As West Virginia is heading for a special gubernatorial election in October, the state's budget is going nowhere. The state's budget is burdened by its pension liabilities and Medicaid - archtypical welfare state budget busters. Huntingon, WV-based Herald Dispatch reports:
Monday, January 31, 2011
Sunday, January 30, 2011
The Dark Side of the Welfare State comes to your neighborhood when government can no longer deliver on its promises, yet keeps pretending it can. In my book Remaking America I describe in detail, at the street level, exactly what this means. I have predicted that we still have 4-5 years before the Dark Side will cast its shadow over America. But with the pace at which government is growing, that prediction may prove to be too conservative. A report in The Boston Herald gives us a glimpse of how the American welfare state is turning citizens into irritating cost units - a clear and chilling sign The Dark Side of the Welfare State is setting up camp right here in America:
Friday, January 28, 2011
The latest issue of The Liberty Bullhorn is now available:---
One of the most difficult moments in public policy – whether research or legislative practice – is the transformation of moral and ideological principles into real, actionable solutions. This is particularly obvious in the realm of the welfare state and its entitlement programs. A key to reforming entitlement programs in the direction of less government and more citizen involvement is to return control over the funding of entitlements to taxpayers. As two recent research contributions show, this does not have to mean an immediate elimination of taxes as an instrument of funding. The essential part is to return control over how taxes are spent to citizens.
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Bobby Jindal, Louisiana's hard-working governor, is the target of a raise-taxes-now rant by Edward Ashworth of the Louisiana Budget Project. Without specifying who should pay the higher taxes he wants, Ashworth spends an op-ed in New Orleans-based Times Picayune on blaming tax cuts a few years back for The Pelican State's current budget deficit:
Wednesday, January 26, 2011
This blog recently reported that the city of Madison in Alabama ran a surplus in 2010 of 24 percent of its revenues. This surplus was only the top-off on a series of years of excessive surpluses - and yet city politicians went out of their way to attract more retailers to the city so they could harvest more sales tax revenues. Not all cities are equally eager to exact confiscatory taxes from their residents. Macon, GA is an example. As the local TV station WMAZ explains, Macon put more focus on cutting spending than raising taxes. But there is a downside even to Macon's finances that WMAZ does not mention:
Politicians know taxes hurt business. This is why they give out tax credits and make exemptions from their own taxes. But their understanding of common-sense economics tends to wither away when government revenues drop in recession times. Instead of reforming away deficit-driving entitlements, politicians cater to their own spending addiction and seek to replace lost revenues. Alas, tax credits and exemptions come under fire. The latest example is from Connecticut where lawmakers and the governor are considering termination of sales tax exemptions. The Hartford Courant has the story:
Florida has been hit hard by the downturn in the real estate market and construction industry. Like most of their colleagues around they country, Sunshine State legislators are struggling with a revenue shortfall. So far their list of solutions excludes tax increases - something that is on the agenda in other states - and focus is instead turning to spending cuts. This focus is laudable, but there are other problems in the state budget than just the General Fund deficit. The Orlando Sentinel reports:
Tuesday, January 25, 2011
City governments are in almost as much fiscal trouble as state governments. This has led to an absurd hunt for revenues, especially where sales taxes are a crucial component of city funding. Madison, Ala., believes it is in such deep revenue trouble that it needs to hire a person to recruit sales-tax generating retailers to the city:
Newly minted Governor Martinez in New Mexico has pledged not to raise taxes. The battle over the state's budget will certainly put that pledge to test. An immediate hot spot is her proposed reduction in the tax break for movie production. An editorial in the Santa Fe New Mexican illustrates how tough the battle over the state budget will get. The editorial leans against corporate tax breaks - a measure commonly used by politicians to attract businesses to their state - except, oddly, for movie companies:
Monday, January 24, 2011
The News and Observer in North Carolina has an interesting forum for discussing the state's budget crisis. They invited two public policy analysts to give their takes on the state's budget crisis.
