Byron Schlomach explains in a new research report, Wyoming actually ranks right at the top in personal income. 

Schlomach reports that when personal income per capita (not per employee, which I use) is adjusted for cost of living, Wyomingites have $58,359 in pre-tax income at their disposal. This is the highest number in the country; Connecticut is second ($55,574) and North Dakota third ($55,524).

How is this possible? How can Wyoming, a state where most private-sector employees average three grand a month before taxes, suddenly rank as the most affordable place to live and earn a paycheck?

The reason is not sloppy work on Schlomach's behalf. He is a solid economist who, in his report, takes careful measures to qualify his findings and caution against runaway conclusions. That said, like any other economist he is stuck in a methodology that someone once summarized with the words: you get the answers you ask for. In using traditional economics methods, Schlomach has to narrow down his focus and leave out some real-world factors that - if brought into the picture - would dramatically alter his conclusions. 

The good thing with Schlomach's study, aside the fact that it is a solid piece of research worth reading, is that he makes a meaningful contribution by defining cost of living in a realistic fashion. In doing so, he establishes that Wyoming's overall cost of living is somewhere in the lower third of all states, in a strictly relative comparison. Using a realistic definition of cost of living, he makes a good case for Wyoming as a relatively affordable state. 

There are, however, two points where his study somewhat skews the picture of cost of living here in Wyoming. First, there is the problem with the sharp division between minerals and non-minerals jobs. Even though our state is suffering from the decline in the coal industry, the difference in earnings between minerals and non-minerals jobs has remained. This, in turn, is due to the overall weakness of non-minerals industries; when minerals production and employment decline, there is no secondary industry there to step in. Incomes outside minerals remain depressed. 

The second point has to do with government - and I have to criticize Schlomach for overlooking this factor in his study. Not only does government artificially drive up compensation of its employees, but the government employment ratio varies substantially between states: in Wyoming, we have some 300 state and local government employees per 1,000 private employees, while in other states the ratio is less than half of ours. 

A high government employment ratio, combined with a big difference in earnings between government and the private sector, can together make a statistically identifiable difference.* The comparatively high per-capita personal income number for Wyoming is partly the result of a very large, well paid government workforce. 

Government employees make more than private employees in every state, thereby pulling up average income. However, the disparity varies quite a bit. Figure 1 shows compensation of employees, per state government employee, per dollar earned by a private employee. In other words, for every $1.00 of compensation of one private employee, a state government employee earns $1.90 in compensation:

Source: Bureau of Economic Analysis

Wyoming ranks fifth-highest in the country, more than 20 percent above the U.S. average, and 52 percent above Indiana, ranked 50th, where the state employee makes $1.25 in compensation per $1.00 of a private employee.

On the local-government side, things do not look much better for Wyoming:


With a compensation disparity of $1.77, we are now 19 percent above the U.S. average, and 51 percent above Kansas, which is dead last at a $1.17 compensation disparity. 

Already here, we have a reason to believe that government is skewing the personal-income numbers in Schlomach's report. But the most compelling numbers on artificial inflation of government employee compensation are reported in the so called government compensation ratio in Figure 3 below. Here, we compare total employee compensation in state and local governments to total employee compensation in the private sector. The percentage we get is, so to speak, a hypothetical tax rate that private-sector employees would have to pay, if state and local government workers got paid directly out of private-sector compensation. 

In other words, in Wyoming in 2016 all private workers made a total of $11.8 billion, and state and local government employees earned almost $4.4 billion in total compensation. This comes out to a ratio of 36.8 percent: if we privately employed paid for our state and local government employees directly out of our paychecks, we would lose almost 37 cents out of every dollar we made:

Figure 3

U.S. average is 17.7 percent. Once again, Indiana comes in dead last at 13.9 percent. This discrepancy makes me wonder what eminent, brilliant services we get from our government employees that Indiana residents have to give up. And no, it is not a matter of us being a rural state: in North Dakota, this government-to-private compensation ratio is 18.5 percent, or almost exactly half of ours. In South Dakota it is 19.4 percent. In Idaho, 20.4.

If we had the same compensation ratio as North Dakota, Wyoming taxpayers would get to keep more than $2.1 billion per year. Inject that back into the private sector, folks, and you would see substantial economic growth and persistently rising prosperity. 

The numbers reported in this article clearly demonstrate that Wyoming looks artificially prosperous, especially when adjusted for cost of living, and that over-inflated compensation of government employees is a major contributor to this artificial image. 

These numbers also demonstrate, beyond a shred of a doubt, that we have built a government sector in our state that is indefensibly expensive. Let us keep that in mind as we continue our arguments with those who want to raise our taxes by up to half a billion dollars. 
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*) I purposely do not use the term "statistically significant". I do not want to make this a peeing contest between different regression models. For the purposes of public policy, a modest diet of statistical methodology is highly preferable. I will be happy to elaborate in case anyone is interested.

Principles of Liberty Classes

Here is an important announcement. I am not affiliated with Principles of Liberty, but I do support their cause. I recommend you participate if you have the day off!

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Sunday, October 8, 2017

When Egalitarianism Strikes

Sometimes, it is important to take a step back from the issues pertaining to our daily work to save Wyoming from its tax-and-spend activists. Our focus must always be on the threat of higher taxes, and the detriments of frivolous government spending, but there is also a broader discussion we must sometimes delve into. This is a discussion of ideas and political and economic theory, the ideas that ultimately help us set course for the horizon, to aim for the kind of country and society we really want.

One of the essential questions at that level is about the proper role of government.

Friday, October 6, 2017

More Taxes Coming Your Way

Last week I reviewed the tax increases we can expect from the state legislature and the governor's ENDOW program, as well as some of the demands from the Wyoming Association of Municipalities. I concluded that in total, we are looking at about $500 million in higher taxes on families and businesses here in Wyoming.

Sadly, that is not all.

Thursday, October 5, 2017

Poverty Trend in Weak Household Spending

In their much-anticipated data on personal consumption, the Bureau of Economic Analysis has some sinister new numbers to report. 

Not for the country as a whole - generally, the U.S. economy is still moving along at a decent pace. If Congress could get Trump's tax reform done, we might be able to extend, even accelerate our current growth.

Again, that refers to our country as a whole. As far as Wyoming goes, the latest private-consumption numbers, from 2016, are not exactly good news.

Tuesday, October 3, 2017

A Lesson on the Income Tax

Nobody wants an income tax in Wyoming. Right? 

If you ask our legislators directly, almost all of them will state clearly that they will never vote for an income tax. Some of them are honest to the core in their answer; others will play on the semantics of the question: so long as you ask about an income tax proper, they think they can be honest with you and still get away with voting for an income tax.

Monday, October 2, 2017

Sober Analysis from State Economist

This blog's readership continues to grow! August was a record month, and September reader volumes inched even a little bit higher. Thank you, Wyoming!

There is a lot to get to this week. We now have a good idea of just how big, broad and serious the threat is to our state's economic future. Those who claim they are working the hardest to save us - our Governor and the legislative leadership - are in reality the ones whose policies are the greatest threat to the future of this great state.