Talking taxes III: No new taxes, says Governor ... Andrew Cuomo

So this "no new taxes" position is catching on.

New York's incoming governor, Democrat Andrew Cuomo, says he won't raise taxes even though he will inherit a budget deficit of at least $9 billion when he takes office in January. Ohio Republican Gov.-elect John Kasich is promising to cut taxes, despite a shortfall of about $8 billion. ...

"I think we have to be realistic with the people of South Carolina: This is gonna hurt," said Republican Nikki Haley, South Carolina's incoming governor. She has ruled out raising taxes or increasing fees for such things as hunting, fishing and drivers' licenses. ...

At least nine incoming governors have pledged not to raise taxes to close their states' budget gaps. All but Cuomo are Republicans.

The good news for Nevadans is that governor-elect Brian Sandoval is among the nine.

In Nevada, with a projected deficit of $1.1 billion to $3 billion, incoming Republican Gov. Brian Sandoval is refusing to raise taxes, calling it "the worst thing you could do" during a recession. Nevada leads the nation in home foreclosures and bankruptcies and has the highest employment rate at 14.2 percent.

"Nevada families and businesses are suffering, and our budget cannot worsen the problem," Sandoval said.

Sandoval is exactly right — raising taxes in the middle of a recession is "the worst thing" you could do in terms of the economy.

In fact, Sandoval's so right that two of his biggest rivals on this issue — Sen. Horsford, who's called for a $1.5 billion tax increase, and Sen. Raggio, who's said he'd consider raising taxes in 2011 — have actually agreed with Sandoval.

Both Horsford and Raggio have previously stated that they wouldn't support raising taxes in the middle of a recession, and Nevada is certainly in the midst of a recession.

Although Horsford and Raggio have both gone back on their words, the senators' previous statements should encourage Sandoval and his staff to stick to their guns and continue to remind the public that even Sen. Horsford and Sen. Raggio have acknowledged that the middle of a recession is not the time to raise taxes.

Talking taxes II: Who said this?

Let's play another guessing game: Who said this?

With our citizens facing higher costs, over $4.00 per gallon for fuel and higher costs for food and other necessities, businesses hurting, unemployment rising, this is not the time to talk about raising taxes.

Governor-elect Brian Sandoval? Rory Reid? Someone from the Nevada Policy Research Institute? Chuck Muth? Senate Majority Leader Horsford circa 2008?

No, no, no, no, and no, although each has publicly noted that raising taxes in the middle of a recession isn't a good idea.

So who said the above quote? Former Senate minority leader Bill Raggio, in 2008.

In case Sen. Raggio needs a reminder, Nevada's private sector is still in a recession.

Las Vegas ranked second-to-last among the nation's 100 largest metropolitan areas in making progress toward economic recovery through the third quarter, Brookings Mountain West reported in its December Mountain Monitor.

The severity of the Great Recession has been well documented in Las Vegas through the housing market crash, foreclosure crisis, massive job losses and slowdowns in tourism and gaming.

Nevada also has the nation's highest unemployment rate.

Now, Sen. Raggio already broke his word by voting for the largest tax hikes in Nevada's history two years ago, and this year he's suggesting that those taxes be extended. It should be noted that Sen. Raggio pushed to make the tax hikes in 2009 temporary, which at least ensures that we're going to have this debate again instead of having a tax increase already in place.

Reminding Sen. Raggio of what he said two years ago may not change his mind, but it should remind everyone — citizens, lawmakers and the media — that even those calling for hikes, like Sen. Raggio, recognize the destructive impact of tax increases on the economy.

It should also empower conservatives and libertarians to continue pointing out that tax increases kill jobs and hurt the economy.

If you tell the truth about taxes for enough time, Sen. Raggio might even decide he agrees with you again.

The alternative to raising taxes is cutting spending, and in that area, NPRI has many ideas to offer.

Which theory is borne out by data?

Robert Murphy's new column over at the Mises Institute reviews the data on macroeconomic performance over the past two years in response to the ARRA stimulus package and casts this ex post facto data against Keynesian and free-market theories to determine which theory was right. His column is worth a read, although I consider this line to embody the central lesson:

As Jim Manzi has been repeatedly arguing — echoing the writings of Mises — it is impossible to conduct a truly controlled experiment in the social sciences. Often without realizing it, economists interpret the data as confirming their preferred theories, even when those same data give stronger support to their ideological opponents.

Talking taxes: Who said this?

Let's play a little guessing game: Who said this?

"I won't support tax increases -- not when the private sector is losing revenue and losing jobs," [name removed] told the Review-Journal's editorial board in September.

"The general fund needs to be managed in a way that doesn't allow growth beyond population growth and inflation."

Governor-elect Brian Sandoval? Rory Reid? Someone from the Nevada Policy Research Institute? Chuck Muth?

No, no, no and no — although each has publicly noted that raising taxes in the middle of a recession isn't a good idea.

So who said the above quote? Senate Majority Leader Steven Horsford, in 2008.

In case Sen. Horsford needs a reminder, Nevada's private sector is still in a recession.

Las Vegas ranked second-to-last among the nation's 100 largest metropolitan areas in making progress toward economic recovery through the third quarter, Brookings Mountain West reported in its December Mountain Monitor.

