ECONOMIC POLICY WEEKLY

COMMENTARY ON TODAY'S ECONOMIC ISSUES
MICKEY A. HEPNER, PH.D.

Number 2006-05

January 29, 2006

 

With a Legislature Like This, Who Needs TABOR?

 

It is good to see Governor Brad Henry and Oklahoma's legislators hard at work as they prepare for the upcoming Legislative Session. Over the last few weeks state officials have been trotting out their proposals for new spending and for new tax cuts. This promises to be an entertaining session as officials debate these important issues. Interestingly, the more intense the debate, the less of a need there is for TABOR--the so-called Taxpayer's Bill of Rights.

Conservatives in Oklahoma (and around the nation) have long decried the growth in government. According to the Tax Foundation--a conservative group that monitors taxes across the nation--Oklahoma's tax burden for supporting its state and local governments has risen from 8.0% in 1970 to 9.4% today (it reached a high of 9.9% in 2001). In other words, today Oklahomans must pay more of their income to support government than 35 years ago. However, this number is still smaller than the national average.

As a result of the growth in Oklahoma's government, some Oklahoma conservatives are proposing that we impose new constitutional limits on how fast government can grow. The proposal--known as the Taxpayers' Bill of Rights (or TABOR)--would limit the growth in state government spending to the sum of the rates of inflation and population growth.

But many seem to forget that we already have a limit on government growth--the political process. Over the next few months, liberals and conservatives will be debating whether Oklahoma's government should be larger or smaller. A few months after that, we will get to decide which side we like the best. The political process helps to ensure that the Legislature follows the will of the people. After all, if we do not like our legislator's performance, we can pick someone new in November.

I know that many conservatives have a natural distrust of the political process and point to Congressional Republicans as an example of a process that fails to serve the interest of society. I can understand the frustration that some conservatives feel with the Republican Party in Washington, D.C. After all, Republicans gained control of the U.S. House of Representatives on the promise that they would reign in wasteful government spending. However, a decade later these Republican revolutionaries have proven to be more wasteful than their predecessors.

The reason that Republicans succumbed to the D.C. culture is that there is no incentive (other than it being the right thing to do) for Congress to stop wasting money. There is no punishment for being wasteful, in fact Congress often reaps rewards for their profligacy. Even when Congress wastes money to satisfy supporters, they can still promise more tax cuts. In other words, Congress can hide the cost to taxpayers. It is no surprise that with these incentives, the U.S. government has been in perpetual debt since the American Revolution. As of last week, our nation has accumulated $4.7 trillion in debt. Congress will not change because there is no incentive to change.

This is why an effective system of government establishes rules which give policymakers the incentives to do the right thing. But in Oklahoma, we already have a set of rules that limit spending behavior--the Legislature must balance the budget each year. Thus, every dollar the Legislature wastes means one less dollar of tax cuts. Since Legislators are rewarded by limiting taxes, they now have an incentive to limit wasteful spending. At the federal level, Congress can give everybody everything without worrying about how to pay the bills. At the state level, this is not possible. Every penny spent by the Legislature necessarily means an additional penny of taxes.

This is why the debates in the Legislature in the coming months will be so intense. Some Legislators believe the government should increase spending on education, health care, roads, and prisons. However, others believe that government should spend less so that they can pass more tax cuts. This decision will be made (and should be made) with one eye on the November elections. The will of the voters will guide the Legislature to make the decision that Oklahomans want.

Instead of trying to impose more limits on the Legislature (like TABOR proposes), we should use the upcoming session to watch the beauty of the Legislative process at work. We should watch as they weigh the competing interests of more government services and more tax cuts. We should watch the debates, the disagreements, and most importantly the decisions. And remember if you do not like the result, you can express your discontent at the ballot box.

Feel free to submit your comments to mhepner@ucok.edu.

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