Recently another entry on "Government Bytes!" examined data that would indicate mediocre fiscal trends under Gov. Tim Pawlenty’s Administration. To lend some additional perspective, I will step out of character and respectfully point out some of the positives that have occurred in Minnesota under his leadership.

Yes, overall spending has grown on Pawlenty’s watch, but less so than the 14% average two-year-cycle boost that previous Governors tolerated. He’s also put the state’s financial management among the best nationwide. Not a bad achievement in a notoriously liberal state.

Some would argue that Minnesota’s standing as one of the worst-taxed states in the country has been turning around. That's true, but the turn has been very gradual. According to Tax Foundation statistics, for 20 years (1982-2002) Minnesota finished among the top nine state and local tax burdens as a percentage of income. From 2003-2007, Minnesota ranked at or better than 10 … still a long way to go. Let's hope this inching in the right direction becomes more measurable as time goes on.

Pawlenty’s pluck was certainly on display this year when he vetoed the Legislature’s
attempt to raise fuel taxes. Though his veto was overridden, the tiny margin by which his decision was overturned suggests he stood up for taxpayers when his leadership could have made the difference … not when the prospect of defeat was so large the veto was really a “free” gesture with no political consequences.

One of the highest (but unintended) tributes to Pawlenty comes from his arch-liberal enemies, who are pounding on him for issuing so many vetoes of hare-brained fiscal policies that the Minnesota Star-Tribune called him the “new godfather of‘'no’.” In this budget cycle, he has resisted calls to close budget deficits through more tax hikes that Minnesotans cannot afford.

Some data may paint a less-than-glowing picture of Pawlenty’s record, but
these are a few more considerations in evaluating his credentials for a Vice
Presidential pick. And the debate continues ...

We're all used to Congress, state legislatures, administrative agencies, and local governments taking money out of our pockets. But, Leona Helmsley is so kind to remind us they aren't the only ones reaching for your wallet.

When Ms. Helmsley died, she left a bundle to her dogs. A $12 milllion bundle. Normal? Maybe not. But, I imagine most of us can agree that when we die our money should go where we say it should.

Not so fast.

A judge has reduced the amount of Ms. Helmsley's money to be used for the care of her dogs from $12 million to $2 million. In addition, the judge gave $6 million to two grandchildren Ms. Helmsley explicitly excluded from her will.

Maybe that's a more "just" use of Ms. Helmsley's billions. But what exactly gives the judge the right to, in the words of the New York Times be so darned "flexible" with someone else's money?

Most American school children can probably recite the first few words of the Declaration of Independence ("When in the course of human events...") or identify its most famous passage ("We hold these truths to be self-evident..."). But, when reflecting on independence day I realized I went through grade school, high school, college, and law school never having read the entire Declaration.

(Let's pause for a moment and toast to public schools)

So today, I decided before another Fourth went by, I should try to push back the bounds of my own ignorance and read the darned thing. In reading two things struck me.

First, I often think of the Declaration of a series of high-minded ideals, mostly because school house rock never got past the second paragraph. But, the Declaration is a pretty impressive attack on King George, who according to Thomas:

has plundered our seas, ravaged our coasts, burnt our towns, and destroyed the lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation, and tyranny, already begun with circumstances of Cruelty & Perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

Second, I think we all know taxes were a pretty important part of the revolution. But it's pretty striking seeing amongst grievances like the ones listed above, the Founders also called King George a tyrant

For cutting off our Trade with all parts of the world

For imposing Taxes on us without our Consent

So for those taxcutters out there in internet land, when you see a student this Fourth of July remind them this country was founded on the principle that high taxes and cutting off trade with other countries was tyranical. They probably weren't taught that in school.

At 5:00 AM on Tuesday, Delaware’s lawmakers had just finished their final revision of the budget for fiscal year 2009. Disagreement last week over how to meet an anticipated $200 million deficit had forced legislators back to the drawing-board. The General Assembly finally adjourned with a balanced budget, reached in part by some last-minute corporate tax increases. By raising taxes to help balance the budget, Delaware’s legislators illustrate a fundamental difference between how government and the private sector deal with budgetary difficulties.

