An Objective Look At Issues Without Idol-Worship

Thursday, October 6, 2011

The Problems with Rick Perry

Keeping in line with my Reagan post, here are a few quick facts about Rick Perry as Governor of Texas:

- Texas state debt has more than doubled under Rick Perry. [source] Is this really the kind of "leadership" we can afford?

- Government spending has increased 79% under Perry's watch. [source] How could a principled fiscal conservative let this happen?

- He has enacted numerous tax increases, including a new business tax and taxes on tobacco products, fireworks, used cars, and diesel equipment.

- He has used the revenues from the aforementioned tax hikes to lower the property tax. This is a very shrewd political move. Let me explain why: Most people "feel" the impact of property taxes. Everyone who owns a house pays property taxes. Everyone who owns a ranch or a farm or any land pays property taxes. However, most people don't "feel" the impact of business taxes. Though business taxes still end up harming everyone by having downstream effects on production and prices, most people don't "feel" these effects because they don't have to directly pay the bill - only businesses do. Most people won't notice the slightly increased prices or slightly lower wages or slightly higher unemployment that will occur as a result. Likewise, many sales taxes, such as taxes on tobacco or used cars, are included in the price of a good sold on the retail level ( in other words consumers are not told how much tax they're paying). So what's the overall result here? Perry is creating the illusion of cutting taxes for the average taxpayer in Texas, while he is simply replacing the lost tax revenue from obvious taxes with new tax revenue from a hodgepodge of hidden taxes. One problem with this approach is that many small taxes have higher compliance costs than a single larger tax, so such a set-up creates some inefficiencies. More important, however, is that taxpayers are less aware of the price they pay for government and are thus less likely to organize themselves in order to demand lower taxes and less spending.

- A state payroll tax levied solely on business known as the "unemployment tax" has risen during Rick Perry's reign as Governor. Though this tax increase was "automatic," there was nothing blocking the Governor from doing something in order to prevent this tax increase during a recession, when such a tax would be the most harmful to the economy. The least he could do would be to cut some other tax in order to offset this increase in the unemployment tax. So why did the Governor sit idly by while twiddling his thumbs? Because he's a shrewd politician who knows that he can avoid getting blamed for an "automatic" tax increase while he does get the benefits from said tax increase - more revenues in government coffers and a lower budget deficit, which he can then boast about and claim he had something to do with.

- So, following the above, net taxes have increased, and Rick Perry cannot excuse himself by saying that those tax increases were driven by an "automatic" tax hike. [source]

- There's also the problem of the Texas DREAM Act which Rick Perry supported. The DREAM Act is a law which allows illegal immigrants living in Texas to go to college and pay in-state tuition. So, Rick Perry subsidized illegal immigrants to go to school at a cheaper rate than out-of-state US citizens. Does this make sense to even the most pro-immigration, pro-open border, and pro-welfare people? Doesn't this violate every standard of fairness one can think of?

Anyway, the bottom line is that Rick Perry has increased taxes, government spending, and state debt in Texas. So can anyone seriously argue that this guy is some Tea Party hero who will save us from the jaws of Big Government? Or is he just another shrewd politician trying to get in on the action?

Wednesday, October 5, 2011

Do We Really Want Another Reagan?

Here is my question to all Republicans, conservatives, Tea Partiers, and everyone else who is a fan of limited government: Do you really want another Ronald Reagan? Do you really think Reagan was a godsend for Republicans? Do you think that Reagan was the greatest fiscal conservative to occupy the White House and do you desperately desire another Reaganesque Republican to pursue the Oval Office? Well, think again.

