I don’t want to get off on a rant here, but . . .
. . . but Bradley J. Fikes passes along a link to Michael Hiltzik’s latest column titled What California should learn from the Texas budget crisis. The deck headline reads as follows:
The so-called Texas Miracle is in trouble, demonstrating that fashioning fiscal policies strictly along low-tax lines doesn’t protect you from budget deficits or business slumps or make your residents necessarily happy or healthy.
The column is researched with Hiltzik’s characteristically low regard for facts and fairness.
Hiltzik starts out by talking about how bad Texas is supposedly doing, and then quickly moves to weak criticism of the legislature’s response. You can’t help but chuckle at reasoning that could convince only an avowed leftist:
California’s Legislature has won national renown for its dysfunction, but Texas lawmakers know how to squeeze dysfunction until it squeals. The late Molly Ivins reported years ago that when a good-government group ranked the Texas Legislature 38th among the 50 states, the reaction among knowledgeable Texans was, “You mean there are 12 worse than this?”
Maybe things have improved in the Texas statehouse since Ivins’ day. But given that the legislators put off action on the budget this year so they could first debate an anti-abortion measure, a balanced-budget amendment for the U.S. Constitution and a voter-ID law, maybe not.
Well! If Molly Ivins didn’t like the legislature, that’s good enough for me! Never mind that her definition of “knowledgeable Texas” was basically “liberal Texans.”
And I’m with Hiltzik: why should a state fritter away time discussing a balanced budget amendment for the U.S. Constitution? Everyone knows that the federal budget is in tip-top shape under Supreme Regime Leader Barack Obama, and any minor multi-trillion dollar kinks are being quickly and professionally ironed out by our eye-on-the-ball Congress, which is moving to HACK and SLASH spending by MILLIONS of dollars at time — MILLIONS! I say — spending reductions that obviously reveal any discussion of a balanced budget amendment to be a frivolous waste of time.
Add that to wasting valuable legislative debate minutes worrying about abortion, which has snuffed out a mere 50 million or so lives since Roe v. Wade, and voter fraud, which is a non-issue according to such eminent authorities as Bradley Friedman and Senior Fellow of Senior Fellows Eric Boehlert, and the Texas Legislature’s skewed priorities come into even sharper focus, thanks to Hiltzik’s deft wielding of the policy microscope.
Pondering the problems of Texas isn’t merely an exercise in schadenfreude, the pleasure one takes in the misfortune of others (some examples evoked by the puppets of the show “Avenue Q”: “Football players getting tackled; CEOs getting shackled … “). The goal is to gain perspective on our own crisis and the conventional proposals to address it. The bottom line is that fashioning fiscal policies strictly along low-tax lines doesn’t protect you from budget deficits or business slumps or make your residents necessarily happy or healthy.
Hiltzik is no doubt about to prove this through a systematic state by state analysis of tax burdens and deficit sizes. This is why they pay L.A. Times columnists the big bucks: with a responsibility of only three columns a week, they have the time to do the research you and I can’t do.
The budget crises afflicting states coast to coast arise from a combination of the nationwide recession and obsolete or wrongheaded state taxing schemes. The National Council of State Legislatures says that at least 15 states face large deficits this year and 35 in fiscal 2012.
Proof coming any second, in the form of that comprehensive analysis!
As things stand now, the council’s figures place California’s projected 2012 deficit at $19.2 billion, or 18.7% of its general fund, and the Texas deficit at $7.4 billion, or 17% of its budget. States with broad-based tax policies that balance property, income and sales taxes are best equipped to ride out economic cycles, because those levies don’t all move in lockstep with the economy. Neither California, with its over-reliance on income and sales taxes, nor Texas, which has no income tax, qualifies.
We know Hiltzik is right because of his comprehens –
OK, by now you get the joke. There is, of course, no comprehensive analysis. It’s simply a comparison of one state to another: Texas to California.
So as long as we’re making that direct comparison, I’d like to point out one little fact that Hiltzik totally omits. The big debate in Texas is whether to tap the state’s $9.4 billion “rainy day” fund. Governor Perry says it’s not necessary — they can balance the budget without touching it, by making necessary budget cuts.
And California’s rainy day fund? We don’t really have one.
Now that I have pointed out a teensy $10 billion difference between the two states, let’s do at least some of the work that Hiltzik isn’t doing. Here are the 15 states with the worst deficits, according to this source:
3. New Jersey
6. South Carolina
13. North Carolina
Meanwhile, what states are doing well on the budget front? Not too many. According to this source, 44 states are facing a budget shortfall.
Which 6 are not? Alaska, Wyoming, North Dakota, Arkansas, Alabama, and Delaware.
Does this prove up Hiltzik’s theory, that low taxes = bad fiscal situation?* Not quite.
Which are the states with the lowest taxes? It’s not as easy to determine as you might think. It’s not simply a matter of looking at income tax rates. You also have to take into account sales taxes, property taxes, and other miscellaneous taxes. For example, while Texas has no income tax, it has some of the highest property taxes in the nation, and a hefty sales tax to boot. I can’t find a good and comprehensive source that ranks all the states, but this source lists the five states with the lowest overall tax burdens as follows:
The two best, Alaska and Wyoming, are two of the six states with no budget shortfall.