When facing a deficit, governments, corporations, and individuals have two options. One is simply to spend less. The other is to boost revenues. The government often departs from the private sector in the second option, in how it increases revenues. Whereas the private sector raises revenues by increasing productivity and output, the government can do so merely by passing laws. If a CEO needs to raise a firm’s revenues, he will direct the firm to improve its products, broaden marketing efforts, or invest further in research and development. Likewise, to earn more, an individual must take another job, continue his or her education, or save and invest prudently. For the private sector, revenues increase because of higher productivity. Higher output raises income levels.

In contrast, government can increase revenues simply by passing laws. If legislators in Delaware enact a bill to raise taxes, their action has not created wealth or advanced economic prosperity. For government, then, increasing revenues does not require productive action.

To put this difference in terms of opportunity cost: those in the private sector must sacrifice more to raise income than the government must. For a firm, generating higher revenue dictates applying more resources to that end, resources which could have been applied elsewhere. The net effect may be profitable, but that profit will have come at a price. On the other hand, senators and representatives can legislate at no economic cost to themselves. The cost (to those in government) of legislating a tax increase is far less than the cost (to those in the private sector) of providing a better product or working a second job.

Delaware’s situation illustrates the difference in how government and the private sector approach the problem of balancing the budget. For firms and individuals, balancing income and spending is costly. Since resources are scarce in the private sector, there is rarely, if ever, a painless way to increase revenues. For government, though, raising revenue through legislation ensures an easy way to balance the budget. And any government that “balances the budget” by consistently raising tax burdens severely limits that budget’s ability to restrain spending and foster fiscal prudence. Instead of guiding legislators, the ideal of a “balanced budget” becomes an annoying but fluid and trivial benchmark.

Confronted with a $15.2 billion budget shortfall, California legislators are mulling a change to Proposition 13, the San Diego Union-Tribune reports. Prop 13, approved by voters in 1978, slashed property taxes and instituted a limit on annual increases. Though the law is still immensely popular among Californians, some politicians are kicking around the idea of changing it to extract more money from business community. With greener pastures for business in numerous border states, it doesn't seem like a bright idea to levy more punitive taxes on commerce. Try telling that to the California legislature.

North Carolina Governor Mike Easley (D) is struggling to find a budget compromise with the leaders of the General Assembly (both chambers controlled by Ds). Some politicians are suggesting doing away with agreed-upon relief of the gift tax, among other things, to fill a $70 million hole in the budget.

NTU has suggested holding back on pay hikes for taxpayer-paid government jobs (North Carolina teacher compensation – when adjusted for cost-of-living factors, experience levels, and pension contributions – is $5,400 more than the national average).

Joseph Coletti with the John Locke Foundation identified savings of up to $300 million in operating expenses and as much as $250 million in new debt. Coletti identified numerous wasteful or low-priority projects that could be eliminated, like an inflatable planetarium, a John Coltrane museum, and a mandate for the state use of biodegradable bottles. Furthermore, the state could cut interest costs on bonds by restructuring loans to go before the voters for approval.

My apologies to all Coltrane fans, but tax relief should come first.

More ultra-depressing news from the land of my birth, the Motor City. Auto sales have slumped dramatically in the last year and people are starting to talk very seriously about liquidity problems that could render some of the automakers incapable of financing their ongoing operations. For the uninitiated, that essentially means they might not be able to keep the lights on. It doesn't take a genius to tell that this isn't good news.

Extremely interesting (and disturbing) quote from the story about GM's market cap (a measure of the total value of the company)...

"What's GM worth now -- $7 billion?" asked Bruce Birger, managing director of Birger Capital Management. "People can write checks for that amount."

You know what? He's right. There are a few people that can write checks for that amount. Not many, but it truly boggles the mind to imagine the economic titan that was General Motors being snapped up in cold hard cash.

Meanwhile, Google has a market cap of over $166 billion. Yahoo is nearly $30 billion. For an auto industry reference, Toyota is roughly $172 billion.