Sunday, January 23, 2011
One of the toughest reform battles in the realm of the welfare state is centered on the core welfare programs, such as Temporary Assistance to Needy Families, TANF, and Food Stamps, now known as the "Supplemental Nutrition" program. For moral as well as tough economic reasons it is difficult to develop workable models that reduce government presence in caring for the poor, which is what these programs were originally designed to do. Some steps are being taken toward turning the cost tide in the core welfare programs, although the reform efforts discussed in an article in the Press Herald in Portland, Maine move the programs in the right direction, far more radical, yet perfectly workable models are available. But first, the story from The Pine Tree State, which is about efforts to limit the ability of welfare recipients to draw cash on their welfare cards:
Saturday, January 22, 2011
Turning the tide of big government is a work of big dimensions, and small. The Denver Post reports on an example of the small-scale efforts. The Joint Budget Committee of the state legislature has voted not to add money to a program paying for breakfasts at school for low-income children. The program already has a balance from previous years when it has been over-funded, which raises the question why the vote not to add more money was 3-3 and not 6-0:
Friday, January 21, 2011
As media reports that the federal government is working behind the scenes to create an opportunity for states to declare bankruptcy, they inaccurately state that pension liabilities are the main causes of states' tentative debt-service defaults. Reports the New York Times:
The latest issue of The Liberty Bullhorn is now available:---
A group called RestoringFreedom.Org has proposed an Amendment to the U.S. Constitution aimed at curbing or eliminating growth in the federal fiscal debt. The group’s intentions are good, but there are important reasons why a Constitutional Amendment is the wrong way to go. Existing debt-capping laws have been ineffective since 1917 and nothing is done to change debt-causing economic mechanisms.
This economic newsletter has explained in detail that the root cause of government debt is the entitlement programs in the welfare state. These programs will remain in place.
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Thursday, January 20, 2011
State governments keep wrestling with deficits. As explained in the latest issue of The Liberty Bullhorn (order your copy at email@example.com) these deficits are driven by ideologically motivated entitlement programs. Yet even in states where Republicans are in control or strongly influence policy there are no concerted efforts to address these entitlements. Instead, there is an emerging trend of tax increases to close deficits. Texas is the latest example, as reported by the Politex blog in the Fort Worth Star-Telegram:
Tuesday, January 18, 2011
Many conservatives around the country believe great things will come from South Carolina's new governor, the Sarah Palin-backed former state congresswoman Nikki Haley. Anyone with some knowledge of politics in The Palmetto State will raise an eyebrow at such expectations. From a fiscal viewpoint Haley's legislative track record is only modestly conservative. It is a safe bet that she will not deviate from her established record and radically change the structure of government. More than likely, deficit-driving entitlements will remain in place in South Carolina during her gubernatorial tenure. An early test as to whether this prediction is right will come when she addresses the gaping deficit hole in the state's Medicaid program. From The State:
Monday, January 17, 2011
Michigan's newly inaugurated Governor Rick Snyder is getting ready to deliver his thoughts on the state's budget crisis. The governor's budget proposal is not due until next months, but the Detroit Free Press nevertheless expects some initial ideas in his speech on what he intends to do about the state's $1.8 billion budget deficit. The long list is nevertheless interesting because The Great Lakes State is now completely in Republican hands. That gives the GOP a chance to show what they are good for in dealing with the economic consequences of the welfare state and intrusive government that America has built for itself over the past few decades:
Fergus Hodgson, Capital Bureau Reporter with the Louisiana-based free market think tank Pelican Institute for Public Policy, has written an important report on the state accounting system in Louisiana. Hodgson contrasts an analysis of the state's debt from Institute for Truth in Accounting with The Pelican State's own official method and finds that despite the state's claims of balancing its budget, Louisiana taxpayers are shouldering a growing financial debt burden:
Sunday, January 16, 2011
Another city is making hair-raising priorities. This time it is Camden, NJ, the second most crime-ridden city in the country, where the mayor doles out $6 million in "community development" grants and lays off police officers. From the AP News:
This blog thanks reader Christina for news tip.
