As you may have noticed, we at the Independence Institute don’t like tax increases of any kind. We especially don’t like them during rough economic times. (Side note: Have you heard the good news yet?! Colorado’s unemployment rate is DOWN to 8.3%! Hooray?) The evidence is pretty clear. If Proposition 103 passes and we get a massive tax for the next five years, all of our jobs will be in jeopardy. Just like these falling dominoes over here. Aside from just losing around 11,000 jobs if we tax ourselves into oblivion, there’s also the education side to the argument. Prop 103’s proponents say the tax hike is “for the kids.” (What tax hike isn’t really?) But nowhere does it say that the money raised from Prop 103 must go to education. Remember all that Ref C money and where it went? Yeah, me neither.
Thankfully, Charlie Leonard of the Aspen Timeswrote on the education side of Prop 103. He cited two important points: one, that the money isn’t guaranteed to go to education to begin with. And secondly, even if all the money went to education, that doesn’t mean OUTCOMES – the stuff that matters – would improve. Charlie writes,
According to the nonpartisan Independence Institute, “Americans have increased spending on K-12 education by 50 percent over the past 30 years, and doubled spending over the past 40 years. Educational outcomes, as defined by test scores and international comparisons, have barely budged. Some school districts such as those in Washington, D.C., and New York City spend the highest amounts per pupil and have worse outcomes than Colorado’s test scores. The neighboring state of Utah spends $2,700 per pupil less than Colorado and enjoys better outcomes.”
And there you have folks. There is very little connection between money spent and educational outcomes. It’s not as if the more you spend, the more our kids learn. Not even close. So why tax ourselves into despair for the kids nothing?
Yesterday the Independence Institute held a press conference here in Golden to illustrate the job destroying results if Proposition 103, Sen. Rollie Heath’s tax hike, passes this November. Like I say in the video below, we wondered, “how in the world can we show the domino effect of job loss if Prop 103 passes? People’s jobs will fall like dominoes! How do we show this???” Well, after much thought and some whiskey, we finally came up with the perfect illustration… LET’S KNOCK THOUSANDS OF DOMINOES DOWN! So I got on the phone and called up 5-time domino world record holder Robert Speca to see if he wanted to come to Colorado to knock some dominoes down. Thankfully, he said yes and within a day, he was out near our offices in Golden setting up thousands upon thousands of dominoes to represent all of the jobs that will be lost if Prop 103 passes.
Yesterday at 2pm, we held the press conference and I was the lucky guy who got to push the first domino over. It was REALLY fun! In total, Robert the “Domino Wizard” set up 5,500 dominoes, with each domino representing TWO jobs lost due to this tax increase. Take a look at the video below to see the job killing destruction Prop 103 will wreak on our economy. Prop 103: Colorado’s job killing tax increase:
Fox31’s political reporter Eli Stokels also covered our event. Here is the article and video they took. You’ll notice in the video that Eli Stokols makes a mistake. He says that only 1,100 jobs will be lost because of Prop 103. Oops. It’s actually 11,000. Eleven thousand. Big difference.
The Independence Institute’s dynamic scoring study on the impact of the upcoming sales and income tax increase ballot initiative, Proposition 103, on jobs and the economy in Colorado has been published and cited in both print and television news. Here is a round-up thus far.
The study has also been cited in television news coverage of Prop 103 here by CBS4, and here by 9News.
Opinion pieces excerpted from the study have appeared here in the Denver Business Journal, here in the Summit Daily newspaper, and here in the Salida Mountain Mail newspaper.
Independence Institute writers appeared in the opinion pages of Colorado’s two largest newspapers this weekend.
In the Denver Post, Brian Schwartz makes the case, as part of a pro/con series, against the Proposition 103 sales and income tax increase ballot initiative.
Brian’s piece is here. Colorado State Senator Rollie Heath’s accompanying piece in favor of Prop 103 is here.
In the Colorado Springs Gazette, Amy Oliver Cooke and Michael Sandoval burst the green jobs bubble, explaining how Colorado’s “New Energy Economy” has failed to become the jobs engine promised by its proponents.