In fairness to GM and other American companies, automakers in general are struggling right now. Only Honda has managed to increase their year-over-year sales, and then only by 1.1%. Toyota's sales are actually down more than GM's. Nonetheless, neither of those companies face short- or long-term challenges that even approach the scale of the American companies.

The Americans spent much of the 1990s and early 2000s neglecting passenger car development to focus on high profit-margin SUVs and trucks. Now that gas prices are so high, many consumers are shunning gas guzzlers for more efficient cars. All of this is adding up to some serious problems.

They are weighed down by decades of union contracts that make their labor force expensive and difficult to manage (read: cut). Let me illustrate my view of the auto unions with a slightly absurd analogy. As the American auto industry exploded and the fat union contracts were signed, the unions were like a young son catching a piggy-back ride from Dad. The son sure as heck had fun, and the Dad enjoyed it too, even though he was lugging around a little extra weight. Times were good and they bonded through the experience.

Well, add 40 years to the age of the child and the Dad, and what do you get? You get an overweight middle-aged man on the back of a shriveled and shrinking old Grandfather. Grandpa's still standing, but his back is killing him and he can't handle it much longer. Not a pretty picture, but basically accurate.

This story feels like deja vu to me. Seems like we've spent much of the last seven or eight years documenting the decline of the American auto industry. Unfortunately, the decline has been pretty steady, with but a few bright spots here and there. Hopefully they'll finally do some wholesale restructuring, take advantage of some of the better product they've been putting out recently, and be on better footing in the future. Hopefully.

Administrator’s Reminder: The opinions of Guest Bloggers do not necessarily represent the views of National Taxpayers Union or National Taxpayers Union Foundation.

As promised, Tim Pawlenty’s Fiscal Record in Minnesota:

Spending:

Like Governor Romney, Pawlenty’s spending record started off strong. During his first year in office, Pawlenty was actually able to cut general fund spending by 1.2%. This penchant for fiscal probity waned in later years, however. In the next four years, general fund growth averaged 6.6%.

This rate in government growth is average when compared to the rest of the United States. From FY 2004-07, spending increased 17.2% (from $13.6 billion to $15.9 billion).

Unfortunately for taxpayers, government employment in Minnesota grew 27.7% (from 33,279 state employees to 42,515) during Pawlenty’s tenure.

Taxes:

Pawlenty’s record on taxes can rightly be characterized as a disaster for Minnesotans. There have been no broad-based tax cuts in Minnesota and the largest reduction during Pawlenty’s time in office is only $28.7 million.

Overall, during Pawlenty’s tenure, taxes have increased $1.74 billion (with a b). Some supporters might attempt to describe these increases as merely fees, but consumers and corporations nevertheless have to pay the bill. To his credit, Pawlenty has proposed a modest $77.3 million reduction in sales taxes for FY 2009, but this is more than offset with $138.7 million in other tax and fee hikes.

Rumors are abound that Pawlenty is the front-runner for McCain’s VP slot, but with over $1.7 billion in tax hikes to his name and even more on the way, McCain might think twice about choosing Pawlenty.

A new regulation has been proposed for Washington DC. The idea is to force all intercity buses to pick-up/drop-off in one location in order to remove congestion in other areas. Private businesses have concerns about the impact of this regulation on their customers (and thus their business). Some of the bus lines that would be affected are relatively small operations that do not have a fleet of buses, but carefully thought out each aspect of their customers' experience (including pick-up locations). Additionally, different bus lines may have picked different areas to focus on bringing easy-access to many parts of the city. This regulation would eliminate choice and hamper the entrepreneurial efforts of these businesses. Finally, although some roads are less crowded then others, funneling all the buses to one area seems like it might create a new congested area. Regulations frequently have affects beyond their original intent. It is important to explore the possible ramifications in order to weigh the full costs and benefits of a new policy.

The BBC has an article here that is supposed to explore whether Massachusetts's health care reforms could serve as a model for the country. The BBC leaves the cost issue for the second to last graph saying: "There is one problem: paying for the programme has only been possible because of extra cash from the federal government." According to the Kaiser Family Foundation, costs for taxpayers and individuals are rising:

The law was expected to cost about $472 million in the first year, but because of higher-than-expected enrollment in government-sponsored programs, the actual cost was $625 million, according to figures from the Massachusetts Health Insurance Connector Authority. Gov. Deval Patrick (D) has requested $869 million for the program for fiscal year 2009, compared with previous estimates of $725 million.

Costs also have increased for residents. Monthly premiums for partially subsidized coverage increased by an average of 9.4% going into the second year of the program, according to state figures. Premiums for people purchasing private coverage without a subsidy increased by an average of 5.1%.

If the BBC believes this is a reform model for the rest of the US, I hope they will take some time to discuss the costs and tradeoffs associated with the law rather than glossing over important details.

Governor Jindal's veto yesterday of a $28 million pay raise for legislators in Louisiana constitutes a resounding victory for taxpayers in the state. The newly founded Taxpayers Union of Louisiana should be thanked for its significant grassroots contribution to this effort.

Headed by John Roberts, the Taxpayers Union of Louisiana formed recently after receiving one of NTU's Standing Together grants. The organization was a key player in mobilizing a network of taxpayers who refused to accept such frivolous government spending, and has already made a name for itself in the movement for economic freedom. Mr. Roberts called yesterday "an outstanding day for the voters of Louisiana," saying that "our voices were heard in Baton Rouge and our sentiments prevailed with the veto of the legislative pay raise."

The group set up a specific website to fight the pay raise, receiving thousands of hits within a mere week and galvanizing over 800 citizens to get involved. They rallied a crew of newly-discovered taxpayer advocates behind the slogan, "The Citizens are in Charge!" This is certainly a promising organization moving forward.

With the Taxpayer Impact blog series' heavy emphasis on results, the Taxpayers Union of Louisiana was a no-brainer for this feature. We at NTU look forward to working closely with Mr. Roberts in the future, as well as working to spread his group's methods of success to other organizations across the country. For more information on opportunities to enact meaningful change in Louisiana, or if you know of another group worthy of mention in this space, please contact me at jculling@ntu.org.

State budget deadlines are coming up all around the country. Some states seem more likely to have a working budget on time than others. New Jersey, however, recently enacted a law that protects a certain industry in case of budgetary delays. If you are going to keep open one essential industry during a budget shutdown, what would it be? In this case, it is the gambling industry. Another good question that might come up is why casinos need the government to be funded and operational in order to keep their doors open? The answer is regulations. State inspectors are required for casino operation. The new law provides an alternative form of inspection.

There are a few things to consider with this law:

1. This provision singles out one industry affected by government shut downs. What makes this industry a higher priority to remain open than others?
2. Without state regulations, there would be no issue to correct. There are many examples of governments needing to create new laws to correct for previous laws they designed.
3. This new law may remove some of the incentives for government to agree on a budget on time. What is the point of having a deadline if there are no consequences for missing it?

Offering private industries that suffer from government inaction an alternative to shutting their doors is appealing. As with anything though, there are important tradeoffs to consider. One thing to think about is what kind of message such an action sends to citizens? What are your thoughts?

Today, the NTU Foundation says goodbye to Elizabeth Terrell and Brianna Cardiff. Elizabeth has been a policy analyst in the Foundation for several years and moves on to the private sector. Brianna was our first Koch Associate, and she leaves us for grad school. My thanks to both of you!

Last week a certain friendly blogger, who moonlights as a state government worker, got a letter from the Commonwealth of Pennsylvania informing him he would not be receiving a paycheck starting in July. Why you might ask? Because Pennsylvania isn't very good at making a budget.

Which got me thinking. Government can't pass a budget to pay state workers in PA. It failed totally at every level after Katrina. It was responsible for a complete failure of health care for veterans at Walter Reed. It can't figure out how to regulate the borders. It isn't exaclty winning praise for its handling of the War in Iraq.

Why does anyone think, when it can't do any of these basic things, that it's a good idea put them in charge of health care?