Texas, Welfare Queen

Says Kevin D. Williamson at NRO’s Corner:

Texas has no income tax, a part-time legislature, an enviable economic record — and Senate Republicans there have just introduced a budget that limits the level of spending to the state’s expected revenue. That’s the real killer for liberals: In Texas, revenue determines spending, not the other way around. And liberals hate it.

By pure serendipity, I caught a liberal complaining about Texas just a few items later in my newsfeed:

Texas was the state that depended the most on… stimulus funds to plug nearly 97% of its shortfall for fiscal 2010, according to the National Conference of State Legislatures.

Texas, which crafts a budget every two years, was facing a $6.6 billion shortfall for its 2010-2011 fiscal years. It plugged nearly all of that deficit with $6.4 billion in Recovery Act money, allowing it to leave its $9.1 billion rainy day fund untouched.

“Stimulus was very helpful in getting them through the last few years,” said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers, said of Texas.

It’s a good example of how politics isn’t about policy. It’s about signaling. Texas is a member of the conservative club, regardless of what it does. Even if it mooches shamelessly off the rest of us.

Update: Williamson replies, missing my point. I hadn’t intended to say anything particularly derogatory about Texas myself. I’d only intended to note that what liberals dislike about Texas has no discernible relationship to what Kevin Williamson apparently thinks liberals dislike about Texas. This I’ve already done, and it would be tedious to repeat myself.

Do I think Texas is a “welfare queen”? Well, it could have paid its own way through hard times with money to spare. It declined and took taxpayers’ money instead. I’ll let you decide.

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109 thoughts on “Texas, Welfare Queen

  1. I wonder how much oil subsidy money winds up in Texas’s tax coffers? Louisiana and California get chunks due to the refineries as well, does anybody know how that money winds up being disbursed?

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  2. I’m not sure it shows politics is about signaling over policy. It seems to show what pols say is about signaling but what they do is about governing. Oh and shame and honesty are no longer virtues supporters hold their pols to.

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  3. Are there any states where stimulus couldn’t be said to have “helped get them through the last few years”?

    I guess you could say that if a state didn’t take any stimulus money at all. But then, if they have a budget deficit and don’t take stimulus money they’re “foolishly ideological to the point of harming their residents”. If they didn’t take money and don’t have a deficit then they’re “ignoring the threat of underfunded pensions”. And if they didn’t take money and don’t have deficits and are fully funding their pensions, well, I’m sure there’s a pothole somewhere that will let us do ’em for “crumbling infrastructure”.

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    • It’s just a bit odd to brag of Texas’s balanced budget and frugality, and then chide liberals for hating it. Meanwhile, Texas is effectively lining its pockets — in the form of the rainy day fund — with everyone else’s money.

      Adding insult to injury, there are reasons liberals might not care for Texas, but these are not the reasons conservatives think.

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    • Do you kiss your mother with that mouth?

      But anyway, my point is that it’s baseless to say that liberals hate Texas for its frugality. Texas hasn’t been especially frugal, and it was perfectly willing to throw conservative principles to the wind when federal money came along. That’s what liberals are objecting to here, and… well… they do have a point.

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      • What conservative principles did Texas fail to uphold that it should have?

        The reason we had the stimulus package is because the Republicans lost that battle for fiscal restraint. If we want to have fiscal restraint we have to have actual Republicans as the decisionmakers in Washington.

        Among other things, this is all pretty clear from Williamson’s post at Exchequer (check it out, there’s been a few on the subject), which you seem to ignore. Frankly, I’m a loss to understand the thought process behind your original post.

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        • A conservative government could easily have said “no thanks” to the stimulus money. Particularly if it were as well-situated as Texas, with its rainy day fund. Many states threatened to do so. Texas could have done it, and it would have set an example for everyone. But instead it caved.

          The thought process behind my original post is simple:

          Williamson says: “Liberals hate Texas for A.”

          Moments, later, a liberal says, more or less, “I hate Texas for B,” making no mention of A whatsoever. B happens to be something conservatives like to complain about. In just about any context but Texas.

          I found that interesting, so I blogged about it.

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            • I didn’t say “surprising.” I said “interesting.” That conservatives might get their facts wrong would not actually surprise me. Particularly on a subject like government budgets.

              Are you surprised that I’m not surprised?

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              • Btw, thank you for explaining your train of thought again. It seemed inexplicable to me as I first read it, though it seems clear enough in retrospect.

                Here’s an angle, that’s amusing for me at least. Occasionally I claim things like the Republican party is the best hope for fiscal restraint and prosperity in America today. Some people find this silly, or a wild exaggeration at best. In reality, it’s just a sober summary of our current state of affairs.

                But, the same people who won’t bear any such hyperbole seem to have bought into more Texas braggery than the Texans themselves. Somehow, they want to believe, for accepting federal stimulus money (like most or all of the other states) that Texas is a failure as the frontier of John Wayne economic toughness in America.

                The idea that Texas is a state, that it has problems like other states and that it tries to solve them as best as possible, that’s just too banal to contemplate for at least some number of liberals. No, if we are actually going to truck with some particle of the Right in America, it shall solve all of our problems immediately. It’s the very least they can do, considering the circumstances.

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                • How about this then: Can we back away from the actual Texans completely, and make no judgement at all regarding their degree of morality or frugality…

                  … and now say “You know, we (maybe not you in particular, but a lot of us) have been pointing to Texas as a prime example of how with fiscal restraint there’s no need for tax increases to maintain a rainy day fund. But it turns out – because we hadn’t taken into consideration the federal stimulus money – that we weren’t quite right – at least about Texas – so we might want to re-examine this. Or at least find a better example.