The severity of the Great Recession has been well documented in Las Vegas through the housing market crash, foreclosure crisis, massive job losses and slowdowns in tourism and gaming.

Nevada also has the nation's highest unemployment rate.

Now, Sen. Horsford already broke his word by voting for the largest tax hikes in Nevada's history two years ago, and this session he's called for a tax increase of $1.5 billion, which would shatter the "largest tax increase" record he helped set in 2009.

Reminding Sen. Horsford of what he said two years ago may not change his mind, but it should remind everyone — citizens, lawmakers and the media — that even leftists like Sen. Horsford recognize the destructive impact of tax increases on the economy.

It should also empower conservatives and libertarians to continue pointing out that tax increases kill jobs and hurt the economy.

If you tell the truth about taxes for enough time, Sen. Horsford might even decide he agrees with you again — but probably not until 2012.

The alternative to raising taxes is cutting spending, and in that area, NPRI has many ideas to offer.

Corporatist America

As my friend Veronique de Rugy comments in her column yesterday:

Business people love to say how much they cherish free markets, all the while decrying government that limits entrepreneurialism and personal freedom.

But the truth is there is nothing most business people like less than free markets.

Indeed.

Veronique tells the story of embalmers and funeral directors in Louisiana who leaned on the state, using their political connections, to regulate away their competition - carving out a cartel for themselves. You see, the monks of St. Joseph Abbey provided for their needs by making and selling simple wooden caskets, lowering consumers' demand for the high-priced caskets sold at the state's funeral homes. While this was of obvious benefit to many of the low-income families in Louisiana burdened with the task of burying a loved one, the funeral directors knew they could make more money if the state forced these low-income families to purchase more expensive caskets from funeral homes - even if it meant squeezing the families' ability to feed their children.

So goes the tale of Corporatist America: It is the unending collusion of rent-seeking, pseudo-capitalists using their political connections to establish legal monopolies or cartels. The action subverts the rule of law, injures consumers and lowers the national standard of living. And it happens every day.

Murray Rothbard wrote incessantly about how the Federal Reserve System was purposefully designed by its member banks to establish for themselves a legal cartel wherewith to plunder the people.

Frederic Bastiat once wrote an excellent parody of this form of behavior in his famous "Candlemakers' Petition."

A story from yesterday's Las Vegas Sun details the same story once again right here in Clark County. Large gaming interests are appealing to the county commission in an effort to use the regulatory system to shut down competition from small taverns and bars operating slot machines.

The story is just part of a continuing theme of Western civilization: Never trust capitalism to the so-called "capitalists."

Must-watch from 60 Minutes: 'The Day of Reckoning' coming for states' budgets

This is just an unbelievably good report on the budget problems numerous, if not most, states are facing.



Three things to conclude from the report above:

1. Budget deficits, like the one Nevada is facing, are not unique to Nevada.

2. Like the video above shows, these budget deficits are the result of unsustainable government spending. And state spending in Nevada has been increasing at an unsustainable level. The red line represents what state spending would have been if it had only grown at the rate of inflation and population growth.

3. In order to correct years (and for some states, decades) of unsustainable spending, government spending must be decreased and pension liabilities eliminated. To prevent future problems states should convert state defined-benefit plans to defined-contribution plans.

If you think this is an important issue, I urge you to share this 60 Minutes story with your sphere of influence. "The Day of Reckoning" is coming, but Nevada's response is yet to be determined.

Programming note: Blogging will be light to non-existent until Monday. Happy Holidays!

‘Cuts’ of $819 million are actually a 17 percent spending increase

Last week I wrote a commentary describing how a 10 percent "cut" in state spending equals a double-digit spending increase.

And today's story by Ed Vogel in the Las Vegas Review-Journal on proposed budget "cuts" is the perfect example of what I was referring to.

State agencies have proposed cutting their budgets by $819 million in the coming two-year budget period, Assembly Speaker-elect John Oceguera said Tuesday.

Stop right there. Let's take a look at the Agency Request budgets and the supposed "spending cut."

General Fund spending FY 10, 11: $6,421,152,167
Requested General Fund spending FY 12, 13: $8,345,385,970
General Fund spending FY 12, 13 with "10 percent" cut: $7,526,068,816

Yep, in the last biennium, General Fund spending was $6.4 billion, and after a "cut" of $819 million, General Fund spending would be $7.5 billion, or a 17 percent increase.

See what's happening here? Government officials aren't mentioning that they want a 30 percent spending increase before talking about the 10 percent "cuts."

Only in government is a 17 percent spending increase labeled a budget "cut."

Now, I have no problem if speaker-to-be Oceguera says, "I believe Nevada's General Fund spending needs to be $7.5 billion (or $8.1 billion)." That's a debatable proposition.

The problem is that Oceguera is attempting to assume $2 billion in new spending before he bemoans $819 billion in "cuts."

You can't have an honest debate with someone using incorrect assumptions. If Oceguera or another lawmaker wants to argue that Nevada needs a $2 billion spending increase, because of X, Y or Z (sorry, I'm not going to give the other side arguments), fine. Let's have a debate on that.

But pretending that a $2 billion spending increase doesn't exist when you talk about $819 million in cuts is dishonest and distorts reality for the general public.
Before engaging in a debate on Nevada's budget, believers in limited government need to make sure that "cuts" and "spending increases" are defined accurately.

