Friday, May 25, 2018

The Left, The Wrong and The Right

Two weeks ago I expressed my worries that our fiscal conservatives are not going to step up to the plate and deliver on spending cuts - permanent, structural cuts that change the trajectory of government spending and fix the budget deficit, all at the same time. Since then I have pointed to the need for stronger commitment on spending reform from our gubernatorial candidates, a move that would definitely help bring our legislators closer to good reforms.

As if the arguments for spending cuts are not strong enough, let me today add an angle that - hopefully - will shake up slumbering fiscal conservatives around the state. Yesterday, leftist website Better Wyoming published an article under the headline 
Wyoming’s budget is the smallest it has been in 15 years. We still need new revenues. 
In other words, the left is doubling down on higher taxes. That in itself should surprise nobody; in fact, I have more respect for the hardline statists at Better Wyoming than some people in this state who call themselves fiscal conservatives every time they can smell an election. What is important about their article is that it serves as a formidable reminder of what we are up against. And before we listen to them, let us not dismiss Better Wyoming as a fringe group: they are at least as active as I am, and their candidate for governor, Mary Throne, could get as much as 35 percent of the vote. In a three-way race with a weak Republican and a strong third-party candidate, that could be enough for her to win. 

And, as I explained the other day, if there ever were a governor's race where a third party candidate could give the Republican a run for his money, this would be it.

In other words, it is more important than ever to know what is going on on the left side of the field. Here is Better Wyoming:
In the final days of this year’s Wyoming State Legislative session, House Speaker Steve Harshman (R-Casper) told his fellow State Representatives they should be proud of crafting a lean 2019 – 20 budget. In fact, he said, it is the smallest Wyoming state budget in 15 years. As Better Wyoming reported prior to the 2018 session, the Legislature’s deep cuts to state agencies, public programs, and infrastructure in recent years have had a variety of negative effects: crumbling roads, closing schools, degraded healthcare, rising prison rates, gutting the state’s university. The list goes on.
Before we get to the details of their tax-hike pitch, there is a very simple list of solutions to the "negative effects" they point to: toll the I-80, create school choice (for all kids, not just the rich as the left wants), repatriate Medicaid and make Wyoming a real health-care freedom zone, and privatize University of Wyoming. 

As for the prison rates, that is for legal and criminal-policy scholars to deal with.

Now for the substance of Better Wyoming's budget statement: that it is smaller than it has been in 15 years. The only source they refer to is Speaker Harshman, whose credibility as a budget analyst I began questioning the summer of 2016 when he claimed - in a committee meeting - that Wyoming did not have a budget problem to worry about. Four months later he predicted a $700-million deficit. 

But let us not leave Harshman hanging. Let us actually check his claim. Fifteen years ago was 2003. Back then, total spending by the state government in Wyoming was $4.2 billion, and General Fund amounted to $897 million. In 2017, total spending amounted to $5.04 billion, with a General Fund of $1.45 billion.

At no point in between 2003 and 2018 has either General Fund or total state spending fallen below the 2003 levels. The second-lowest levels were in 2004 with $4.43 billion in total spending and $941 million in the General Fund. To fall below that level, total state spending in 2019 would have to decline by more than $600 million and the General Fund would have to shrink by about half-a-billion dollars.

I am sure that such big cuts would have made bold headlines everywhere, not just at Better Wyoming, whose report on total spending cuts add up to $100 million "over the past three years". While I am sure that Better Wyoming take Speaker Harshman's word for it - and they should be able to do that - the sad fact is that Harshman in this case simply does not tell the truth. First, it is important to recognize that on the one hand, it is correct to say that spending today is lower than a few years ago. On the other hand, however, most of the fluctuations in spending are tied to capital construction. 

Even if we disregard the funding of new buildings (or shrines of worship to our legislature) it is important to put things in context. In current prices, total state spending today is the lowest it has been since 2008; the General Fund is the smallest it has been since 2005. A long time, no doubt, but no 15 years. 

More importantly, though, if we take inflation out of state-spending numbers, things look a bit different. When we take total and General Fund spending as of 2003 and increase them only by inflation-adjusted GDP, both kinds of spending are up in 2017 over 2016. An inflation-adjusted trajectory extrapolating through 2018 leads to the same conclusion: spending is up, not down. And that includes the $100m cut that Better Wyoming is referring to.

The separation between facts and fiction, between factoids and fictoids, is always important. It is even more important in public policy and when the livelihood of hundreds of thousands of people is at stake. Again, I respect Better Wyoming for being the unabashed statists and tax hikers they are, and I understand that they want to trust Speaker Harshman with knowing what he is talking about. However, I do have a problem with proponents of higher taxes who do not answer the simple question: 

What should a family making $37,000 per year - the average income in the non-minerals private sector - give up, so that government can take more of their money away from them?

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