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                  • Why? If the shoe fits, wear it. And the shoe of fiscal responsibility clearly fits Texas. And there’s nothing about the stimulus money that changes that.

                    If Texas (or some random state) has a funding shortfall of $10B and gets $10B in stimulus money then then the stimulus money is 100% of the shortfall. If the state had a pre-stimulus shortfall of $1B, then the stimulus money is 1000% percent of the shortfall. And if the state is in surplus the stimulus money is a negative percentage of the deficit.

                    Comparing the stimulus money to the state deficit is mostly obfuscation. What’s important, as Williamson points out, is that when the fiscal crunch comes, we can and often should cut spending instead of borrowing or taxing more. Texas really does demonstrate that.

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                • “Here’s an angle, that’s amusing for me at least. Occasionally I claim things like the Republican party is the best hope for fiscal restraint and prosperity in America today. Some people find this silly, or a wild exaggeration at best. In reality, it’s just a sober summary of our current state of affairs.”

                  Which is completely contradicted by the facts on the ground for the past three decades.

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          • Ok, what example would that have set? Considering that all but (I think) three GOP Senators voted against the stimulus (and that includes Specter who became a D like months later), the GOP has plenty of credibility in opposition to the stimulus. That’s not exactly the same thing as the state of Texas corporately, but then that really doesn’t make any sense because states by definition don’t set federal policy.

            Furthermore, you’re missing part of the reason to accept (or decline) the stimulus money for those threatened to do it was that money carried with a bunch of policy changes the states might not want. IIRC correctly this applied to Jindal and Sanford in particular.

            As far as your idea that what really upsets liberals about Texas is that they are “welfare queens”. There in denial, of course, that the basic facts of model of Texas governance actually works, which it plainly does.

            And the idea of forgoing the federal stimulus money as a gesture of interjurisdictional noblesse oblige is ridiculous. Let’s face it, getting out of the problem that we’re in now means punishing Democratic constituencies and Democratic jurisdictions, to the extent that they are forced to reform their ideas of leveraging political power to sustain their economic status. That just doesn’t apply to Texas, and I think we both know it.

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      • Depends on how you define “frugality”. If you define it by maintaining a balanced budget, you may be right. They came up 2-5% short or so*. If you define it by Texas’ unwillingness to expend resources on health care, education, and so on… I think it’s fair to say that’s one of the reasons they don’t like Texas.**

        According to the Kaiser Family Foundation’s 2008 numbers, Texas spends less per capita than any other state. That may or may not count as “frugal” depending on whether you’re looking at it like “the state government is spending more money than it has” or like “the state government is spending less of the ‘people’s money’.”

        * – Except not really. The shortfall represents, as much as anything, inaccurate revenue and expenditure assessments. No government is perfectly able to know how much money they’re going to bring in or how much things are going to cost. So they have to plug in that hole. Which they actually have the money to do. The issue is that they’re not using that money or raising the funds themselves through increased taxes. They are, in a sense, being greedy. And hypocritical, depending on how you look at it***.

        ** – Other reasons include Texas’s social conservatism, the idiotic Texas Board of Education, Rick Perry’s buffoonery, dirty air, and quite a bit more. There’s a lot to dislike about Texas. A lot of it depends on your perspective. Given the mismatch between Texas’s cultural values and liberal cultural values, the dislike is genuine and not, as some have ridiculously suggested, envy of the state’s “success.”

        *** – I’m personally n0t terribly convinced that it’s hypocritical to take advantage of a government program that you don’t think is a good idea. I thought Cash-for-Clunkers was a bad idea and I would have voted against it if I had been in congress, but I likely would have taken advantage of it if I’d been eligible. I also think that gasoline taxes should be higher, but I’m not going to cut a check to the federal government commensurate with what I think everybody should be paying. We have to live with the laws that are passed even when we don’t like them. I think that means, to some extent, that you get to benefit even from those you think are a bad idea.

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        • “Given the mismatch between Texas’s cultural values and liberal cultural values, the dislike is genuine and not, as some have ridiculously suggested, envy of the state’s “success.””

          That’s a great point. Liberals aren’t envious of Texas, they’re afraid of what Texas represents (and in denial of it). Liberals want to think that their understanding of the relationship between the government and the people who live in its jurisdiction is the only game in town. Texas (and a few other places) proves that it’s not.

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          • I doubt liberals are afraid of what Texas represents. Texas is a classic petro-state living off the revenues of a finite resource.

            That Texas is able to balance it’s budget because oil revenues are high is not all that remarkable. How was that budget when oil was $30 a barrel?
            It’s education system is the laughing stock of America (saying a lot considering Kansas). It is home to some of the worst criminal elements in America (drug cartels). It would be the quintessential ‘fly-over’ state, except too many of us are forced to land in Dallas on the way from one civilized state to another.

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            • I have no doubt quite a few liberals think that. It’s convenient, and let’s face it, liberals aren’t necessarily the sharpest knives in the drawer either.

              Unfortunately, it’s just not so. The Texas budget is balanced when oil prices are high, and balanced when they are low. This is due to structural reasons, but also because of the people who live there and their attitude toward debt.

              In other words, the cause of the problem is liberals. Get rid of the liberals, get rid of the problem.

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  4. Texas is hypocritical for not being stupid?