Recently the Anchorage Daily News reported on the city's proposed budget cuts. The newspaper was thrilled to announce that Anchorage mayor Dan Sullivan had been able to reduce the layoffs proposed in his first budget for the 2011 fiscal year. Instead of concentrating the city on its essential functions, the city is laying off police officers and proposing sending crime-solving detectives out on the streets in uniform:
Saturday, January 15, 2011
As the national economy slowly transitions from the flat bottom of the recession to a very slow recovery, state governments are beginning to forecast improved revenues. One of them is Vermont where Governor Shumlin is hearing cautious optimism from his economic advisors. From the Burlington Free Press:
Friday, January 14, 2011
Like California, Iowa has re-elected a governor of yore, though not as erstwhile as California's Governor Moonbeam. But just like his new-re-elected colleague out in California, Governor Branstad is hurled straight into the state's dire fiscal straits. From the Omaha World Herald:
Thursday, January 13, 2011
This week's issue of The Liberty Bullhorn is now available:---
The welfare state is a European invention that Americans are only partly familiar with. While many rightly claim that government is too big in America, it still has not reached the proportions it has taken in, e.g., the Scandinavian countries.
Many suggest taking preemptive action to slow down the growth, or even reduce the size, of government. In order to do so successfully, though, one needs to understand the anatomy of the American welfare state. This anatomy differs from the anatomy of welfare states in Europe as a result of the United States being a federation, not a unitary state.The distinct property of the American welfare state is the intense collaboration between the federal government and the states in funding the welfare state. A closer look at the California state budget illustrates this point.
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America still does not have the full-fledged welfare state that has burdened taxpayers and stifled economic growth in countries like France, Belgium, Sweden and Denmark. One of the missing pieces is universal, tax-funded pre-school. Another push for this expansion of the welfare state is being made by the socialized-education lobby in Indiana. According to the Indianapolis Star, Governor Mitch Daniels is open to the idea:
Wednesday, January 12, 2011
Given the past century of perpetually growing government, and the past decade of ridiculously growing government, America desperately needs politicians who can set examples that it is actually possible to contain government spending - and even cut it. New Jersey Governor Chris Christie has set out to take that leadership role and he is staying the course:
Tuesday, January 11, 2011
The Sacramento Bee reports that California's newly re-elected governor is hitting the ground running on the state budget. The problem is the governor is not running in the right direction:
Monday, January 10, 2011
In the Oregon-based Statesman Journal, officially sanctioned blogger Dennis Thompson tries to make the case that the state's gaping budget hole has nothing to do with state politicians being fiscally reckless. Instead, Thompson alleges, it is really just a matter of paying state employees their inflation-related cost of living salary advancements. The problems is, state spending data and employee compensation numbers are stacked against him:
Sunday, January 9, 2011
City politicians around Ohio are complaining loudly about their budgets. The ability to prioritize and emphasize essential government over non-essential government is conspicuously absent in their priorities. From the Columbus Dispatch:
Saturday, January 8, 2011
Idaho joins the ranks of states struggling to keep their budgets in balance. Unlike others, The Gem State has slowed down its spending over the past couple of years and legislators have worked with Governor Otter to shrink spending to fit the shoes that the revenue stream provides. The focus on spending cuts puts Idaho a big step ahead of other states where legislators still suffer from an insatiable spending addiction, but so long as their cuts are indiscriminate they are not addressing the core problem behind the budget deficit:
Friday, January 7, 2011
Dan Mitchell, Senior Fellow with the Cato Institute, has done a great job covering the fiscal recklessness in Illinois. His forecast that The Prairie State will beat California to bankruptcy is worth taking seriously. In fact, today's CBS Chicago report that Illinois Democrats are pushing for a panic-style tax increase on the state's taxpayers reinforces Mitchell's prediction:
Thursday, January 6, 2011
The latest issue of The Liberty Bullhorn is now available:---
In two years, from 2007 to 2009, the state of Tennessee increased its spending by 19 percent. Going in to 2011 the state is wrestling with a deficit that is about one third of the $5-billion spending increase.
Georgia lawmakers expanded their state’s outlays by eleven percent from 2007 to 2009. They are also wrestling with a deficit that is considerably smaller than the recent spending increase.
In Hawaii the state is expecting a $771 million deficit in its next biennium budget, yet its lawmakers are planning to increase spending by $827 million over the next two years. This comes on top of an eleven-percent, $1.2bn increase in state spending from 2007 to 2009.Rarely do facts illustrate with such clarity the cause and effect of excessive government spending.
