5/8/2000

KUFM / KGPR

T. M. Power

Politically Motivated Economic Hysteria

Today a special session of the Montana Legislature began. It was called for a quite narrow purpose: to provide alternative funding for a set of economic development initiatives passed by the last session that lost its funding as a result of a Montana Supreme Court decision. The majority leadership of this lame-duck legislature, however, wants to use this brief session to pursue a quite different ideological agenda: to strip funds away from as many public institutions, including our schools and universities, as possible. The actual impact of this attack on the state’s basic public infrastructure will be the very opposite of the economic development theme on which the Governor called the special session.

The cover for this attack on our schools and other public institutions is two fold: First it is argued that our economy is in crisis and desperate measures must be taken to arrest its decline into depression. Second, a familiar ideological medicine is offered for our claimed economic ills: the poison is government and taxes; the antidote is crippling government and cutting taxes. As economic propositions both of these are nonsense.

First, despite the politically motivated mantras to the contrary, our economy is not in a state of collapse. We have not been “passed by” during the current nearly decade long national economic expansion, quite the contrary. As the Bureau of Business and Economic Research stated in its Spring 2000 forecast: “The recent growth and continued optimistic outlook for Montana mirrors US trends.”

We have been adding jobs at a rate of 10,000 to 15,000 per year during the 1990s. That rate of job growth has been almost twice the national average. Unemployment is down to levels that haven’t been seen since the early 1970s. Total real earnings have continued to increase at a brisk rate, slightly slower than the national rate in recent years but ahead to the nation for the 90s as a whole. We added 85,000 new residents as we drew more people and economic activity to the state. Although population growth, to the relief of many in Western Montana, has slowed in the late 1990s, Montana was ahead of the national average for the decade as a whole. We have not been stagnating by any stretch of the imagination.

It is true that average pay and income have not kept up with the national average, but that national average is tied to folks who live in cities that have more people than two entire Montanas. When we compare ourselves to similarly small cities across the nation and to other rural areas, we are doing as well as they are. Our economy is not in a state of crisis. The economic crisis talk is politically contrived hysteria.

Will cutting taxes and government spending on schools and other public infrastructure stimulate an economic boom? Hardly. It is exactly that type of spending that is central to Montana’s and Montana citizens’ participation in the “new economy.” The anti-government ideologues who equate our schools, libraries, and roads, with totalitarian oppression are simply disoriented 21^st century Luddites who do not understand what makes up the backbone of the new economy.

They cite studies that show that taxes discourage economic activity and that cutting taxes will stimulate the economy. Studies also show that low prices stimulate consumption and boost living standards. Does that mean that the government can promote economic development by ordering businesses to lower prices? Of course not. It is only when prices have been reduced because of increased productivity or the development of new, less expensive supplies that the economy reaps the benefits of the lower prices. Similarly, if the government were behaving like a rapacious gang of bandits, stealing our wealth and galloping out of state to enjoy the plunder, we know the economy would be damaged. There is a similar far-fetched fantasy that simple-minded liberals could engage in: fairy-godmother government that provides valuable services without having to levy taxes to pay for them. We know that such mythical free services would give the economy a boost.

But these are uninteresting ideological fantasies. Taxes are levied to fund services that we as a people have been willing to support. The public services we want cannot be had without taxes. So the only interesting as well as practical question is what is the economic impact of the combination of the public services and the taxes that fund them? There is no evidence that taxes that support education and public infrastructure damage the economy. Quite the contrary, the evidence is all the other way: public spending on schools, universities, highways, environmental protection, crime control, public health, etc. lay the basis for economic vitality. States and communities that refuse to commit resources for these fundamental public services ultimately get left behind.

Unfortunately, our lame-duck legislature wants to head down this road in the name of economic development. They want to put a hole in the state government budget so large that educational expenditures along with all other government services will either have to be cut back when the legislature elected this coming November meets or the burden of supporting basic public services will have to be shifted back to residential property taxpayers where the ideologues hope the over-burdened homeowners will turn thumbs down.

If this were just Guerrilla Theater, it would be outrageous but entertaining in an annoying way. Unfortunately these folks are serious about adopting an Appalachian approach to economic development. If they succeed, it is our children and our state that will suffer the consequences.