    Besides, if any state in the union could put “stimulus” money to its intended purpose of stimulating the economy, it’s probably Texas. Most other states flushed it down the sinkhole on salaries and payoffs and sustaining what’s unsustainable. It was Texas’ patriotic duty to take the dough!

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    • No, Texas is smart.

      People who hold up Texas as a model version of “pay as you go” or “limiting spending to revenue” are hypocritical. Because that certainly isn’t the whole story. It had a deficit. A $6.6 billion shortfall is a far cry from, say, California’s current budget woes, but $6.6 billion dollars isn’t exactly chump change.

      Some interesting follow up factoids I just discovered:

      Texas’s two-year budget was $182 billion (source: http://sunshinereview.org/index.php/Texas_state_budget)

      California’s one-year budget for ’10-’11 was just over $93 billion (source: http://www.ebudget.ca.gov/pdf/BudgetSummary/SummaryCharts.pdf) and $111 billion in ’09-’10 (source: http://2009-10.archives.ebudget.ca.gov/pdf/BudgetSummary/FullBudgetSummary.pdf)

      So, it seems to me that either Texas does in fact spend *way* too much goddamn money, or California doesn’t tax enough. I mean, Texas’s GSP was 1.2 trillion in 2009 while California’s was nearly 1.9 trillion.

      So a state that has an economy that is 163% of its nearest competitor and has a budget that’s only 111% bigger. We can be generous and say that Texas is responsibly withholding $9 billion for a rainy day fund while California has a paltry $500 million, but that just means that the difference in practical expenditures is that Texas spent $173 billion in two years and California spent the same $204 billion. In which case California’s economy is 163% of Texas’s, but their budget is only 118% larger.

      Sorta belies the whole, “California is a hugely overspending state and Texas is a model of fiscal restraint” meme.

      Now, of course, Texas might be spending that money a lot more *intelligently* than California…

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      • From skimming your sources, I don’t think you’re anywhere near apples to apples here. And, I’m not sure where you’re getting your numbers for Gross State Product and what you’re intending to use them for.

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        • Not anywhere near? Whyforso do you make this judgment?

          Well, it’s certainly the case that each state is going to mark its expenditures and revenues differently (there is no financial reporting standard for states, as far as I know). So there are going to be some things that don’t show up in container “A” that do show up in container “B”.

          The GSP numbers I just nabbed off of Wikipedia. If you have better sources for Gross State Product, that’s okay with me.

          The point is showing *expenses* as a ratio of the size of the economy. The question isn’t who is balancing their budget better (this would require us to look at revenue as well, of course).

          The underlying idea that Texas likes small government, and thus pursues practical methodologies that deliver small government, while California likes big government, and thus pursues practical methodologies that deliver big government. Whether they do either well or not isn’t really what I’m talking about here.

          What I’m talking about is this small vs big government comparison. By a comparison of expenses to the size of the economy, it’s readily apparent (to me, at least), that Texas spends *way* more on government than California does, relative to the sizes of their respective economies. This provides pretty compelling first pass evidence that the idea that Texas likes small government and California likes big government is largely a bunch of hooey.

          Now, you might be right, there might be better numbers out there. I might be comparing apples to aircraft carriers.

          But I’m suspecting that at worst I’m comparing a Granny Smith to a Red Delicious.

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          • “Not anywhere near? Whyforso do you make this judgment?”

            Basically along the lines of what Trumwill wrote somewhere. Ie, the figures for spending per capita times the number of residents in the state seem to imply a significantly different answer.

            In particular, apples to apples in my view means that we take a look at a state, and its subsidiary government authorities, and its future obligations (pensions, etc.) in a comprehensive way so we can measure the states commitments versus it’s financial response to them. In this way, your prior comment was useful but definitely not apples to apples. Is this kosher for you, or do you disagree?

            And, we should differentiate as clear as we can the trajectory of state and local spending before the fall of 2008 and in response to it. That’s not a failure of your sources, of course, because they have other purposes. But it’s crucial for us, to discuss Texas or any other state as a model for governance.

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            • > Ie, the figures for spending per capita times the
              > number of residents in the state seem to imply
              > a significantly different answer.

              No, it actually doesn’t. There’s a difference between comparing size of government expenditures as a proportion of economy vs size of government expenditures as a proportion of population size.

              They’d only correlate if population size correlated to economy size, and I don’t imagine that there’s any reason to expect this in the general case.

              There are going to be expenditures that are directly related to per-capita costs (like, say, issuing ID cards). There are going to be expenditures that are strongly correlated to per-capita costs, but have weak additional factors (like, total number of police, which will have a positive correlation with population size but have contributing factors like socioeconomic status). There are going to be expenditures that have weak correlation with population size but have strong additional factors that may make the per-capita aspect dwindle quite a bit (like, say, water treatment costs, which are going to be linked both to water supply and agriculture rather heavily). Finally, there are going to be sunk costs that have almost nothing to do with population size whatsoever, except in a macro sense.

              There is enough in the way of demographic and local geography factors to make per capita expenditure a weak comparison in government efficacy… as you can’t attribute sunk costs on a per capita basis and have a good comparison.

              > In particular, apples to apples in my view means
              > that we take a look at a state, and its subsidiary
              > government authorities, and its future obligations
              > (pensions, etc.) in a comprehensive way so we
              > can measure the states commitments versus it’s
              > financial response to them.

              Oh, sure, that’s fair. And it’s probably the case that California has back-loaded obligations that Texas doesn’t. California may have a substantial debt burden whose servicing isn’t recognized in today’s budget that Texas doesn’t. I don’t want to pay $550 for Moody’s debt obligations report to find out for certain.

