December 11, 2005

The Fisking of Petro’s Criticisms of TABOR Misses the Biggest Point: Economic Growth

Filed under: Economy,Taxes & Government — Tom @ 3:27 pm

In an attempt to discredit the Tax Expenditure Limitation (TEL) initiative of Ken Blackwell, Jim Petro’s campaign literature has criticized the tax limitations imposed in a similar measure, Colorado’s Taxpayer Bill of Rights (TABOR). In the Petro literature (forwarded courtesy of Right Angle Blog), three of four key claims made relating to Colorado’s economic performance while TABOR has been in effect have been thoroughly debunked: personal income growth, bankruptcies, and unemployment. The fourth, relating to higher education spending, appears either suspect, irrelevant, or both as of this moment (see UPDATE 2 Below).

All of this fisking is important and necessary, but misses a bigger point–Colorado’s economic performance:

  • During the first 5 years after TABOR took effect in 1992, Colorado’s economy outperformed the rest of the country and Ohio by a substantial margin, even after considering population gains.
  • Since then, Colorado’s economy has performed as well as the rest of the country, and Ohio’s hasn’t.

Here is the proof:

COOHUSAgrowth

Sources: For GDP/GSP data–US Bureau of Economic Analysis (bea.gov; specific interactive page to obtain data is here); For underlying population data not shown–US Census Bureau (census.gov). Also note that there was a comprehensive methodology change in determining GSPs and GDP in 1997 that makes any attempt to compare the 1997 data presented in the top and bottom halves of the table above meaningless.

From 1992-1997, Colorado’s per-capita GSP increase was 28% higher than Ohio’s (3.2% difference divided by 11.9%), and 59% higher than the country’s per-capita GDP increase (5.6% difference divided by 9.5%). Ohio’s per-capita GSP increase also outperformed the country as a whole by 25% (2.4% difference divided by 9.5%), which though less than Colorado’s eye-popper, is still pretty impressive. It is no coincidence that the 1992-1997 time period mostly contains the years when George Voinovich and the Ohio Legislature were fiscally responsible.

From 1997-2004, Colorado’s per-capita GDP increase was the same as the rest of the nation (i.e., there wer no visible negative effects on growth from TABOR after the initial 5-year spurt), while Ohio’s per-capita increase was a whopping 52% lower (5.9% difference divided by 11.4%). It’s no accident that these are the years that include the final year (1998) of the Voinovich Administration, when the governor allowed state spending and taxes to balloon, and the first six years of tax-raising, spend-happy Bob Taft.

The Petro campaign has attempted to paint TABOR as a disaster for Colorado. If what you see above is a “disaster,” I think you’ll agree that Ohio could use one.

Petronians (is that a word?) are also attempting to portray the candidate’s “CAP” plan (Citizens’ Amendment for Prosperity) as superior to Blackwell’s TEL. David Hansen at The Buckeye Institute believes Blackwell’s TEL is far superior to CAP in keeping a lid on future state tax and spending increases. He also believes that CAP will do little to restrain future increases, and, looking at past history, has demonstrated that “Between 1995 and 2005, the CAP proposal would have provided no restraint on state taxes and spending.” . I agree with The Institute that TEL is superior, and the CAP is pap.
_________________________

UPDATE: It’s hard not to note that Mr. Petro has not (to my knowledge) challenged the tax-and-spend Taft Administration while he has been in office. By 1997, after what were mostly George Voinovich’s good years, Ohio’s per-capita GSP was only about 3%-4% less than the national per-capita GDP. Now it’s almost 8% less, and Mr. Petro has stood around while it all happened.

UPDATE 2: Made 4 the Internet points to a Tax Foundation statement back in March. Item V at that statement, about 2/3 of the way down the page, essentially says “Yes, Colorado is 48th in spending, but the state gets better-than-average results from its university system, and has also done a better-than-average job of keeping higher education affordable.” In my view, they should get a gold star for doing all of this while still being 48th in spending.

A Week of Wall Streets (121105)

A possibly weekly feature that will note items reported in The Wall Street Journal that weren’t significant enough to merit full posts but still deserved notice elsewhere, and received little (All WSJ Links require subscription unless otherwise indicated):

Dec. 5 — “Chinese Doctors Tell Patients to Pay Upfront, or No Treatment”
Not quite a People’s Paradise:

Health care is an issue vexing the world’s most developed countries, including the U.S., where people without insurance can lose all their savings if they get sick. But in worst-case scenarios, people who need urgent care generally receive it. (BizzyBlog edit–”are required by law to receive it, and almost never fail to receive it.”)

That’s not the case in China, where patients are routinely denied care if they cannot come up with the money to pay for it in advance — even in emergencies.

The World Health Organization ranked China fourth from the bottom of 191 countries in terms of the fairness of its medical coverage in a survey issued in 2000. This March, a report from a Chinese cabinet think tank said that unless China overhauls its medical care, “it will directly affect economic development, social stability and public support for reform.”

Dec. 5 — Are States Undoing Welfare Reform Through the Food-Stamp Back Door?
States’ Food Stamp Fight Intensifies” is primarily about how states have been attempting to extend the Food Stamp program to families with incomes well above the proverty line, in some cases as much as 85% above that line. Food stamp recipients have increased from 17.1 million to 25.5 million during 2000-2004, and federal costs have gone rom $17 billion to $27.1 billion. That’s an alarming acceleration that needs to be tamed.

Dec. 6 — Westin Hotels to Ban Smoking and Fine Violators
The rest of the hospitality industry will surely be watching how this works out: The Westin “will add $200 to the bill of anyone who violates the policy, an executive said. Westin Hotels & Resorts is banning smoking indoors and poolside at all 77 of its properties in the U.S., Canada and the Caribbean, said senior Vice President Sue Brush. Smokers will have to go to a designated outdoor area, she said.”

Dec. 6 — Testing Immigrants
The current test that immigrants must pass to become citizens is being revised, and of course there is controversy, along with the usual criticisms from the various sides that get raised in almost any testing debate (“useless trivia,” “too hard,” “not tough enough,” etc.). The question I have, after looking at the test, is how many people born here would flunk it. See it for yourself.

Dec. 7 — Alan Greenspan Translated Correctly
Much news on Greenspan’s December 3 Philadelphia speech gave the impression that he is okay with tax increases. Balderdash:
“However,” he added, “tax increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base.” Those risks are great enough “to warrant aiming, if at all possible, to close the fiscal gap primarily, if not wholly, from the outlay side.” Translated from the Greenspan-ese: Cut spending.

Dec. 8 — America’s New Un-Retirees
I’m not at all convinced that this is a bad thing, which may be the instinctive reaction of many to this news:

The oldest baby boomers turn 60 next year. Modern medicine is prolonging their life spans. The weakness of public and private pension plans is ever more obvious.

So experts predict many more people will work past age 65 — for their own good and the good of the societies in which they live. This sounds logical. In the U.S., after all, more than half of today’s 65-year-old men can expect to live beyond 81½, and more than half of today’s 65-year-old women can expect to live beyond 84½. Quitting at age 65 may be unaffordable.

Even if it’s NOT unaffordable, what’s wrong with continuing to work?

Dec. 8 — Motown Loses Its Mojo
The City of Detroit is in really, really dire straits: “The most immediate problem is on the cost side. The Citizens Research Council of Michigan, a privately funded watchdog group, found that as of 2002, Detroit was still employing more than twice as many workers per 100,000 residents as Phoenix, San Diego or Portland, Ore. ….. in order to make ends meet, Detroit still needs to lay off half of the 12,000 workers paid from the city’s General Fund — or cut the compensation for civilian workers by $27,000 each.”

Dec. 9 — Sarbanes-Oxley Has Given Tech Firms a New Line of Business
The new line of business is SarBox compliance: “Market researcher IDC estimates that world-wide compliance spending on technology will reach $7.5 billion this year and grow 22% annually. AMR Research says that companies will spend $6.1 billion overall this year to meet Sarbanes-Oxley requirements alone, with tech spending accounting for nearly $2 billion of that.” My take is that all of this is a drain on executive time, resources, and openness to innovation. Compliance does not add value or move the economy forward; it holds it back. I think we could be ripping along at 5% annual GDP growth if SarBox wasn’t holding us back.

Positivity: Mother and Daughter Reunited after 48 Years

Filed under: Positivity — Tom @ 7:11 am

The mother credits God:

(more…)

S.O.B Alliance Member Viking Spirit Nukes 2 Petro Claims about Colorado and TABOR; Bizzyblog Takes Care of Another

Filed under: Bankruptcy & Reform,Taxes & Government — Tom @ 12:02 am

The claims made in Ohio gubernatorial candidate Jim Petro’s campaign literature (first noted at Right Angle Blog), are these (quoted items are from a direct review of the campaign flyer sent to me by RAB):

  • Colorado, “in per capita spending on higher education ….. has fallen to 48th in the nation.”
  • Colorado’s “unemployment rate has nearly doubled” while TABOR was in place.
  • Colorado’s “bankruptcies have increased by 16%.”
  • Colorado’s “personal income growth rate ….. had fallen to 45th by 2003.”

Viking Spirit shows that unemployment went down, and did not double, and also refutes the personal income growth rate claim.

I think both of the other claims are suspect. I’ll take care of the bankruptcy claim right here and right now.

The Bankruptcy Facts

From 1992-2004, one year short of the period Colorado’s Taxpayer’s Bill of Rights (TABOR) was in effect, as noted by Parker at Viking Spirit:
— Annual business and nonbusiness bankruptcy filings nationwide grew by 65.6%, from 977,476 (12 months ended 9/30/1992) to 1,618,987 (12 months ended 9/30/2004), vastly more than Colorado’s 16% specified by the Petro campaign.
— Filings in Colorado went from 16,316 during fiscal 1992 to 27,879 in fiscal 2004, a 70.9% increase.

Note: 2004 data is available by downloading a spreadsheet available here (“2004 Fiscal Year by Chapter”), and 1992 data came from a PDF file for 1987-2003 listed on that same page (“1987-2003 Fiscal Year Bankruptcy Filings by Chapter and District”).

Giving the Petro folks a HUGE benefit of the doubt, it’s possible that they meant that Colorado’s nonbusiness bankruptcies went up 16% FASTER than bankruptcies went up in the nation as a whole, because if I look only at nonbusiness (i.e., personal) bankruptcies, that statement is true (specifically 16.9%). But even then, their literature should have specified personal bankruptcies, and does not, and should have specified growth in filings compared to the rest of the country, and does not. TABOR affected the growth of all taxes in the state, both individual and business, so it’s appropriate to look at all bankruptcies, and inappropriate to exclude business bankruptcies. I’m not presenting the figures to support the possible Petro claim because there are too many numbers flying around already.

Making Sense

Before the Petro people do a victory dance and try to say it’s just some kind of clerical error, the “faster” claim, even if somehow true, ignores two very relevant factors (comparative population growth and the general explosion in bankruptcies nationwide). Ignoring those two factors makes the Petro claim meaningless. Colorado’s population went up more than twice as fast as that of the rest of the country during the time period involved. The state’s population increase actually masks an improvement relative to the rest of the country in the growth of bankruptcy filings. Though Colorado’s filing rate is still higher than the national average, that difference has narrowed significantly. Here’s the proof:

Population (000s)–
Colorado 6/1/1992 — 3,496
Colorado 6/1/2004 — 4,601 (31.6% increase)
All USA 6/1/1992 — 256,514
All USA 6/1/2004 — 293,655 (14.4% increase)
(a download in .pdf or .xls is required to see 2004 results)

Bankruptcies per 1,000 population–
Colorado 6/1/1992 — 4.67 (16,316 divided by 3,496)
Colorado 6/1/2004 — 6.06 (27,879 divided by 4,601)
All USA 6/1/1992 — 3.81 (977,476 divided by 256,514)
All USA 6/1/2004 — 5.51 (1,618,987 divided by 293,655)

12-Year increase in bankruptcies per 1,000 population–
Colorado — 29.8% (1.39 increase divided by 4.67)
All USA — 44.6% (1.70 increase divided by 3.81)

Rate by which Colorado’s filing rate exceeded the national rate–
1992 — 22.6% (.86 difference divided by 3.81)
2004 — 10.0% (.55 difference divided by 5.51)

Conclusion:

Bankruptcy filings benchmarked against total population went up faster in the rest of the US than they did in Colorado during a period covering nearly the entire time TABOR was in effect. It’s reasonable to believe that TABOR’s restraint on total taxes enabled the state to keep its taxes lower than they would have been without TABOR, and increased Coloradans’ ability to stay out of financial trouble relative to the rest of the country’s population. The Petro Colorado bankruptcy claim is very misleading at best, and totally out to lunch at worst.

The central point is that, given what happened during the same time period in the rest of the country, TABOR cannot be blamed for the increases in bankruptcy filings that occurred during the time it was in effect (other factors too numerous to mention influenced the nationwide explosion in bankruptcy filings during this time period). In fact, based on the state’s improvement relative to the rest of the country, it’s reasonable to believe that TABOR reduced bankruptcy filings from what they would have been had TABOR never gone into effect.

Chinese Officials Attempting to Pay Hush Money to Families of Murdered Protesters

Filed under: Taxes & Government — Tom @ 12:01 am

Alternate title: Well, at least they’ve found a use for their currency reserves.

Item: Chinese officials reportedly offering money to conceal shooting deaths (HT Riding Sun):

Residents of a southern Chinese village near Hong Kong where police opened fire on demonstrators described a tense standoff in the area on Saturday with thousands of armed troops patrolling the perimeter and blocking anyone from leaving.

Frightened villagers said they were either hunkering down at home or arguing with police who are refusing to return the dead to their families.

A Hong Kong newspaper quoted villagers accusing Chinese officials of trying to cover up the killings on Tuesday in Dongzhou, a village in Guangdong province.

Residents said police opened fire on a crowd of thousands protesting against inadequate compensation offered by the government for land to be used for a new wind power plant. Up to 20 were killed, villagers said, while some said dozens more were missing.

….. Hong Kong’s South China Morning Post newspaper on Saturday quoted Dongzhou villagers as saying authorities were trying to cover up the killings by offering families money to give up the bodies of the dead.

“They offered us a sum but said we would have to give up the body,” an unidentified relative of one slain villager, 31-year-old Wei Jin, was quoted as saying. “We are not going to agree.”

Hong Kong reverted to Chinese control in 1997, but the former British colony maintains a high degree of press freedom. Its proximity to Dongzhou gives local reporters good access to events there.

I may be wrong, but the tactic bribing victims’ families so they can bury their murdered loved ones in exchange for their silence seems to be a first for a “modern” totalitarian regime. They must be getting soft: Stalin or Mao probably would have just killed threatened to kill them all.
______________________

UPDATE: Pajamas Media is on this.