Of the other three, only Colorado (barely) appears on the list of the fifteen worst state budget situations above.
All of a sudden, Hiltzik’s little California/Texas comparison looks less like a valid column, and more like unresearched partisan hackery.
But I’m not done with Hiltzik yet.
Many state budgets will get worse before they get better, because federal stimulus funds used to close their gaps over the last two years are drying up. That points to a fact that hasn’t been widely remarked upon: President Obama’s stimulus program helped both California and Texas — indeed, many states — manage their deficits.
While Texas Gov. Rick Perry sucked up to the “tea party,” declaring himself opposed to “government bailouts” and prattling about seceding from the union, he papered over his state’s budget gap with $6.4 billion in Recovery Act funds, including increased federal handouts for education and Medicaid. So when you, the California taxpayer, hear talk of the Texas Miracle, you should take pride in having helped pay for it.
Don’t Texans pay federal taxes?
The only way Hiltzik’s assertion (that Californians are paying for Texas’s shortfall) makes sense is if California spends more in federal taxes than it receives in services, while Texas receives more in services than it pays in taxes. If Texas is paying more than it gets back, then Californians aren’t paying for the Texas shortfall — Texans are, with extra money going to the federal government.
You’ll be SHOCKED to learn that Hiltzik’s assumption is not borne out by the facts. At least as of 2005, which is the most recent year for which I could find data — as well as for every year since 1981 — both Texas and California have sent more money to Washington than they have taken in.**
If I’m a Texan, paying more to the federal government than I’m taking in, you’re damn right I’m going to take federal dollars — I’m taking back my own money. This is especially so since, like every border state, Texas is paying through the nose to deal with an illegal immigration problem that is the federal government’s responsibility — albeit one that it routinely shirks.
The supposed superiority of Texas over California in fiscal policy long has been a conservative article of faith. In 2009 the libertarian American Legislative Exchange Council published a report co-authored by the conservative economist Arthur Laffer underscoring the contrast. The report posited that “Texas’ superior policies over the past several years are making the Lone Star State more resilient to the current economic downturn.”
But Texas was hardly immune to the recession. From 2006 through 2010, the unemployment rate in Texas soared from 4.4% to 8.3%. Yes, that’s a better showing than California, which went from 4.9% to 12.5%, but the difference may reflect the huge effect on California’s economy of the popping of the housing bubble, which jumped our unemployment rate to a new magnitude and is likely to keep it there for a while.
This is supposed to be a slam on Texas? That California’s unemployment rate is 50% higher than Texas’s? Making that difference even more impressive is another factor Hiltzik entirely omits: Texas gained 4.2 million people from 2000-2010 — an increase of about 20%. Yet, after absorbing all those people, still has an unemployment rate stunningly better than California’s. California, by contrast, added only 3.38 million people from the 2000 census (33,871,648) to the 2010 census (37,253,956) — only about a 10% increase in population, compared to Texas’s 20% increase. This makes California’s skyrocketing unemployment even worse when compared to that of Texas.
(I know: Hiltzik probably still thinks the California population increase was 30%, like he told us a couple of years ago.)
As with the above unemployment statistics, it is amusing that when Hiltzik does cite the occasional fact, it turns out to be a fact that fails to support his thesis, but has to be explained away. (Texas is awful! OK, their unemployment is nowhere near as bad . . . but that’s probably the housing bubble!) Another such awkward fact:
Curiously, Texas’ reputation as a low-tax, business-friendly state survives although its state and local business levies exceed California’s as a percentage of each state’s business activity (4.9% versus 4.7% in 2009, according to a report by the accounting firm Ernst & Young). What’s different is that Texas business taxation relies more on property, sales and excise taxes and government fees than California, which relies on taxing corporate income.
Uh, I thought your whole point was that Texas is doing horribly because of its awful, terrible, conservative policies. Now you’re telling us that it really has some fairly high taxes too?
Maybe that’s why you should have looked at a few other states. There are 48 other ones, you know. (55, if you go with Our Heroic President’s count.)
But if you insist on talking about California, Mr. Hiltzik, you really ought to acknowledge that our fiscal situation sucks rocks. When you toss into the mix our pension liability, plummeting corporate tax receipts, the worst bond rating in the country, and a host of other problems, California’s fiscal situation is one that no responsible business columnist should be defending, especially with a bogus comparison to Texas like this one.
But then, who ever said Michael Hiltzik was a responsible business columnist?
*Purists might argue that Hiltzik is not arguing low taxes = bad fiscal situation; he is arguing that low taxes does not mean good fiscal situation. Aside from the fact that he hasn’t proved this, so what? If you have a choice between living in a state with a poor fiscal situation and high taxes, or a state with a (not quite as) poor fiscal situation and low taxes . . . which one are you gonna go with?
**This may well have been different under Barack Obama, who showered states with all kinds of federal money we couldn’t afford to spend, but if so, it’s true for California too. And indeed, lawmakers have estimated that under the stimulus, California was getting $1.45 back for every dollar spent.
Rather than California paying for Texas, it’s more like our grandchildren paying for all of us.