              If somebody knows somebody that can get me a copy of it, though, let me know ;)

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              • “There is enough in the way of demographic and local geography factors to make per capita expenditure a weak comparison in government efficacy… as you can’t attribute sunk costs on a per capita basis and have a good comparison.”

                In California’s case, I’m sure we can find billions of dollars in plausible savings without causing drastically horrible consequences, but even so there’s more to life than efficacy. In particular, if the money really isn’t there and can’t be borrowed, it doesn’t matter as much how efficacious the spending is.

                It’s true that expenditures per capita is not the only game in town. On the other hand, I’m not sure government as a percentage of GDP is any better. And the data for the number of residents in a state is going to be much less fuzzy than GSP. In any case, I’m highly confident that Williamson’s narrative, (that Texas governance is much more fiscally conservative than California’s and the difference has worked substantially to Texas’ advantage since autumn 2008) will stand up to any amount of scrutiny we want to apply. Do you disagree?

                “Oh, sure, that’s fair.”

                Good (assuming that you’re not being sarcastic here), that’s at least one plausible element of disagreement out of the way.

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                • > In any case, I’m highly confident that Williamson’s
                  > narrative, (that Texas governance is much more
                  > fiscally conservative than California’s and the
                  > difference has worked substantially to Texas’
                  > advantage since autumn 2008) will stand up to
                  > any amount of scrutiny we want to apply.
                  > Do you disagree?

                  Not really; but I’ll grant you that it would be difficult to compare (certainly well outside the scope of a blog post, let alone a comment thread).

                  Largely because I don’t live in Texas, and I have no idea what advantages Texans get out of their state government; while Texas may or may not be more fiscally solvent at the present time does tell us something, it doesn’t tell us much if anything about the last decade of government-supplied experience for Texans vs. Californians. Texas may have paid less for their DMV than California did over the last decade, but Texans may have spent more time in line there. Quantifying those differences would be difficult if not impossible; even a qualitative analysis would be of limited utility because of expectation differences.

                  I don’t know what Texas’s unfunded pension obligations are, but California’s are certainly bad. I’ll grant you that from appearances, Texas’s current forward-looking prospects look better than California’s, but I can’t even make that comparison in an absolutist sense, I don’t know enough about Texas.

                  That said, if you’re looking at fiscal health when you say, “has worked to Texas’s advantage”… that doesn’t jibe.

                  Alaska has a much higher per capita expense rate than either Texas or California, and it’s bonds are rated Aa1. Likewise, Vermont’s are triple-A, Delaware’s are triple-A.

                  I can’t find Wyoming on Moody’s site, but if spending per-capita was a good metric for overall financial health, I’d expect to see all of the above worse than California, as they’re all bigger spenders using your metric.

                  So maybe “advantage” isn’t the right word.

                  > It’s true that expenditures per capita is not the
                  > only game in town. On the other hand, I’m not
                  > sure government as a percentage of GDP is
                  > any better.

                  Maybe not. But are you not sure of this because you like the narrative that your chosen metric supports, or are you not sure of it because you’re not sure?

                  Similarly to Trumwill: do you think Kaiser’s numbers are better because you’ve looked at their methodology (really, have you)?

                  I can’t find this citation you quote. Kaiser’s Family Foundation seems to have lots of reports on **health care costs**, but nothing on anything else (I may be looking in the wrong place). Can you show me where these numbers came from, primary-source wise?

                  I did find this (snippet below, link for the entire article):

                  http://govpro.com/resource_center/fiscal_management/per_capita_1013/

                  “A Government Product News analysis of state government per-capita spending data shows Texas spends the least per-capita among the states. The other top five states with lowest per-capita spends are Nevada, Georgia, Tennessee and Missouri. Among the 20 states with the lowest per-capita spends, half are in the South or Western United States. The five states with the highest per-capita spending rates are Hawaii, Vermont, Delaware, Wyoming and Alaska, which has the highest per-capita spending rate among all states.

                  Government Product News compiled data on state government per-capita spending from a variety of sources, including the Tax Foundation, Pew Center on the States and the Kaiser Family Foundation’s State Health Facts Web site.

                  We also consulted other spending statistics sources, including the U.S. Census Bureau, National Association of State Budget Officials, National Conference of State Legislatures, Center on Budget and Policy Priorities, Council of State Governments and the National Governors Association. Statistics used in our calculations are from 2008 or 2007 budget years, with the most recent data weighted more heavily.

                  Can efficiency be measured in state spending? “Yes, there is value to ranking states in per-capita spending,” David Patti told Government Product News. Patti is president and CEO of the Harrisburg, Pa.-based Pennsylvania Business Council (PBC), a business and executive membership organization that defines long-term policy strategies and solutions for Pennsylvania.

                  Patti adds: “But it’s not the sole measure of efficiency, and it has its limitations. Governments, like firms, have certain fixed costs. Not all of these are population-related. And even for population-driven government functions, there can be incredible economies of scale. Larger states like Pennsylvania, tend to look good on measures of the number of state employees per 1,000 citizens, for example.

                  “Similarly, there is probably little difference in processing tax forms for distribution in Pennsylvania (population 12.4 million) and Delaware (population 0.8 million). Some western states with small populations but large geographical boundaries will be hurt by data related to road maintenance or state police operations. Some costs are driven by demographic factors beyond population size. For example, age and lower socio-economic class will drive health care costs.”

