Could Consume-atives Be Deficient?

taxesThey are “consume-ative,” not “conservative,” because well…what are they conserving?

This week’s irony-deficient consume-ative editorial, Give Local Government Budget Control, comes from the president of the Howard Jarvis Taxpayers Association, Jon Coupal. Mr. Coupal worries that unions might protect their wage and benefit agreements from alteration in local government bankruptcies, as is proposed in AB155.

Coupal does not mention Proposition 13, his Association’s signature contribution to public policy, and probably the most important reason such bankruptcies are likely. He also does not mention the consume-ative strategy that encourages reducing taxes but not spending. The resulting deficits make otherwise too-politically-popular-to-cut programs vulnerable to reductions. “Hey,” say our consume-ative friends, “we’re out of money!”… as though it were a surprise.

Wikipedia reports Prop 13 alone led to a 57% reduction in local tax revenues — never mind its requirement for a two-thirds majority to pass any new tax. Then-governor Jerry Brown back-filled this 57% hole with State money, and California’s finances have been precarious ever since.

Consume-atives proclaim we should cut something but seldom propose anything specific. The plan is for bankruptcy court to sort that out, rather than making consume-atives a target for blame. “Take 10% off the top” is another, meaningless Republican proposal in recent budget negotiations. What does that mean, though? Let 10% of the prisoners out? Only treat 90% of the sewage?

More recently cuts proposed by our governor include home healthcare workers for the indigent elderly. Such workers cost a third as much as assisted care homes (which have excellent lobbyists, incidentally), and are orders-of-magnitude cheaper than the inevitable emergency room visits from such patients. Could this be yet another burden on middle class households, even if it’s not a tax?

But isn’t out-of-control spending at the root of the current State deficits? No. Inflation-adjust per-capita state spending increased about 1/8% a year for the last decade, and roughly 1% a year since Ronald Reagan, assuming the consumer-price-index inflation adjustment is accurate for State spending dominated by inflationary sectors like prisons, health care and education. Omitting prisons, real per-capita State spending has actually declined for decades now.

Do we need so many prisons? The U.S. has 5% of the world’s population, but 25% of its prisoners. Canada did not pass the lock-’em-up-and-throw-away-the-key Rockefeller drug laws, or the Reagan policies that led to this imbalance, yet its crime rate differs insignificantly from ours. In other words, gulags are an expense, but not a crime deterrent.

Including prison guards, however, the present number of state workers per capita is less than it was when Reagan was governor, and State spending per $1,000 of personal income is also lower. Mere facts like these do not deter consume-atives like Congressman Tom McClintock from complaining things were better back when taxes were higher. He yearns for the days when college education was entirely funded by the state, something Ronald Reagan terminated.

McClintock continues to say that reducing top marginal tax rates (on the wealthy) is “the only proven way to revive an economy.” However, any graph of tax rates v. median income demonstrates that the fasted income growth occurred when marginal tax rates were highest — during the 1950s and ‘60s (with 92% and 70% tax rates). When Reagan halved rates for the wealthiest taxpayers, the same graph shows far less median income growth.

Incidentally, Reagan and Bush 41 quadrupled payroll taxes. So halving taxes on the rich produced record deficits and even higher taxes on the poor, not miraculous economic revivals. When Clinton raised those marginal rates 3%, the budget balanced, and we had an economy that was the envy of the world.

So are consume-atives deficient, or just deluded? You decide.

Adam Eran

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