You can also check out a longer version of Amy and Michael’s green jobs take-down over at Townhall.com.
Senior fellow and super-economist Dr. Paul Prentice recently wrote a letter to the editor that was published in the Colorado Springs Gazette. In it, he raises two important points: one, that there is a meaningful difference between opinion and news. Second, that there are more schools of economics out there than just Keynesian and ultra-Keynesian. His letter was in response to a Gazette cover story titled, “Economists Support Obama Plan.” As you might imagine, the article presented as news the idea that all of today’s economists (that are worth a darn) believe that Obama’s jobs plan is good and will help turn the economy around. This is where Dr. Prentice points out his two key points.
All the economists quoted in the story come from one school of economic thought, one school among many, who believe in Keynesian economics. The only dissent mentioned in the story is from ultra-Keynesians who didn’t think it goes far enough.
He went on to point out that good newspapers know the difference between opinion and news. He mentioned that the Wall Street Journal also presented some opinions about Obama’s jobs plan, but that in the Journal, they did it a bit differently…
The difference is the Wall Street Journal published these where they belong, on the editorial page, while the Gazette presented theirs where they didn’t belong, on the front page.
Barron’s cover story this week is about state credit ratings. As you might imagine, California and Illinois are at the bottom of the list. Moving from the absolute bottom of the barrel on up, you run into some other pretty obvious states: New York, Pennsylvania, Massachusetts, Colorado… what? Colorado? Yes, you read that correctly. Don’t believe me? Take a look at their worst of the worst list here. Colorado is placed squarely in the bottom half of states with a “AA” rating. There are many factors that go into a state’s credit rating, so it’s difficult to nail one or two things down that we need to improve upon, but I’d suggest that Medicaid is a great place to start. I’d also consider looking at the best of the best list and seeing what these states do differently.
Georgia? Yes, I saw Georgia there too, with a “AAA” rating. Never thought I’d say it but, we need to be more like Georgia.
Recently I’ve been poking fun at government’s attempts at “stimulating” the economy and creating jobs. You might remember the first food stamp debacle, then the unemployment insurance hilarity, and finally the second food stamp nonsense. Well, my jibes were mere child’s play compared to Amy Oliver’s TownHall.com article on the green jobs fallacy. Amy carefully picks apart the Obama administration’s “weatherization” program meant to “stimulate” the economy with new green jobs all while reducing carbon emissions and saving the planet! It’s like magic!
Unfortunately, down in the land of economic reality, government’s attempts at creating jobs always fails fantastically. For example, after receiving a federal grant of $20 million, Seattle went to work on its weatherization scheme. So what was the result of this massive influx of taxpayer cash over one year later? A whopping 14 jobs “created” and a rise in the unemployment rate. Sounds like success to me! Just imagine all the prosperity we could bring around the country if only the government could help “create” more jobs at nearly $1.5 million a pop. Cha-ching!
Amy reveals not only the massive waste that these jobs programs are, but also the fact that in order to execute these schemes, Washington, DC has to impose its will further into the purview of local affairs. In other words, some bureaucrat in DC has the authority to set the “fair living wage” that the local weatherization workers earn while pretending to do work. Because DC always knows better than you.
Please read Amy’s whole piece, but first put a hat on so you don’t pull out your hair.
Remember Whitehouse press secretary Jay Carney and his ridiculous statement about paying the unemployed and how that “stimulated” the economy? Well, agriculture secretary Tom Vilsack tried to one-up Mr. Carney earlier today. Watch this video (and try not to roll your eyes. I dare you):
Ok, so now food stamps are the most direct way to stimulate the economy. Apparently, unemployment insurance just doesn’t cut it anymore. Sorry Jay. But the truth is no different with food stamps than it was with unemployment insurance: wealth transfers don’t stimulate the economy. Let me repeat. Taking from some (who earned it) and giving to others (who did not earn it) does not, in any way, create wealth. It does not matter what the wealth transfer vehicle is – food stamps or cash – the result remains the same.