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                  • “Maybe not. But are you not sure of this because you like the narrative that your chosen metric supports, or are you not sure of it because you’re not sure?”

                    For this particular narrow point, I’m not sure because the data for GDP of a state is more nebulous than the GDP of a country. Interstate commerce is much less regulated and the accounts segregating state from state are murkier.

                    For the big picture, I am confident that Williamson’s narrative holds up. More than that, I also believe that the harder we look at this, the clearer it will be, if we attribute the consequences of our choices correctly.

                    For example, if it turns out to be that Texas has a cheaper DMV but Texans wait longer in line for it, and DMV employees in California are protected by public sector unions or something else from being laid off, there’s a tendency to say “Oh that’s just a tradeoff whaddya gonna do?” (which seems to be where you’re going with your last comment).

                    But that’s not right. In addition to whatever money it saves, the fact that Texas spends less than other states and is structurally set up to reduce its spending baseline when necessary gives it great deal of valuable flexibility in times like these that other jurisdictions don’t have, as we know from reading the newspaper headlines anywhere in the world.

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                    • > There’s a tendency to say “Oh that’s just
                      > a tradeoff whaddya gonna do?” (which
                      > seems to be where you’re going with
                      > your last comment).

                      That’s not where I was going at all; I fully believe that California’s public sector unions do indeedy place a nonfunctional burden even when corrected for cost of living. I’m just not certain exactly to what degree that burden effects the current situation, relative to the other expenditures.

                      California’s prison guard’s union is overpaid. Not overpaid due to cost of living adjustments, just plain ol’ overpaid. No argument there, even taking pensions out of the picture.

                      The rest of your observations, I’ll let go without comment until I can digest T-bone’s linked report, which looks fascinating and will probably re-adjust my thinking on this score.

                      One comment, tho:

                      > For the big picture, I am confident
                      > that Williamson’s narrative holds up.
                      > More than that, I also believe that
                      > the harder we look at this, the clearer
                      > it will be, if we attribute the
                      > consequences of our choices correctly.

                      Yeah, I’m not sure of this at all. If Williamson’s narrative holds up, how do you explain the outliers of Wyoming, Vermont, and Delaware? They all spend more per capita than California does, and they have rosy bond ratings, which is probably a better overall picture of economic health than anything else (jokes about Moody’s abject failures in the subprime fiasco are probably inevitable, but that doesn’t really affect their ability to do the same fiscal analysis they’ve been doing well for decades).

                      I find your stated faith in Williamson’s narrative a little disconcerting; there’s clearly something going on here that isn’t reflected in what we’ve talked about so far on this thread.

                      Now, I’ll agree that actually adjusting your expenditures to match your revenues (what Texas is currently trying to do) is closer to smart than constantly fudging your budget to keep some expenditures from hitting your bottom line (what California has been doing for years now). No argument there.

                      But I don’t know (yet) that this is indicative of small-governmentism vs. big-governmentism – which is where we took things on this thread. We can be comparing a fiscally responsible big government and a fiscally irresponsible big government, here.

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                    • “I find your stated faith in Williamson’s narrative a little disconcerting; there’s clearly something going on here that isn’t reflected in what we’ve talked about so far on this thread.

                      Now, I’ll agree that actually adjusting your expenditures to match your revenues (what Texas is currently trying to do) is closer to smart than constantly fudging your budget to keep some expenditures from hitting your bottom line (what California has been doing for years now). No argument there.”

                      It’s funny for me to see these two paragraphs back-to-back. The latter one is (most of) Williamson’s narrative as I read him.

                      As far as bond ratings go, that’s useful data but I suspect it’s less important than you take it to be. States are taxing entities, and repayment of debt is close to the highest financial commitments they have. Whatever problems we have now, it’s worth noting that state-issued debt ought to have very low credit risk.

                      This is why Texas is such an instructive case. In this environment, any jurisdiction can be a mess. The few who are in good shape are especially valuable examples.

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                    • The problem with the Texas example is that conservatives want to point to how it’s different than California. In terms of low spending and (surprisingly) low taxation, Illinois also compares favorably to most states. Nevada very favorably. And where is all the bad news about Vermont and Delaware?

                      There are almost certainly a lot of different potential answers to these questions (smaller states maybe easier to manage? Nevada simply being the victim of the housing boom in a way that Texas avoided?) that lead to some more questions (How did Texas avoid the housing crash?) and an interesting discussion.

                      It’s just really, really hard to look at all this without wanting states which more closely represent your preferences to come out good and the others to come out bad. I’m as guilty of this as anyone.

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                    • The 2008 NASBO numbers and my trusty spreadsheet (mostly with numbers pulled from the USCB). Illinois is 45th in terms of spending per capita and 48th in terms of GDP. Tax-wise, it’s 40th in overall state and local taxes in comparison to per-capita income, and 38th in terms of median household income*.

                      * – The MHI numbers are from 2007. Anyone finds some 2008 numbers, I would be thrilled to plug them in.

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                    • Well, that was interesting. I think like one or two percent of the sales tax, in Chicago at least, is local, and then county. But the rest is the state’s. I wonder where all the money’s going.

                      The other thing I noticed is that the slice of spending for corrections is less than I would have guessed. And the slice for “other” is bigger.

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          • I think the Kaiser numbers are better. I know you don’t like the per-capita part of it, but if you multiply it by the state population, you get the total amount of spending. These numbers differ from yours by a huge margin. Either California has halved its spending over the last two years, of there is something different about the accounting system that California is using and Texas is using (maybe the former does not include non-discretionary spending already dedicated to federal matching funds or construction projects already under way).