As Governor of California, Reagan:
- Increased the government spending by 122% during his 8-year tenure as governor.
- Raised taxes in 1967 by 33% or $1 billion per year, equivalent to $17 billion per year in today's dollars. His tax proposal was the largest tax hike proposed by a governor in the history of the United States up to that point. It increased, among other things, personal income taxes, corporate and bank taxes, and inheritance (aka "death") taxes.
- Created 73 new government councils and commissions which mired Californian businesses in crippling regulations - such as the California Energy Commission which, among other things, required a three-year review process before any new power plants could be constructed. Could he think of any better way to increase energy costs?
- Proposed to raise taxes again in 1970 by $1.1 billion, but his proposal was defeated by a legislature which apparently was more fiscally conservative than him.
- Grew the state bureaucracy by 20%, from 158,000 to 192,000.
- Increased taxes in 1971 by $508 million - equivalent to $6 billion in today's dollars. This round of tax hikes included a new alternative minimum tax and increases in the personal income tax and the bank and corporate tax.
- Increased welfare payments by 43%, after he booted 510,000 off the dole for no net impact in welfare costs.
- Raised taxes in 1972 by $1.1 billion, or $12.5 billion in today's dollars, which consisted of increases in the sales tax and the bank and corporate tax.
- More than doubled state income taxes from $7.68 per $1000 of personal income to $19.48.
- Fought against initiatives similar to Prop 13 in 1968 and 1972.
- Overall, he tripled state revenues from $2.9 billion to $8.6 billion.

As President, Reagan:
- Increased government debt a whopping 40.9% his first term and 40.2% his second term.
- Cut tax rates in 1981 - but allowed "bracket creep" from inflation and payroll tax increases to more than offset these tax cuts.
- Increased government spending 14.5% his first term and 7.4% his second term.
- Raised taxes in 1982 by close to 1% of GDP, making it the largest peacetime tax increase in American history.
- Increased government spending from 27.9% to 28.7% of GDP - that's more than Ford and Carter combined.
- More than doubled foreign aid.
- Increased federal entitlements, such as Social Security and Medicare, from $197.1 billion in 1981 to $477 billion in 1987.
- Lowered income tax rates overall, especially for the wealthy, but replaced those income tax cuts with various hidden taxes such as the gas tax which hit low-income households disproportionately hard.
- Expanded the power of the IRS.
- Promised to eliminate the Departments of Education and Energy - yet failed to do so. In fact, the Department of Education's budget more than doubled to $22.7 billion.
- Halted the momentum for deregulation which Carter created.
- Increased the economic costs of regulation.
- Increased the size of government bureaucracy by an additional 230,000 workers.
- Restricted trade by doubling the portion of imports under quotas and other trade restraints.
- Used dubious doublespeak such as "revenue enhancements" to hide the fact that he was raising taxes by eliminating tax credits and deductions which many businesses and middle income Americans benefited from.
- Increased marginal tax rates on 40% of Americans with the 1986 Tax Reform Act.
- Supported the FDA and wanted to expand OSHA, among other regulatory agencies.
- Increased the debt-to-GDP from 32.5% to 53.1%.
- Backed off trucking deregulation, which even Ted Kennedy favored.
- Raised taxes a total of 11 times.

Reagan was no fiscal conservative or free market capitalist. As Governor of California, he raised taxes and expanded the size and scope of government in every conceivable manner - and as President of the United States, he might have cut income tax rates, but he did so while eliminating or reducing many important tax credits and deductions, peppering the US economy with hidden taxes, raising payroll taxes, and allowing inflationary "bracket creep" to overtake the benefits of his tax rate cuts. Moreover, government spending, deficits, and the national debt all increased when Reagan was President. Its time for Republicans to turn their back on this Big Government RINO and forge ahead with real dedication to fiscal conservatism and free market capitalism.

All of the information presented here was culled from:
* The Two Faces of Ronald Reagan and The Myths of Reaganomics by Murray Rothbard, an economist who received his PhD from Columbia University, taught at Brooklyn Polytechnic Institute from the mid 1960s to the mid 1980s and was S.J. Hall Distinguished Professor of Economics at the University of Nevada, Las Vegas.
* The Sad Legacy of Ronald Reagan by Sheldon Richman, the editor of The Freeman, published by the Foundation for Economic Education.
* Reagan's Forgotten Tax Record by Bruce Bartlett, a former adviser to Ronald Reagan.
* National Debt by US President from Wikipedia.