The Keynesian story that both Jay Carney and Tom Vilsack tell is nothing more than a half truth. They both focus on what is seen. Some people “spending” on items they might not have purchased without the stolen loot they were given by Daddy Government. In their minds, these purchases spur economic growth and hiring. Put more specifically, in the Keynesian story, these purchases spur economic growth and hiring with no offsetting costs. And that’s where the story ultimately fails. It only considers one side of the equation. The side that is seen. The side that they neglect to mention is the important “unseen” side – all of the costs associated with the redistribution program.
If told this Keynesian fairy tale, an intelligent lay person might wonder where the money came from to give some people food stamps to spend and to give others cash to spend. This is the million dollar question. To answer this question reveals the unseen costs these programs incur. By taking money from productive people, either now or in the future, the government is skewing the incentives in a few important ways. First, the productive people (including business owners) who are targeted for the government shakedowns have a disincentive to keep producing wealth and earning more money. Why keep earning more money if you can’t keep all of it? After a certain point, the take home percentage becomes small enough where the entrepreneur is better off just enjoying some leisure. Secondly, the unemployed who are being paid to remain jobless have the incentive to, now stay with me here… remain jobless. If the government is paying you because you don’t have a job, why would you get a job that could potentially pay you less than you earn sitting on your couch? Finally, the employers who are paying higher taxes in order to give jobless people money and food stamps could have used the money taken from them to hire productive people. These wealth transfers are realized in the higher costs of doing business for employers. Last I checked, it’s employers who hire and create wealth. How about we refrain from taking their money so they can more easily hire employees.
Even if we accept the Keynesian notion of a world with no costs, the whole food stamp scheme still doesn’t make any sense. If it did, then we could create more wealth and prosperity by simply adding more people to the food stamp rolls. Why stop at a few million people here and there? Why not put the whole country on food stamps? Clearly, wealth doesn’t come from buying food with food stamps. It comes from production. Food stamps, oddly enough, are not production.
I don’t want to place all of the blame on Tom Vilsack though. Remember Colorado Springs Gazette reporter Emily Wilkins? She made the same disastrous case for food stamps and their magical stimulus powers in this Gazette article. You’ll recall that Ms. Wilkins lamented the fact that only around 40% of Coloradans eligible for food stamps actually apply for them. She thought it was a shame. I think it’s a shame that economic ignorance is pervasive among bureaucrats in Washington and even some journalists in great newspapers like the Gazette. After all, it doesn’t take a rocket scientist to see through these stimulus scams. The results are all around us. $11 trillion in stimulus money spent since George W. Bush – and look where that got us.
White House press secretary Jay Carney took the American public on the economic fallacy superhighway yesterday. A Wall Street Journal reporter correctly asked Carney, “I understand why extending unemployment insurance provides relief to people who need it, but how does that create jobs?” Legitimate question. If Jay Carney or anyone else has the stones to say that extending unemployment insurance creates jobs, they ought to be called on it and asked to explain how exactly that happens. Carney, like the self-deluded Keynesian he is, replied arrogantly, “I would expect a reporter from the Wall Street Journal would know this as part of the entrance exam.” Watch the video of this exchange to see for yourself. Carney goes on to explain the typical Keynesian fantasy land narrative: (said in a pompous voice) “You see, when someone is unemployed they aren’t spending any money. Unemployment insurance gives them money to spend. That spurs economic growth. Duh.” He then goes on to say that economists across the spectrum agree with this analysis. Really?
I’m willing to bet that not all economists agree that extending unemployment insurance, a euphemism for paying people not to work, creates jobs on net. And that is the key here. A government policy can very easily create some jobs. But the real question is, has it created more jobs than it destroyed. And my guess is that most economists would agree that paying people not to work does indeed spur some economic production, while at the same time destroying much greater amounts of economic production. So on net it is a job and production destroyer. Taken further, if this story were true, we could all quit our jobs and collect unemployment checks while we sit back and enjoy higher and higher levels of economic prosperity!