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            • > Either California has halved its spending over the
              > last two years, of there is something different
              > about the accounting system that California is
              > using and Texas is using

              Or California and Texas are using roughly the same system, and Kaiser’s numbers are suspicious.

              I expect the truth is somewhere inside all that muddle.

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              • Suspicious, to me, is the notion that Texas spends a lot more than California despite the fact that the latter has wider and more revenue streams across the board.

                Kaiser’s numbers come from the National Association of State Budget Officers (google NASBO State Expenditure Report for the PDF), which is a pretty good source. Do you have a more authoritative source that is making a comparison across different states (and therefore using the same criteria)?

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      • California certainly spends money very badly, although it indulges in certain luxuries, like reasonably fair and impartial judicial system, that Texas lacks. But it also has a top income tax rate of 10% with all federal deductions and exemptions mirrored in the state tax code, meaning most people pay very little, no state sales tax, and a limit of 1% of on property taxes, on a valuation that can be reduced if prices fall but not really increased if they rise. Texas has an average property tax of 2-3% on appraised value and a state sales tax of 6.5%, but no income tax. Obvious Texas has a much more reliable, and probably significantly higher, tax income stream.

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      • If these numbers are comparing apples to apples, it brings to light a question: How is Texas collecting more money per-capita than California? California has a higher state sales tax (8.25% to 6.25%*), a significant income tax (which Texas lacks), and collects (a marginal) property tax (which the Texas state government does not**).

        So where in the world is Texas getting its money?!

        * – My understanding is that local governments tack on to both of these, though that wouldn’t figure into state revenues.

        ** – From what I understand, you get bit pretty hard on local property taxes, but those don’t go into the state budget.

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      • Something wrong with those numbers, I think. Google “state spending per capita” and you get two reports as the first two links. The first is from the Tax Foundation, which is a conservative organization, with numbers for 2007. The second is from the Kaiser Family Foundation, which is not to my knowledge a conservative organization, with numbers from 2008. In both cases, it’s under $4k for Texas and over $5k for California on a per-capita basis.

        2007 (Conservative Tax Foundation):
        California: $6,417 (x37m =$237b)
        Texas: $3,831 (x25m = $95b)

        2008 (Kaiser Family Foundation):
        California: $5,311 (x37m=$196.5b)
        Texas: $3,380 (x25m=$84.5b)

        I don’t think since 2008 and now that California has slashed its budget in half.

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        • State spending per capita is another metric, sure. We can look at this lots of different ways.

          However, if your economy is 60% bigger, it stands to reason that your cost of living is going to be higher, and thus your comparative cost of labor for your guvmint employee is also going to be higher, right? I mean, I imagine if you compare two state official positions, one of whom serves in San Antonio and one of whom serves in San Francisco, the guy who needs to afford a house in the City by the Bay is going to demand a much bigger salary than the guy who needs to afford a house in S.A.

          That’s a tangent; I don’t think government spending per capita is as useful a metric as government spending as a ratio of the economic engine. We can debate that, of course.

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          • If the Kaiser numbers are accurate, switching from per capita to totals is simple multiplication. Take that total and compare it to the state GDP and you have California in the middle and Texas at the bottom.

            I had insomnia last night and created a spreadsheet using the Kaiser numbers and more numbers from the Census Bureau. On this specific metric, California’s state spending as a percentage of its GDP was 10.6%, 30th out of the 50 states. Texas’s was 6.7%, 50th.

            Even if you want to factor in per capita state spending as a portion of per capita income, California is #31, Texas #46. As a portion of Median Household Income, it’s #34 to #47. From this, you can argue that California and Texas are closer than they appear at first glance, but I can only find one metric in which Texas is outside of the bottom ten, and in more metrics than not they are in the bottom five. California’s performance varies much more from one metric to another, but never really touches Texas’s.

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        • Bill Clinton signed welfare reform, balanced the budget, and ran a surplus. True, he had a Republican Congress to work with, but for the most part, he did — even despite the impeachment.

          Reagan gets all the credit for deregulation, but he doesn’t deserve all of it. Carter really got the ball rolling, and he deserves much more praise here than he is usually given.

          Yes, both Clinton and Carter did things I don’t approve of, but I have to give credit where it’s due. You should do likewise.

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          • You’re correct that Carter can take more credit than he’s given for deregulation.

            But the welfare argument isn’t legit. Slick Willie got rolled on welfare, by Congress working with the American people, not the President. Let’s recall this was more or less the same time that President Clinton came out in favor of the V-chip and school uniforms for elementary school students. I wonder whatever became of those two, probably nothing.

            The point being, his supposed conservatism at the time was a matter of presentation rather that substance. He would have let welfare reform die a quiet death, but the GOP in Congress passed the bill three separate times. They wouldn’t let him.

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          • Also President Bush Senior (and better) laid down most of the groundwork for the balanced budget in his negotiations with congressional Dems that resulted in reduced spending and increased taxation. So liberals get plenty of credit for the balanced budget in the 90’s as well. All the Republican congress had to do (and did) was bring about general gridlock. The trajectory was already in a good direction when they did so.

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  5. In other news, whenever I buy a house I plan to take advantage of the mortgage deduction (provided it’s still around) even though I think it’s questionable policy.

    I know. I’m a hypocrite. And a welfare queen.

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    • But where will you buy, if you pick Des Moines or Indianapolis given the median price of housing there, you may not get much of an advantage at todays interest rates over the standard deduction (if married). If you live on the expensive coasts its a different matter.

