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Wednesday, July 07, 2010

Conservative Economics at Work

In 1992, Republican and Libertarian economic principles won the day in Colorado. No longer would Big Gummint be able to spend money whenever it thought it needed to and raise taxes to pay for it. The cause of Liberty was served and was poised to become the freest and happiest state in all the land. According to Wikipedia, "[T]he voters of the state amended Article X of the Colorado Constitution to the effect that any tax increase resulting in the increase of governmental revenues at a rate faster than the combined rate of population increase and inflation as measured by either the cost of living index at the state level, or growth in property values at the local level, would be subjected to a popular vote in a referendum." In other words, any tax increase -- except in circumstances so rare as to be nonexistent -- would have to survive a referendum. Called the Taxpayer Bill of Rights or TABOR, this was clearly what the founders intended. Now that more than a decade has passed, let's see how things are going with this triumph of fiscal sanity, shall we?

Denver Post Editorial Board:

We have abdicated our responsibility to manage our elected officials by resorting to the referendum and forsaken our role in a representative democracy. The founders did not establish a direct democracy for a reason. We tamper with this at our peril.

We have foolishly allowed political charlatans to convince us that government in and of itself is evil and should be shrunken to the point that, as famously put by Grover Norquist, the government can be drowned in a bathtub.

Well we are there and the results are ugly indeed. Mandatory furlough days, diminished services, state budgets drenched in red ink. State employees will not receive pay raises and will steadily lose ground to inflation and as retirees leave their positions won't be filled. Schools cannot afford new books and some are struggling to pay for heat and busses for the students. Colorado, once one of the leaders in education in the nation is now 40th in per student spending. Serious conversations around a 4-day school week are occurring in many of our districts.

Cities such as Colorado Springs and Pueblo cannot afford to hire replacement police officers or firefighters and the infrastructure we all depend on such as roads, water systems and sewage treatment plants age into obsolescence.

Yay for conservative common sense!

Even TABOR's supporters acknowledge that things aren't going so well. Colorado Springs Mayor Lionel Rivera, who calls himself "a strong supporter of TABOR," has called for a three year "time out" -- which probably isn't so constitutional. At any rate, suspending or waiving the requirement every time it becomes a roadblock kind of defeats the whole purpose. If Rivera's call is heeded, TABOR would effectively be dead.

TABOR is widely seen as a fiasco. At one point, the state of Ohio was considering adopting a similar amendment and Republican Brad Young, a one-time chairman of both the Colorado Joint Budget Committee and House Appropriations Committee, warned them that it was a really, really, really bad idea.

"The proposed amendment here in Ohio is, at its core, the same as the one in Colorado -- its impact would be the same," Young said. "After twelve years, TABOR is now forcing the state to make draconian cuts to key government programs, especially in higher education and human services. There is no money for capital construction and maintenance or for transportation. Businesses are very concerned that our community colleges and universities are not getting the resources they need to produce a good workforce; health care and infrastructure cuts have created a less attractive business climate for companies to relocate jobs. TABOR will do the same thing here in Ohio."

The problem here is the conservative idea that taxation is the be-all and end-all of economic development. The idea in Colorado -- as in so many states -- was that if you could keep taxes lower than other states', businesses would come flocking. But business owners look at more than just tax rates; as Young pointed out, they look at infrastructure as well. If the schools are junk, then business owners will have a hard time recruiting employees. If fire and police protection is weak, investments will be at risk. If the roads are bad, they'll have a harder time getting the resources they need for their business to thrive. It's like anything else; if your product is cheap crap, you're not going to have the most popular box on the shelf. Your attempt to bring in consumers has the opposite effect. So businesses leave Colorado in favor of states where things actually get done.

And, of course, under economic voodoo like TABOR, this all has a cascade effect. Revenues begin to fall and you have no way of raising them, because people will almost always vote down a tax increase -- that's the entire purpose of TABOR. Too many voters really do believe you can have your cake and eat it too, especially if you've got a lot of people who listen to talk radio and watch FOX News. And this just makes everything worse. In the end, your business climate is as attractive as a case of the swine flu.

In Colorado Springs, buses now stop running at 6:15 PM, cutting employees off from employment and employers from employees. Three city pools have closed. The parks go to weeds. Police are cut to the point where they have trouble keeping up with crime and, to make matters worse, most streetlights are turned off at night.

So what happens when Republican and Libertarian economic principles win the day? Economic disaster.


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