I just so happen to be in a profession where I can talk to economists and see what they think. I first called economics professor and Independence Institute Fiscal Policy Center Director Penn Pfiffner. I explained what Jay Carney had to say and asked how he would reply. This is what Penn said,
Recent developments in the understanding of economics now point to an overall loss to the economy from extending unemployment insurance. While it does help the individual receiving the redistributed funds to continue spending, that spending is not based on increased productivity (output), therefore we’re continuing to borrow from the future in circumstances where the debt mood is already oppressing the economy.
Okay, that’s at least one economist who disagrees. Let’s talk to Linda Gorman, an economics PhD, former academic economist, and Independence Institute Health Care Policy Center Director. This is what Linda had to say,
Mr. Carney must believe that the money used to pay unemployment benefits comes from elves. In fact, it comes from businesses who have to pay the taxes that are used to support the unemployed instead of using the money to hire productive workers.
Okay, we’re two for two. Let’s talk to someone outside our organization. I thought about it and decided that I could give Professor of economics at George Mason University Bryan Caplan a call. Luckily for me, he was in his office and agreed to give me his reply to Carney’s assertion. This is what Professor Caplan had to say,
Even if that story were true, its not the whole story. What extending unemployment insurance does is help people not look for jobs. Even Larry Summers believed that unemployment insurance extensions delay people getting back into the workforce. The incentive effect against finding employment is larger than any positive effect of the unemployed spending money.
Ah-ha! Even former director of the Obama White House National Economic Council Larry Summers agrees that extending unemployment insurance only encourages unemployed people to remain without a job. What else should we expect when we’re subsidizing an activity (not working). When you subsidize something, you get more of it (people not working). I worked some Google magic and came upon this Larry Summers quote,
The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a ‘reservation wage’—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase [the] reservation wage, causing an unemployed person to remain unemployed longer.
This was taken from his chapter on “Unemployment” in the Concise Encyclopedia of Economics, first published in 1999. Of course Larry Summers changed his tune on unemployment insurance after he became an economist for the Obama Whitehouse, but he can’t hide from his past life when he was a relatively independent economist.
I wonder if Jay Carney has ever heard Larry Summers speak on the effects of unemployment insurance. Maybe Larry could change Jay’s mind some day. Or maybe this Independence Institute video on unemployment benefits could do the trick.
In a perfect world, our queen MAD (Mothers Against Debt) Mom Amy Oliver would be the 21st century’s Rachel Carson. And I don’t mean that in the environmental way. What Rachel Carson did in 1962 with her book Silent Spring was to start a worldwide environmental movement. The book helped launch the ban on DDT. Turns out that DDT was not the evil pesticide it was portrayed as, and banning it actually kills millions of people who suffer from malaria. (oops) Despite being wrong and extremely deadly, Rachel Carson and her book were able to sound the alarm, get activists fired up, change policies, and set in motion a movement that lasts some 40 years later.
Although Amy Oliver doesn’t have a book (yet), she is on a mission to kick start a movement to get activists fired up and policies changed. In this Townhall op-ed, Amy outlines her version of the Silent Spring – what she calls our “Economic Silent Spring.”
Right now every man, woman and child in the United States is shackled with more than $46,700 of national debt and that does not include interest or unfunded liabilities such as Medicare and Social Security. Assuming we continue down the superhighway of spending, by 2015 every child in America and their parents will owe more than $70,000 each according to the U.S. Debt Clock.
Debt is the new DDT. But unlike the harmless pesticide, debt is toxic. As it grows and grows it poisons our children’s future. Amy’s plea for less spending and a brighter future for our kids is not going unnoticed. Mothers Against Debt is getting bigger each day (like our debt). More Moms are coming to understand the danger in having policies that promote the “spend now, leave bill for later” lifestyle of Washington, DC. After all, the bills we are accruing at an unprecedented rate are neatly stacking up in each and every baby cradle across the country. Forget your kid’s impending college debt. They’re already tens of thousands in the hole before they take their first class.
If Amy gets her way, the Economic Silent Spring will start a movement that lasts over 40 years and changes business as usual in Washington. Help Amy ban wreckless debt. Join Mothers Against Debt today.