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      • We live in a pretty inexpensive area, but we’re probably going to spend a fair chunk on the house when we buy it. My wife’s job is also the sort that can come with a whole lot of expenses, so we will probably itemize.

        Anyhow, my point is that just because I am against a particular benefit does not mean that I am going to leave money on the table. I don’t see why I am under an obligation to.

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  6. “politics isn’t about policy. It’s about signaling.”

    This is absolutely right. But keep in mind, it isn’t just true for “them.” It’s true for “us,” too. All of us.

    *ALL* of us.

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    • Absolutely. The longer I’ve been interested in politics and the more I have interacted with people of every political stripe, the more I am convinced that self-image and concomitant tribalism is the driving force behind the vast majority of political alignment.

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      • Tribalism is a big factor in politics, and signalling is a big and underappreciated part of economics. But that’s not what’s in play here.

        Texas, for structural reasons and its Republican and conservative Democrat political base, is in better fiscal shape than any other jurisdiction of it’s size anywhere on earth AFAIK. And, let’s also recall that during the debate of the stimulus and shortly thereafter, GOP governors from other states either refused or threatened to refuse the stimulus money (for which they were also criticized for hypocrisy).

        For cosmopolitan liberals and Left-leaning centrists of whatever stripe, the problem is not that Republicans are not fiscally responsible. The problem is that they are, and are forcing such people to get out of their comfort zone if they actually want to contribute to the hope for prosperity in America.

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        • I found some interesting tidbits about Texas that are awaiting moderation.

          Did you know that California’s economy is 163% of Texas’s, but their budget is only 118% larger?

          As a percentage of GSP, Texas spends more than California does.

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        • I don’t recall the GOP governors being called hypocritical. I recall them being called short-sighted and stupid. I can sympathize with the idea that their opponents are going to call them one thing or the other.

          But “they hate Texas because it’s fiscally responsible” is absurd. They hate Texas because of its Board of Education, Rick Perry’s irritating personality, Texan smugness, its religiosity, its judicial system, and its unwillingness to spend money (and tax accordingly) on its children, its sick, and its less fortunate.

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        • Texas, for structural reasons and its Republican and conservative Democrat political base, is in better fiscal shape than any other jurisdiction of it’s size anywhere on earth

          I only recenty discovered Google stats where you can get all sorts of economic and fiscal info for multiple nations so if you have a definition of good fiscal shape it might actually be fairly easy to check this. Of course we’d also need to pin down what is meant by comparable size, is it area, population, GDP?

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          • OK I had a quick check and didn’t find anything obviously linked on google stats after all. I did learn from Wikipedia that two subnational areas closest to Texas in GDP/GSP are California and Tokyo Prefecture and find websites for Texas Comptroller of Public Accounts and California State Controller, which if they are what they appears should give us the official figures.

            I’ll have a look for Tokyo but since I can’t read Japanese I don’t expect to find much.

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              • It wasn’t meant to be that complicated. Over the last three years, we have seen horrible problems in financial governance associated with:

                The EU, where the worst of the problems are associated with the PIIGS but not all of them by any means.
                the UK
                the US federal government
                California, Illinois, Michigan, New Jersey, New York, etc.
                Japan
                China

                By comparison Texas looks pretty good. The idea that “well, they took stimulus money seems like a weak distraction.” Smaller jurisdictions like Wyoming, Norway, Liechtenstein, Monaco, whatever, are unlikely to be models for major nation-state economies. But Texas can be.

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                • You mention PIIGS. It’s worth mentioning that until recently Ireland was held up as a “model nation” by conservatives with it’s lowish taxes and relatively free regulatory environment.

                  Canada seems to be doing alright.

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                  • That’s true. On the other hand, that is mitigated quite a bit by the fact that Ireland was caught up in forces bigger than itself and negotiated away the means to handle them to the EU, which you definitely can’t blame the Right for. Megan McArdle has written quite a bit about this.

                    Canada is also a useful example. The problem there is an obscure counterfactual, ie, the failure of Quebec secession in 1995. If that had gone through, we’d see cleary the economic consequences of English-speaking freedom-loving culture on one hand and French-style interest group lobbying on the other.

                    That is ancillary though. The main point, is that with so many jurisdictions having so many problems, it is very valuable to take the example of those who have the way out. The refusal of liberals to accept Texas as an example when the essential facts are so clear (or Canada for that matter, as it applies to budget cuts) doesn’t speak well for them.

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                    • Still reading on the numbers provided. Really cool report, Trumwill.

                      Koz, you’re still steadfastly not acknowledging the fact that there are high spending jurisdictions that are doing just fine (some of which are at least on paper considered “conservative” states, e.g., Wyoming and Alaska, and some of which are… surprise!… considered “liberal”).

                      How does this support your “get rid of the liberals and everything will be fine” meme?

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                    • I’m trying to follow this very good discussion.

                      Did you know that California’s economy is 163% of Texas’s, but their budget is only 118% larger?

                      Wouldn’t this suggest that even with lower tax rates, Texas ends up with a maximization of revenues, a Laffer Curve thing?

                      There are also some several sui generis things, in trying to get apples and apples—that California’s nicer weather might mean some industries and millionaires will put up with the taxes because of the sunny climate.

                      [This also applies somewhat to NYC; as a world financial center [and America’s], folks bite the bullet because that’s where the money is.]

                      There is also the illegal immigration question, although some argue it’s revenue-neutral, if not a net benefit.