Is collective bargaining on the chopping block?

Oh, yes.

He [Sandoval advisor Dale Erquiaga] confirmed that making changes to the collective bargaining laws is something local governments are demanding in order to keep their payroll expenditures in check, and Sandoval will support such legislation.

"We have been told by school districts and local governments that they can't weather the reductions coming in this biennium unless we address Chapter 288 (the collective bargaining law)," he said.

In case you're wondering what kind of excess government workers are enjoying under current collective bargaining agreements, head over to TransparentNevada and see if you can count how many government workers made over $200,000 last year.

If that's not enough, Nevada is also facing a $33.5 billion unfunded pension liability, when calculated using an economically sound, "options pricing" method of accounting for risk.

Ending collective bargaining would help government rein in these excessive salaries and help prevent taxpayers from getting fleeced.

Want to pay more and get less? Green energy is for you

David Schwartz of the Las Vegas Sun had a great piece this weekend on the cost of green energy in Nevada.

The state is considering switching to solar power for a significant number of its buildings and facilities, even though critics question whether the change would save taxpayers money.

A politically connected Sparks company would have the first right to develop solar projects on 53 government properties and sell the generated energy back to the state, under the proposal Nevada officials are evaluating.

The four-year deal with GA-SNC Solar could spur $300 million in private investment, according to the state energy office. GA-SNC Solar is a partnership between international solar company Gestamp Solar and Sierra Nevada Corp., a Northern Nevada defense contractor that has been a heavy contributor to elected officials, including Gov. Jim Gibbons. ...

Commercial Solar Services, a competing company in Reno, argued in a letter to the state that the price of energy under GA-SNC Solar’s contract, at 17 cents per kilowatt hour, would be 54 percent higher than what the state pays NV Energy.

To bolster its argument, Commercial Solar cites a contract that GA-SNC Solar-partner Sierra Nevada secured for a 2.6-megawatt solar project at a Nevada Army National Guard facility. According Commercial Solar Services’ letter, the National Guard is paying 18 cents per kilowatt-hour from that project, compared with the 11 cents per kilowatt-hour it paid before the installation.

The piece is especially timely, because most politicians are claiming that green energy projects and green jobs are a key to Nevada's future economic growth.

Green energy and green jobs may be important for Nevada some day, but right now those industries are dependent on government subsidies, mandates and tax breaks for survival. You can't create long-term economic growth through government spending and intervention. Exhibit A: the failed stimulus.

Also, the Heritage Foundation points out that some solar projects require billions (yes, billions) of gallons of water per year — a problem that is especially pertinent in Nevada.

Green energy technology is famously unreliable but it also faces serious technical issues, including the fact that solar farms consume billions of gallons of water every year where water isn’t available. For instance, Solar Millenium announced the construction of two solar farms in Armagosa Valley, Nevada that would consume 1.3 billion gallons of water per year, (20% of the desert valley’s available water). Many people became concerned about the scarcity of water resources and the environmental impact of this massive water consumption on wildlife. More generally, many communities that foster green energy projects are facing water shortage problems.

Until we let all types of energy succeed or fail on their merits, not on their ability to garner special favors from the government, we'll continue to pay more for energy.

Getting Nevadans back to work: Great ideas from the Nevada Taxpayers Association

The Nevada Taxpayers Association has just released a terrific report detailing the reasons businesses aren't hiring as well as what Nevada lawmakers can do to enable businesses to grow and expand.

First, employers detail some of the many government regulations that are preventing businesses from hiring more people.

1. The cost per employee keeps rising - the modified business tax was increased, the unemployment insurance tax will increase January 1, 2011, and the federal health care provisions have started to kick in. How can I consider hiring anyone, when I don’t know what it will cost me?

2. Why can’t the local governments and the State look at what the federal government is doing and planning on doing to business (additional filings - 1099Ks, tax increases, increased regulatory burdens) before they add their burdens on us? Government, at any level, can’t keep operating in a vacuum and expect me to survive. At what point will each level of government, that has decided they want more revenue, talk to each other to see the totality of the impacts to my business and my ability to hire?

3. I don’t understand how the minimum wage can keep increasing when unemployment is so high. Why isn’t there a realization that increasing the minimum wage in this economy just means I can’t consider hiring entry level employees.

Government can't create long-term economic growth, but by raising regulations and costs and increasing uncertainty, it sure can do a great job of stifling economic growth.

Many of these government-created obstacles are the results of an intrusive and economically destructive federal government, but there's plenty that state politicians can do — either to make it worse or to create an environment that enables businesses to create jobs.

A couple of great suggestions from NTA:

2. Change the prevailing wage requirements to: (1) eliminate prevailing wage; (2) eliminate prevailing wage when construction unemployment is greater than 6 percent; or (3) increase the prevailing wage threshold from $100,000 to $2 million. ...

3. Eliminate Nevada’s 24 hour overtime rule, in favor of the federal 40 hour overtime rule.

NTA also suggests a couple of constitutional reforms to Nevada's minimum-wage law. While NTA's proposed reforms wouldn't be as beneficial as repealing the minimum-wage amendment, they'd certainly help.

About the only thing I disagree with in the NTA's report is this suggestion:

1. Provide that an employer who hires any workers who have been unemployed for six months or longer do not have to pay the modified business tax for that employee for four quarters. For the next four quarters the modified business tax is reduced 50 percent. Allow the reduction to continue for the length of time that unemployment remains more than 6%.

Reason: This would be a program similar to the federal HIRE program. It should also help mitigate the increases that will be occur in the premiums for unemployment insurance in future years. Most important, as no revenue has been generated from the modified business tax because these employees have been out of work, there would be no revenue loss to the State.

While I agree that the MBT is a disincentive to hiring, the government shouldn't be picking the winners and losers in the economy through subsidies — or tax breaks. Taxes should be low AND uniform.

When the government starts messing with the economy, no matter how good its intentions are, negative unintended consequences result.

With that small caveat, the NTA's report is really excellent, and there's a lot more in it than I mentioned above. You should read the whole thing.

(h/t Ralston's Flash)

Why the $3 billion budget deficit myth matters to leftists

Not because it's true, but because it's a good negotiating position. As noted by Jon Ralston, who was talking with an anonymous businessman:

But then he [the anonymous businessman] called back almost immediately to make two more points. One was that the budget deficit should be pegged at closer to $3 billion by all the politicians to establish a large enough target for negotiations.

What more can you say? I guess some people think the truth should be disregarded when it's politically convenient. (To be fair, the above statement is only representative of the anonymous person who made it, although I suspect it's a large motivating factor for many who overstate Nevada's budget deficit.)

Just remember this the next time someone claims Nevada's budget deficit is $3 billion. That person may not even believe the $3 billion myth himself, but he’s hoping to use the size of the figure to intimidate you into accepting tax increases.

The good news is that most Nevada journalists have rejected the $3 billion deficit myth and are reporting on Nevada's budget deficit accurately. Nevada's liberal politicians ... not so much.

If you want more budget truth, let me suggest reading my recent commentary, titled "How a 10 percent 'cut' equals a 15 percent spending increase."

Is Nevada a ‘low-tax’ state?

Is it bad that I'm already sick of hearing this distortion — that Nevada is a low-tax state — and the session hasn't even started?

The corollary to the low-tax distortion is that Nevada has a relatively small government. For instance, on "Face to Face" last week, Assemblywoman Peggy Pierce, while pushing a corporate income tax, said:

Nevada has, by a very, very large margin, the smallest government in the country.

We have the most conservative government in the country here in Nevada.

Both of these statements — Nevada is a low-tax state and Nevada has a relatively small government — are true in one sense, but false when you look at the complete picture.

Here's the whole truth: Nevada is a very decentralized state, with the Silver State's local governments providing a comparatively greater amount of government services than in other states. Nevada is also a Dillon's rule state, meaning state lawmakers have ultimate authority over local revenues.

Consequently, taxes in Nevada that go to state government are lower than in other states, but local governments in Nevada spend comparatively more in taxes (over which Nevada state government has authority) than in other states. And since Nevada's government is intentionally decentralized, state government is relatively modest, while local governments are more robust.

Overall, Nevada is ranked in the top half of states when it comes to combined state and local tax collections.

The Tax Foundation ranks Nevada 25th in terms of state and local tax collections.

The Brookings Institution ranks Nevada 24th in terms of state and local tax collections.

The Tax Foundation and the Brookings Institution may not agree on much, but they both agree that Nevada ranks in the top half of states in terms of state and local tax collections.

Since Nevada ranks in the top half of states in terms of state and local tax collections, Nevada, despite the conventional wisdom, isn't a low-tax state.

Chamber Report: Education Funding in Nevada

The Las Vegas Chamber of Commerce released an excellent report today, commissioned from Applied Analysis, on education funding in Nevada. For those interested in education policy and funding metrics, the report is certainly a worthwhile read and it further confirms much of what NPRI has said about education spending over the past several years.

One of the unique aspects of Nevada's K-12 education system is the degree to which it is controlled by the state legislature. As the Chamber report highlights:

Nevada’s public school system has evolved from one with over 200 fiscally independent districts to today’s system of 17 county-wide districts for which fiscal matters are highly centralized at the state level.1 School operating budgets “approved” by county school boards are, in reality, largely created by the state. Local boards cannot impose or reduce any taxes for school operations, even with voter approval. The state also controls school spending, as state support per student for each district is “backed into” by replicating prior-year spending patterns and deducting so-called “local” revenue to the credit of the state general fund.3 Here, “local” refers only to the point of deposit, not to governance, as the State Legislature authorizes and directs the use of these revenues. Nevada school districts operate as de-facto state agencies, and cannot gain from revenue windfalls when they occur, except by legislative act. Given Nevada’s low rankings in nationally-administered student achievement tests, this concentration of fiscal authority at the state level is worth revisiting as part of a broader effort to improve K-12.

Despite what Senators Horsford and Raggio errantly argued in the 26th Special Session, the bulk of so-called "local" revenues are, in fact, controlled by the state legislature since the Local School Support Tax is a statewide levy whose rate is determined by lawmakers. Horsford and Raggio argued that they did not control these funds in an effort to misrepresent the size of proposed budget cuts. And they did this only 10 months after they both voted to increase the rate of the Local School Support Tax.