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It is time to send another bus load of state legislators into spending rehab. This time they are from Massachusetts. Since October Governor Patrick and the state congress have added $750 million in General Funds spending. But The Boston Herald only provides its readers with the numbers for the General Fund. That is just over half of all state spending - the fact of the matter is that since 2007 total state government spending in The Bay State has grown by 28 percent:
Wednesday, January 5, 2011
One of the safest bets in politics is that New York will never make the top ten list of business and people friendly states. Not only does the state have one of the most big-government friendly legislatures in the union, but the taxes that pay for the spending binge in Albany have been the highest or second highest by national comparison for at least 30 years. Upper-income taxpayers flee the Empire State in droves, thus further aggravating the situation by leaving on average lower-income New Yorkers to foot the big-gov bill. Against this background it was encouraging to hear that Governor Andrew Cuomo wants to "rightsize" government and "fundamentally remake the state". However, as always - socialism, like the devil, is in the details. Capitol Confidential, a publication of the Albany Times Union, reports on Cuomo's first State of the State speech:
Tuesday, January 4, 2011
Like the devil, socialism is in the details. An entrepreneurial woman in Virginia wants to build a community center to help poor, low-income and unemployed people to advance their lives. The center would provide a social worker office, a free health clinic, an office for skill-enhancing education, child care and a cafeteria. The entrepreneur has a track record of creating similar facilities and is trying to get a land deal with the county for her new facility. But county supervisors are stalling the process and putting the project in jeopardy. What at first glance looks like a smooth cooperation between a non-profit entrepreneur and government is in reality a case of political turf marking and a detail-obsessed, bureaucratic quagmire. From the Free Lance Star in Fredericksburg, VA:
I once knew a guy who drove a Mercedes and complained loudly that he did not have enough money to buy a Porsche. I am sometimes reminded of him when I hear politicians lament about the deficits they have to deal with as legislators. The latest example is from Hawaii where the legislature is getting ready to convene again. The Hawaii Reporter explains:
Monday, January 3, 2011
Not all state governments are in the position of having more money on hand than they had planned to spend. But as the Bismarck Tribune reports, North Dakota is expecting a surplus in its new biennium budget:
The Chattanooga Times Free Press reports on the budget problems in Georgia and Tennessee. The report contains at least one important factual error, but it nevertheless highlights the persistent fiscal trouble that state governments find themselves in. The cause of this trouble is the welfare state spending that states and the federal government have developed over the past few decades:
Sunday, January 2, 2011
A common brand of fiscal conservatism dictates that the government balance its budget. This means nothing more than that lawmakers take in as much in revenues as they want to spend. Friends of economic and individual freedom tend to like this idea because they think it somehow brings government size under control. But as budget-balancing European welfare states have proven, you can be fiscally conservative by the balance-the-budget definition and still run half or more of the economy through government hands. It is in other words pointless to do what Montana has done, namely to mandate a balanced budget in the state constitution. From the Billings Gazette:
An often forgotten face of the welfare state is "economic development". Essentially a government handout as a bribe to businesses for doing something the government likes, economic development is at best no more, no less than corporate welfare. At worst, it is government-sanctioned corruption. Regardless of which, economic development has the same negative effect on economic activity: it allows businesses that would not survive on their own to stay active and sometimes even expand. At the same time, businesses that survive on their own are punished directly with taxes that pay for the development/bribery cash to their competitors, and indirectly by potentially going out of business as a result of tax-subsidized inefficient, even incompetent competitors. one of the largest economic development schemes in the country is operated by the federally owned Tennessee Valley Authority (TVA). The Tupelo, Miss., based Daily Journal reports that the TVA handed out $4.3 billion in economic development in 2010, with the TVA's own website reporting almost as much for 2009:
Saturday, January 1, 2011
An American woman living in Sweden has shared her personal story with me. It is about her nightmarish ordeal trying to get treatment in a single-payer health care system, run by government and funded with taxes. I know her full identity and I have been given her permission to share it. Her text has been edited to fit this blog format and to protect her privacy. Click "Read more" below to learn about her experience.
Six out of ten dollars that the state government in West Virginia spends come out of the so called "Other Funds" category - not General Fund and not Federal Funds. Therefore state spending is not easily visible to the general public. This helps explain how the state could increase its spending by 9.3 percent from fiscal year 2008 to fiscal year 2009. It also shows that state legislators have a lot of work to do to rein in government and give the productive, value-creating sector more room to work and thrive in The Mountain State. A meager, four-year plan to phase out the business franchise tax is obviously welcome, but hardly even the beginning of a serious effort. The Charleston Daily Mail has the story: