Economist Paul Krugman turned a blog post – whose facts we and others disputed — into a NYTimes column on Thursday. His basic point: Haha, Texas the Conservative Poster Boy is in just as much trouble as California, New Jersey, etc. Kevin Wiliamson at National Review fired back yesterday arguing that Texas is just fine, thank you.
Here’s what happens when two ideologues throw facts at each other to make an argument that supports their ideology: Both get it wrong. Texas in no way compares to California’s fiscal debacle – a deficit approaching 50 percent — as Krugman asserts. On the other hand, Texas does have a structural deficit, which Williamson ignores. Revenues simply do not cover expenses. In the last biennial budget, the state was saved by a $12 million cash infusion from the Obama stimulus program. This time, there is no stimulus. Williamson is right to say Texas has a Rainy Day Fund (although it is projected at $8 billion not $10 billion, as Williamson asserts). But where Williamson gets the notion that the state’s deficit is only $11-15 billion escapes me. The state will be lucky if it is $18 billion, and most people say $22-25 billion. (The number depends on how high the comptroller forecasts sales tax revenues.) What’s more, that structural deficit is not going away.
As Republican Senator John Corona pointed out yesterday at the Dallas Friday Group, only 17 percent of the Texas budget is not devoted to education and Medicaid. Cut that entire 17 percent and you still don’t cover the deficit. So Williamson’s scenario is too rosy, while Krugman’s seems largely invented.
The fact is, as even Williamson acknowledges, you gotta pay for things like state troopers and the lady at the DMV, not to mention (which Williamson doesn’t) new roads and rail in the nation’s fastest growing state. Rick Perry, primping for his vice presidential pick, has announced he will veto any new taxes or fees. But what about the business tax, which has come in $8 billion lower than originally projected? Can that be fixed — or will Perry make a show of opposing even that? With no improvements in revenues how can the numbers balance, which under the Texas Constitution they have to do? We can only hope that there are enough non-ideologues left in the Legislature to face reality and make the tough choices. But with Perry in the governor’s seat — and as usual, looking out only for Perry — don’t expect any miracles.
In that, Krugman’s larger point is right, although it is a bit more ironic than he lets on. Texas has a problem paying for its prosperity. Its economy is so robust that its government needs to invest to keep up with it. California, New York, and New Jersey should be so lucky.
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Here’s some constructive recommendations, if anyone is reading:
1) Do away with club memberships entirely for consumption of alcohol. If a community wants to be dry, be dry – don’t make the state incur the cost of auditing to make sure everyone is a “club member”. Use that money to find tax cheats and wrong-way drunk drivers. Stop having the state be the collection agents for the liquor industry by monitoring the accounts receivables for distributors – let the business economy do that. State manpower must be directed at what the law says must be done.
In other words, suck it up and rewrite the Texas Alcoholic Beverage Code for a 21st Century economy.
b) Charge the same tax on all alcohol consumed, because it all carries the same cost to monitor. 14% vs. 8.25%. Make it all the same whether it’s being consumed in a restaurant or at home. Want police? Want safety? Me too. I’ll pay more.
also) Spend some money analyzing where the business, or Franchise tax, failed, and then correct it. The current law does not allow for deduction of very important costs of doing business, like labor, rent and property taxes. These costs, while good for the Texas economy, are penalized when it comes to Franchise tax.
While Texas loves to tout it’s “we don’t have income tax”, the Franchise tax has turned out to be a far worse encumbrance for businesses in the $1-$5 million sales range. Many businesses who end up with a fiscal deficit in 2010 will still owe significant business taxes – whereas with an income tax payment is based on profitability. Let’s face it, it’s easier to collect taxes from a healthy company than a company that’s gone bottoms up.
Finally) We are no way, no way at all as screwed up economically as California. Michigan? Maybe. But not California.
Krugman is a Nobel Prize winner in Economics & his article is likely correct. Texas is probably #2 most bankrupt State in the Union. Zero State income tax is great – but won’t fill this hole. Higher Texas ’stealth’ taxes will have to fill this problem.
Texans are clearly a bit brainwashed into this blind and disturbing excessive and ignorant State pride – to the point of denial of this article by a 2008 Nobel Prize winner in Economics. That is just plain dumb following.
The first thing you should know is the writer of this colunmn: 1) He hates capitalism 2) He hates conservatism 3) He is some combination of socialist/communist/marxist 4) He is a far left liberal zealot who uses half truths, distortions, ommissions, and sometimes lies to make his point 5) He is an alumni of an Ivy League University 6) Because of his elite education and his political ideology, he has a very low opinion of ordinary Americans and sees them as stupid/ignorant and unable to make wise decisions to control their own lives 7) He believes that America is at the heart and cause of most of the worlds problems
It’s not even certain that he refrains from hating America
He assumes that the more money spent on education, the better education will be….where’s the proof? Texas has always been very efficient with school funding. Texas has a good system and has lower per student cost than most statess….that’s a very, very GOOD thing, not a failure of the conservative, capitalistic system. Simply put, it cost less to educate Texans because of the lower cost of living, the lower expense for weatherizing schools (mild winters, springs, falls), and the efficient uses of revenue,etc, etc etc. 9) It is not known what the deficit will be but revenue from sales taxes has started increasing over the last few months and that will reduce the deficit. 10) It is estimated that the worst case deficit will be around $24 billion, but that is for two (2) years 11) Unlike California, Texas will implement a reduction of expenses instead of raising taxes.
Got it? Now, keep that in the back of your mind anytime you read any writings by this political hack. He hates anything to do with Texas because Texas is just about as conservative, flag waving, Bible thumping place you can find in America and anything that negatively impacts Texas is a hit against Conservatism, capitalism, and the American way of life. Texas is in no way as destitute as he would have you believe. Things you need to know about Texas: 1) Texas has a $10 billion rainy day fund that can be used to offset any deficit 2) A lot of the deficit in the Texas budget is caused by some of the mandatory state funding required by the Feds for some of their programs (Medicare, schools, road building, etc etc etc) 3) Texas legislature only meets every 2 years and the current budget was put in place two years ago and a lot of the additional expenditures causing the deficit could not be foreseen two years in advance 4) Texas, by state constitution, must have a balanced budget 5) Texas will cut back on spending (the Governor has already started putting the cut backs in place) to match it’s revenue. Texas will not increase taxes to match its expenditures 7) A lot of the addditional expenses have been created by the thousands of additional illegal immigrants that have entered Texas who must be supplied with schooling and medical attention. These are folk that should not be here except that the Feds didn’t keep them out. And, some of the additional expenditures have occured because Texas has had to spend more money to help secure the border which is the Feds job and the Feds expense but has been dumped on Texas to handle
Bottom line: Klungman believes that everyone should be assisted with housing, food, education, salaries (entitlements) and that citizens should be taxed to a level to produce revenue to pay for it. Conservatives believe in the self-sufficiency of the individual and believe only the ones that are not able to make their own way should be assisted. Conservatives believe that citizens should be allowed to keep the majority of their own earnings cause they know best how to use their resources and that expenses should be no higher than the amount of revenue coming in based on the tax rate estimated to be the best balance between allowing citizens to keep their earnings and their fair share for funding government mandated responsibilities. The writer of this column is full of hot air, hate, and feeds it to the readers as a statement of fact. Texas is ok and will have a balanced budget and not raise taxes. That is the same way your household works…if you can’t afford it, you don’t do it!
Krugman received his Nobel for TRADE, not political economy of this sort. His Nobel does not certify his opinions.
It’s the SPENDING that is the problem, because the “new norm” will not allow sufficient prosperity from which the State can generate revenue.
Anyone concerned with the deficit should look at the budget of TXDOT. Not exactly all pot-holl fill and bridge fix projects.
@ Wm B. If SPENDING is the problem, why haven’t Republicans, who have controlled our state government for 8 years, cut it? I would suggest, as I did in the post, that GROWTH is the problem. It is a happy problem, but it is still a probemin that it has to be paid for.
I’m hoping that Dr. Brown forgot to put the sarcasm tag on his post wrt the idea that the receipt of the Nobel Prize somehow transforms every word [of nonsense] that the recipient utters or writes after that point into some sort of received truth from above. After all, Babe Ruth was arguably the greatest hitter ever, and he still only got on base less than half of his at bats. That said, anybody with business sense knows that it takes lots more cash to fund a rapidly growing business enterprise than a stable or even a declining business. Balanced budgets are a very good thing. God bless Texas!
Well, the magic number has arrived and yes, Dorothy, we are in the rabbit hole $27 Billion, including a current deficit of $4.3 Billion that has to be covered before anything else is done.
Does anyone else find it very disconcerting that we don’t get this number until 24 hours before the gavel drops?
It’s funny how even with the writing on the wall, Perry’s supporters still come out swinging with the “socialist/communist/marxist” comments instead of actually admitting that he isn’t the savior they want him to be. Please get some new talking points because calling anyone who hates Texas or republicans a “commie” is juts plain dumb. You people deserve what you get.
When the population grows, so do the expenditures for roads, cops, schools, and yes, Medicaid.
The idea that you can cut spending (and taxes) at a time of rapid growth (the latter of which the governor brags so much about) makes no sense. But hey, we’re like a whole other country, right?
KMILLS makes a good argument. The fat lady has not finished singing.
Ahh yes, Krugman was awarded the Nobel prize, also awarded to Yasir Arafat, Jimmy Carter and Obama. That hardly qualifies anyone.
After Krugman’s bizarre and rabid response to the Arizona shooting, a response that was clearly wrong and a lie, I have no respect for his opinion.
just as TX did (relatively) poorly in the 80’s, TX is doing well in the 00’s and now.
live by oil, die by oil, live by oil, die by oil, live by…
California went crazy with residential construction bubble, so ‘personal wealth’ and employment suffered (relatively) worse when the bubble burst. California still has Hollywood, Si valley, etc.
this has nothing to do with the usual PC godwinisms: ’socialism’, ‘pro business’, ‘anti-business’ ad nauseum.
appeal to credential == logic fail
and beautiful delicious irony to see from someone who makes it a point to refer to themselves as “Dr Brown”. QED
Of course, it goes without saying we expect career academics who are completely detached from the real world to tally their finances in sums of unicorns and rainbows.
From Teabags to Treason in Texas: Beck & Perry Call for Secession …
From Teabags to Treason in Texas: Beck & Perry Call for Secession. 15 Apr 2009 Author: Cheryl Contee (Jill Tubman). I saw Oliver Willis tweet this post …
http://www.jackandjillpolitics.com/…/from-teabags-to-treason-in-texas-beck-perry- call-for-secession/ – Cached – Similar
From Tea Bags to treason, Stop Perry now.
Treason
Paul Krugman has been wrong with every one of his economic forecasts since he has been making them.
Predicted Carter Presidency would be the most successful in US history.
Predicted Ronald Reagan’s supply side economics would be a failure of historic proportions.
Predicted the EU’s “managed capitalism” is the path the US should take.
Predicted Bush cuts of capital gains, and dividend tax would “wipe out revenue” (went up 3X)\
Predicted Obama’s stimulus package would create 3 million new jobs and cut unemployment to below 6% by now.
Yes the man is someone you should listen to.