Some other highlights from the Chamber report focus on the fallacy of most state-to-state comparisons given the Silver State's unique financing mechanism:

Comparison with other states and with charter and private schools requires reconciliation of different financial structures and acknowledging restrictions on use of funds. By law, Nevada’s “basic support” is not all inclusive; and, therefore, not comparable to other financial measures.

When all district funds are added, expenditures per student might be estimated as high as $12,307; but only if all monies were fungible, which they are not.

For more, I would suggest reading the report in its entirety.

World's lamest PSA?

Let's just say I'm embarrassed to have been born in Washington state.

Pelosi Congress - "most irresponsible ever"

Cato's Richard Rahn has a great piece in the Washington Times today regarding federal tax policy and the debate over extending the Bush-era tax cuts.

Specifically, Rahn cites the historical evidence suggesting income and capital gains tax rates above 30 percent begin to generate fewer revenues - not more - because of the disincentive to work created by punitive tax rates. Allowing the Bush tax cuts to expire for the most productive workers - those who pay the bulk of federal taxes - would not increase federal revenues because, when combined with state income taxes, marginal tax rates would be pushed above 50 percent. However, such a change would lead to a less prosperous and less just society.

Rahn goes on to say "the Pelosi Congress has been the most irresponsible — ever," because of its failure to pass a budget prior to the lame duck session and its failure to act on the Bush tax cuts even though it has had two years to do so. Now, there may not be a vote before the tax cuts even expire, and this uncertainty only exacerbates joblessness as entreprenuers, facing an uncertain cost structure, become reluctant to hire.

How economics saved Christmas

An amazing, economics-themed spin on "How the Grinch stole Christmas!"

Every Who down in Whoville liked Christmas a lot.

But the Grinch, who lived just north of Whoville, DID NOT.

He stood and he hated the Whos and their noise

He hated the shrieks of the Who girls and boys

For fifty-three years he’d put up with it now—

He had to stop Christmas from coming, somehow.

He asked and he questioned the whole thing’s legality

Then his eyes brightened: he screamed “externality!”

He reached for his textbooks; he knew what to do

He’d fight them with ideas from A.C. Pigou

This idea has merit, he thought in the frost

A tax that was equal to external cost

At the margin, would give all the Who girls and boys

An incentive to stop all their screaming and noise

Failing that, an injunction to make them all cease

And they’d have to pay him to have their Roast Beast.

Head over to Forbes to read the rest.

Has Britain's medical system reached a 'breaking point'? Is the US system far behind?

It's dangerously close, reports the Telegraph.

Financial pressures may mean junior doctors are not given training posts within the NHS and the overall number of places at medical school could drop, a report has said.

This is despite extra burdens on the health service, including European rules limiting doctors' hours, more hospital admissions and people living longer than ever before, according to the study from the UK Royal Colleges of Physicians (RCP).

Those specialties dedicated to looking after very ill people are facing particular strain, it said.

Dr Andrew Goddard, RCP director of medical workforce, said the combination of factors was 'adding further stress to a system which may reach breaking point within the next few years'.

And with the passage of Obamacare, things aren't looking much brighter for US medicine, either.

A new survey finds that 40 percent (40 percent!) of current physicians will retire as Obamacare is phased in. Via Investor's Business Daily:

Now a Merritt Hawkins survey of 2,379 doctors for the Physicians Foundation completed in August has vindicated our poll. It found that 40% of doctors said they would “retire, seek a nonclinical job in health care, or seek a job or business unrelated to health care” over the next three years as the overhaul is phased in.

Of those who said they planned to retire, 28% are 55 or younger and nearly half (49%) are 60 or younger.

A larger portion (74%) said they plan to make “one or more significant changes in their practices in the next one to three years, a time when many provisions of health reform will be phased in.”

In addition to retirement, and finding nonclinical jobs elsewhere, those changes include working part time, closing practices to new patients, employment at a hospital, cutting back on the number of patients and switching to a cash or concierge practice.

Is there a waiver for that?

Audit reveals Nevada hasn't yet cut to the bone

How many times have Nevadans heard politicians or government officials echo the stale talking point of "We've already cut to the bone"?

In case you needed another reminder, no, no they haven't.

A legislative audit of government contracts with current and former state employees has uncovered possible sweetheart deals that one lawmaker says suggest "criminal activity."

Sen. Sheila Leslie, D-Reno, said that the irregularities -- such as one employee billing the state for working 25 hours a day and another receiving payment of $350 an hour -- should be reviewed for possible criminal prosecution by the Nevada attorney general.

The legislative review focused on state contracts with 250 current and former state employees, who were paid $11.2 million in 2008 and 2009. Legislative auditors said they didn't know how many of those contracts were suspected of irregularities and could not estimate how much the alleged abuse had cost the state.

Great work by the state auditors. Finding out about waste and fraud is the first step toward eliminating it, which is why transparency is so important.

And speaking of transparency, why isn't Nevada's checkbook online? Since it's necessary to know about waste in order to eliminate it, Nevada's government spending should be as open and transparent as possible.

Another powerful kind of audit is a performance audit.

Performance audits provide an independent assessment of the performance and management of government programs against objective criteria or an assessment of best practices and other information. Performance audits provide information to improve program operations, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability.

In other words, performance audits don't just ensure that there's no fraud and the money's all accounted for, they also measure the performance of the state's spending.

In Washington state, performance audits have identified $3.5 billion in cost savings over a five-year period at the cost of less than $15 million.

This legislative audit shows the importance of oversight and transparency. Let's hope it's a springboard to even more transparency and oversight.

Why the size of the deficit matters (and doesn't matter)

Couldn't help but laugh out loud at Jon Ralston's column yesterday.

Why? Because in between calling NPRI names and pretending the size of the deficit doesn't matter, he actually made a point NPRI and believers in limited, accountable government, especially in the area of education freedom, have been making for years.

First, let's back up to the beginning of Ralston's column and point out why the budget deficit matters (in one sense). He wrote:

When I hear the ongoing, cacophonous debate over the size of the state budget deficit as Session ’11 looms, I can’t help but think of two words:

Who cares?

Size does not matter here. The emphasis by some on a simple math problem — is the deficit closer to $1.1 billion or $3 billion? — is not just unproductive; it’s counterproductive. [Emphasis added]

In an immediate sense, the size of the budget deficit is immensely important. Assembly speaker-to-be John Oceguera has cited the (inflated) size of the budget deficit as prima facie evidence that Nevada needs to raise taxes.

Senate Majority Leader Stephen Horsford has used the size of the deficit to justify his suggestion that Nevada raise taxes by $1.5 billion.

And Ralston himself has previously used the size of Nevada's budget deficit to claim that Nevada needs taxes to balance the budget.

This is a math problem, folks. For those who hated algebra, prepare to wince: You can change the variables to make the numbers work, but you can’t make both sides balance without a plus sign somewhere. [Emphasis added]

In that same column, Ralston also quotes Guy Hobbs misstating the size of Nevada's budget deficit.

Essentially, cutting $3 billion from the state budget ... you’ve heard this comparison before ... if you funded just education alone, you could fund nothing else in the state budget.

That statement isn't accurate now, nor was it at the time, but you get my point. For months, liberal politicians and advocates of raising taxes used the inflated and inaccurately reported size of Nevada's budget deficit to intimidate and frighten people into thinking that tax increases were the only option.

Refuting this mistruth was, then, the first step toward stopping tax increases and creating an accurate description of Nevada's budget situation. Once the situation is described accurately (i.e., based on the correct assumptions), you can make the case for a balanced budget without raising taxes. (And assumptions are so important to get right, because with inaccurate assumptions, it's possible to "prove" anything.)

But now that the media is reporting accurately on Nevada's budget deficit, Ralston says, "Who cares?" Now that's funny.

Especially since, just a few hundred words after posing his rhetorical question, he notes that Sen. Horsford puts the budget deficit at $2.7 billion and then says, "Horsford is right."

But in a larger sense, Ralston's correct that the size of the budget deficit is irrelevant, because Nevada should be focusing on outputs (priorities), not inputs. Ralston does acknowledge this, though it gets lost in the shuffle.

What's great is that believers in limited government have been making this point for years!

What's the point of education? Not increasing funding levels (which contribute to the size of the deficit). The point is (or should be) student achievement.

And as NPRI has noted numerous times before, nearly tripling inflation-adjusted, per-pupil spending in Nevada over the last 50 years hasn't increased student achievement. There are, however, numerous educational reforms that either save money or are revenue-neutral and have dramatically increased student achievement elsewhere, especially among minority and low-income students.

The next time you bring these reforms up in conversation and someone objects by saying, "But Nevada's not spending enough," remind them of what even Jon Ralston says: "Never has there been a better time to focus on what the state’s priorities should be, how they should be funded and what should be excised."

Is the priority how much we spend or the results we achieve? For the vast majority of Nevadans (i.e., for most people who aren't union bosses) student outcomes are a much higher priority than funding levels.

Prioritizing outputs above inputs has many applications — eliminating prevailing-wage laws and reining in out-of-control public employee salaries and pensions are an obvious place to start.

It's also NPRI's main objection to Nevada's current baseline budgeting system, which created the $3 billion shortfall myth in the first place.

Instead of looking at what the state spent in the last biennium and blindly adding roll-up costs, Nevada should institute an outcomes-based budgeting system.

And if you don't agree, remember that even Jon Ralston believes Nevada's focus should be on priorities.

ReasonTV: Great moments in unintended consequences!

Another great video from ReasonTV. Enjoy.



And speaking of unintended consequences, don't forget the negative consequences of Nevada's well-intentioned minimum wage.

Stimulus worked so well, Obama's turning to tax cuts; Updated

News broke Monday that President Obama and congressional Republicans have reached a potential compromise on extending the Bush tax rates. Details included the following:

President Barack Obama reached agreement Monday with Republican leaders in Congress on a broad tax package that would extend the Bush-era income tax cuts for two years, reduce worker payroll taxes for one year and give more favorable treatment to business investments.

The White House is backing a plan touted by Sen. Jon Kyl and others that would set the estate-tax rate at 35% for two years and apply it only to estates over $5 million.

Other elements of the deal include a temporary reinstatement of the estate tax at 35%—the level favored by most Republican lawmakers—as well as an extension of jobless benefits for the long-term unemployed.

Aside from the politics of this deal, I'd argue that it's also an implicit admission that tax cuts — especially for rich job creators — are an important factor in increasing long-term economic growth.

And this policy change, even if it's only temporary, is a much better plan for job growth than the $800 billion stimulus plan — an $800 billion spending spree that the folks at e21, using a study by Daniel J. Wilson of the San Francisco Fed, found had a "net job creation [that] was statistically indistinguishable from zero by August of this year."

Taken at face value, this would suggest that the stimulus program (with an overall cost of $814 billion) worked only to generate temporary jobs at a cost of over $400,000 per worker.

How much of a miserable failure was the stimulus? Business Insider's Chart of the Day has your answer.

The tax compromise isn't necessarily a sure thing, as details of and votes for the tax package are still being worked out. Stay tuned.

(h/t Reason and Hotair)

Update: Or maybe the tax cut package is a brilliant political ploy by Pres. Obama. That's the case made by Charles Krauthammer.

The floundering job market

Yesterday, Lew Rockwell used his Mises Institute column to ask the question, "What's Wrong with the Job Market?"

His answer is remarkably similar to what I said a few weeks ago in an NPRI column: would-be entrepreneurs are hamstrung by the uncertainties created through a continuous deluge of policy changes that has subverted confidence in the rule of law.

Inflating Nevada's budget deficit: The lie that's dying, though some keep trying; Updated

Last week I noted that the media overwhelmingly reported accurately on the size of Nevada's budget deficit.

Although the truth is now the accepted budget narrative, some in the media, including David Schwartz of the Sun, are still trying to inflate Nevada's budget deficit.

Instead of providing clarity, the Economic Forum’s ruling on how much money the state can spend over the next two years set off an even more heated debate on the actual size of the budget deficit.

On one side, there’s Gov.-elect Brian Sandoval and conservatives who say the state has a deficit of $1.2 billion.

On the other side, Democrats and advocates for maintaining current government services say the deficit is $3 billion.

The real number is somewhere in between, about $2.2 billion, according to a Sun analysis. ...

Both sides have accused the other of using fuzzy math to further their ends.

Here's the simple math equation that liberals have consistently answered incorrectly and that David Schwartz avoids entirely in his article above.

Nevada is going to have about $5.4 billion for the next biennium when you include the Economic Forum's forecasted revenue and a little bit in surplus revenues.

In the last biennium, Nevada's General Fund spending was about $6.4 billion.

$5.4 billion - $6.4 billion = -$1 billion.

And the vast majority of journalists in Nevada have reported this correctly — Nevada faces a $1 billion deficit, or about a 17 percent budget gap, not including the $200 million in additional Medicaid funding that Sandoval has pledged to spend.

The problem with Schwartz's reporting on the $1.2 billion, $3 billion and $2.2 billion deficit figures is that he assumes a budget with a $2 billion spending increase and works from there.

Outside of government, no one budgets this way — it's the difference between real and government math.

Schwartz's conclusion, then, is based on his assumptions about the political mood of Nevada's leaders.

The $480 million savings from furloughs and pay freezes is virtually assured to be extended. So we can subtract that from the $3 billion.

The state has made new projections improving the budget outlook, further reducing the number. Still, the 10 percent ($820 million) cuts Sandoval is including seem a generous assumption — especially considering such a proposal will have to make it through the Legislature.

Same goes with the $175 million cut in higher ed. Students, faculty and school boosters won’t let that happen without a fight.

So add back that combined $1 billion in proposed cuts to Sandoval’s number. That leaves a $2.2 billion deficit — and tough decisions for legislators and the governor to make.

Do you see the danger in that kind of thinking? He's subjecting numbers (and what constitutes a deficit) to his thoughts, err ... a "Sun analysis," on what is going to happen politically.

Therefore, using the same logic as Schwartz, I can make Nevada run a surplus.

Since Nevadan's are sick of wasteful government spending and with record high unemployment facing Nevadans, its citizens won't be satisfied until spending is brought down 22 percent (Nevada's "actual" unemployment rate) to $5 billion in the next biennium. This means that Nevada has a $400 million budget surplus.

That type of logic would be just as intellectually disingenuous as what Schwartz did. (Note: This doesn't prevent either side from arguing that Nevada needs to spend $5 billion or $8.3 billion, but neither side should claim that the amount of money it wants to spend determines the budget deficit. And believers in limited government haven't been claiming this.)

A surplus or deficit, commonly defined, is what you have minus what you spent before.

And to their credit, the rest of the media — and add the Elko Daily Free Press editorial board to the growing list — is getting this right.

(An update, including a response from Schwartz after the jump.)

Read more »

Mythbusters takes on President Obama

Enjoy. From ReasonTV

Sen. Coburn on the dangers of debt and uncontrolled government spending

Preach it. I hope America is listening.



(h/t Hotair)

NPRI launches new litigation center

In case you missed the news this week, the Nevada Policy Research Institute announced that it has launched a new litigation center, formally called the Center for Justice and Constitutional Litigation.

I encourage you to learn more about the Center by visiting its website, reading NPRI's press release on it or reading the Review-Journal's story on it.

NPRI has also hired Joe Becker as director of the Center.

In a nutshell, the Center for Justice and Constitutional Litigation will litigate as a means to uphold the nation’s bedrock principles, including limited and ethical government, property rights, Second Amendment rights and the separation of powers.

With the success a similar center has had in Arizona, this is a bright week for the rights of Nevadans.

Blog note: I apologize for the relatively few posts this week. With the Center launching, I was quite busy. I should be able to blog more regularly next week. And with the budget debate really starting to take shape, there's certainly a lot to talk about.

Until then, here's my shameless plug to "like" the Nevada Policy Research Institute on Facebook — over 500 fans and counting. Join the fun!

Media gets it right: Budget narrative now has accurate information

Just a quick follow-up to yesterday's post on the Economic Forum, in which I asked if the media would report accurately on the size of Nevada's budget deficit.

For those who don't remember, Nevada's general fund spending was around $6.4 billion in the last biennium and the Economic Forum projected Nevada's revenue for the next biennium will be $5.33 billion.

Now, this leads to a fairly simple math equation: $5.33 billion - $6.42 billion = a $1.09 billion deficit. That's about a 17 percent shortfall.

Overwhelmingly, members of the media reported this accurately.

Even David Schwartz and Anjeanette Damon of the Sun, although they didn't mention last biennium's total spending, provided some context for the forum's projections.

The forum concluded that for fiscal years 2012-13, the state will have $5.3 billion in general fund revenue to spend — about $1.1 billion less than the current biennium.

Disagreements over what to cut and whether to raise taxes are expected. But everyone will have to deal with the forum’s number.

The projection assumed a few things: Taxes raised in 2009 will expire as scheduled; the federal government won’t shower Nevada with stimulus money as it did two years ago; and Sandoval and the Legislature won’t (even though they probably will) take money from local cities and counties.

To maintain current levels of services, state agencies have requested $8.3 billion, according to the state budget office.

The only print reporter I found who didn't provide context for the state's budget discussion is Geoff Dornan of the Nevada Appeal, who avoided mentioning how much Nevada's general fund spending was in the last biennium.

The Economic Forum on Wednesday set total general fund revenues for fiscal 2012 and 2013 at $5.3 billion. That is nearly $700 million less than the $6 billion the 2009 Legislature had in projected revenue and some $400 million less than the revised projections prepared for the 26th special legislative session last January.

That total is also $3 billion less than the $8.3 billion that state agencies have requested for the coming biennium.

With the narrative correctly reported, the focus can now turn to reducing spending.

Here are some ideas to get started with. NPRI will be putting forward many more ideas in the next few months as well.

Bonus: Andrew Clinger and KRNV do a good job explaining why Nevada's budget deficit is about $1.2 billion.

Economic Forum: Nevada will collect $5.33 billion in taxes

Let the budget games begin:

Nevada's Economic Forum today projected that the state will have $5.33 billion dollars to spend in the 2012-2013 biennium.

It is roughly that which Governor-elect Brian Sandoval was discussing all along, but would be more than $1 billion less than the current two-year budget.

The forum did not include tax hikes, approved by the 2009 legislature, because they are supposed to sunset next year. If the legislature decides not to sunset those taxes, it could cut the deficit by more than $500 million.

Agency requests for the 2012-2013 biennium would put the budget at $8.3 billion, which is roughly $2.9 billion more than the economic forum projects. The projected $8.3 budget would include the end of furloughs for state workers and general rollups of current state programs.

This isn't a surprise. Revenue had been projected to be set at around $5.4 billion.

The pressing question is this: How will the budget debate be framed?

In the last biennium, Nevada's general fund spending was around $6.4 billion.

Now this math equation is fairly simple: $5.33 billion - $6.42 billion = a $1.09 billion deficit.

That's about a 17 percent shortfall.

If this was six months ago, you'd likely here many claims in the media that Nevada is facing a $3 billion shortfall, based on assuming that Nevada's agencies need to increase spending by 30 percent to $8.35 billion.

But to the credit of most members of the media, Andrew Clinger and governor-elect Brian Sandoval, accurate information about Nevada's budget situation is now reported widely.

From Sandra Chereb of the Associated Press, to Ed Vogel of the Review-Journal, to Ray Hagar of the Reno-Gazette Journal, to the Lahontan Valley News, Nevada's budget situation — that our state is facing a $1 billion, 17 percent drop in revenue — is now the accepted (and truthful) narrative.

Even the Las Vegas Sun's David Schwartz, who's joking on Twitter about NPRI's insistence that the budget situation be accurately reported, has had the integrity to change how he's reporting on the budget.

It was his article, $2.5 billion state budget deficit: ‘Best-case scenario’, that contributed to the $3 billion deficit myth in the first place, but note how he described the budget situation yesterday.

Sandoval has remained firm in the face of protests that cuts to balance the state’s $3 billion deficit in funding needed to maintain existing services will harm education, health and human services and the long-term well-being of the state. [Emphasis added]

Not quite as accurate and informative as Hagar's description above (or the description of other reporters), but it's an improvement.

Accurate reporting doesn't mean that believers in limited government have won the debate, however. It just puts us in a position to have an intellectually honest discussion.

Fiscal conservatives now need to make the case that it's better to decrease spending by about 17 percent and live within our means than to increase spending by 30 percent and continue Nevada's pattern of unsustainable spending increases.

The budget battle is just beginning. But the good news is that we'll be doing it with facts, not misleading rhetoric.