                      And I haven’t seen the figures, but if Texas receives a healthy chunk in oil revenues [free money!], the equation goes kerblooey.

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                    • “Koz, you’re still steadfastly not acknowledging the fact that there are high spending jurisdictions that are doing just fine (some of which are at least on paper considered “conservative” states, e.g., Wyoming and Alaska, and some of which are… surprise!… considered “liberal”).”

                      Ok, acknowledged. It doesn’t change my point. Whatever jurisdictions those are, it’s clear that the US federal government isn’t one of them.

                      Therefore, we need smart people with the capability, understanding, and intention to unwind the welfare state to the point of being able to restore hope for prosperity in the future. And guess what? There aren’t any such people associated anywhere in the liberal-Left in America for the last forty years or whatever.

                      Some of the libertarians here at the League have complained that Tom Coburn or Paul Ryan or whoever doesn’t have as much influence as they should within the Republican party. But, for the other team they simply don’t exist at all. And this goes beyond the pols to the pundits and wonks. There simply aren’t any opposite numbers to Keith Hennessy, Kevin Williamson or Reihan anywhere within liberaldom.

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  7. Of course, what Williamson neglects to mention is that constitutionally Texas can’t borrow to meet a deficit, so the choice is cut spending or raise taxes. Texas is making its choice. Since I don’t live there, I don’t care and don’t consider it a precedent for what any other state should do.

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  9. Do I think Texas is a “welfare queen”? Well, it could have paid its own way through hard times with money to spare. It declined and took taxpayers’ money instead. I’ll let you decide.

    Calling Texas a Welfare Queen is pretty derogatory, dude. You didn’t even add a perfunctory question mark. Williamson’s chart about Texas taking less in stimulus funds (per capita) than almost every other state is pretty relevant to that.

    If Texas is a welfare queen, then so is every state but maybe Virginia and Nebraska. Unless the numbers themselves are faulty. I don’t see how you’re not calling Texas a welfare queen simply for doing what every other state has done.

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    • You’re probably right. If I’m faulting Texas, I should fault basically every other state.

      Two possible defenses, however.

      First, Texas had a substantial rainy day fund. I don’t know about the other states, but theirs was pretty good.

      Second, given that the derogatory term in question is a favorite of conservatives — it would be nice to see it applied consistently. If it’s going to be applied at all. Wouldn’t it?

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      • No, because the term implies “government payments are the sole source of support and the person is intentionally acting so as to maximize those payments, to the extent of acting in an immoral and irresponsible manner”. “Got some kind of government benefit” is not the same thing.

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              • Heh heh, Mr. Schilling. It’s the GOP who are the real defenders of the New Deal, even LBJism in the case of Medicare. “Sustainability.” Conservatives are like that. Progressives will risk all for “something better.”

                The problem is that “social democrat,” “Eurostatist,” communitarian—pick a term you find non-pejorative—policies have hit the wall of reality, of sustainability and affordability. It seems the American left are among the last ones to know.

                Governments cannot be all things to all men, least of all God, Divine Providence or Santa Claus. I’m all for incisive bon mots, Mike, but “Teabaggers” and the GOP-as-Ayn Rand are just drive-bys.

                That said, I think there’s a strong affirmative defense to be made for FDRism and even LBJism. From my research, iirc, LBJ’s War on Poverty permanently lowered the US poverty rate from 30% to 20% or so, although that stubborn last 20% might be more pathological than technocratically solvable.

                I will argue the pathology lies somewhere between culture and human nature itself. Why work if you don’t have to? Or be continent when incontinence is more pleasurable?

                Indeed, it has yet to be proven that it’s rational to act rationally! [I borrow from some of the great thinkers here.]

                It would be nice—esp in a unique forum like this—if we brought our swords but dropped our shields, and I don’t direct this remark specifically at you. I freely admit that the blanket condemnation of LBJism from the right lacks nuance and actual facts.

                On the other hand, as a Burkean conservative, I look askance at the progressive notion that the human condition can be solved by policy, and also with the rather fuck-it-all Las Vegas mentality that things can’t get any worse. They certainly can, and often do.

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                • “The problem is that “social democrat,” “Eurostatist,” communitarian—pick a term you find non-pejorative—policies have hit the wall of reality, of sustainability and affordability.”

                  This.

                  Let’s also note that when the issue is stated in these terms the reaction from the Left will almost inevitably some kind of lameoid distraction. On one hand you can say the Left is the last to know. But on the other, it’s pretty likely that in its heart of hearts the Left understands this as well as anyone.

                  For them, they can hope to throw up enough smokescreens and obfuscation to muddy the picture and maintain their political power. But that’s not much of a hope for us.

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        • Good point. Jason, the Administration’s cheerleaders and those who agree with him wrt “welfare queens” want to think that, for x billion dollars of federal stimulus money, they can buy off Texas’ independence and the ability of its residents to politically resist the folk Marxism of the Administration and the Democratic party in general. Obviously that didn’t work in this circumstance.

          Beyond that, it’s important to note that’s a horrible idea whether it works or not (and often times it does work). It’s where cycles of dependence and too-big-to-fail come from.

          That’s why the propensity of Americans to vote Republican is so important. Beyond the acts of any Republican pol in office or any public policy for that matter, American citizens who vote Republican are signalling to the whole world (especially themselves) that they’re going to take their chances and hope to win at the game of life. Whereas Americans who vote Democrat are signalling to the whole world (and especially themselves) that they want a bailout.

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