In this Let People Prosper episode 65, let's discuss the legislative priorities set by the Texas House and Texas Senate in their recently proposed recommended budgets. While there's much to wade through, here’s what I’ve derived so far from the House and Senate recommended budgets. Of course, there will be many discussions over these budgets during the next several months until a final budget is determined and approved by both chambers, but these recommendations give a good indication of the priorities of each chamber, much like your family's budget.
The first thing to note is that both chambers have prioritized public education and property tax relief to a certain extent. Both chambers have relatively large increases in public education, but the details will need to be worked out throughout the legislative session to determine the allocations to public education spending and tax relief.
In general, there should be a push for spending current resources more wisely within public education before considering any new money. In other words, there could be a large amount of money to buy down the school maintenance and operations property tax as outlined in TPPF's property tax plan (view how much you would save over time with our online calculator).
The House budget noted first in the table below shows that the recommendations for state funds and all funds (state and federal) are greater than the Conservative Texas Budget limits based on growth of 8% in population and inflation in the last two fiscal years. The amounts appropriated for 2018-19 budget are from the LBB's Fiscal Size-Up for an apples-to-apples appropriation comparison. I've also noted the Texas Comptroller's Biennial Revenue Estimate (BRE) amounts. The House budget allocates $9 billion towards pub ed/property tax relief but is contingent on bills passed for those. There aren’t specific allocations of that $9 billion for pub ed or property tax relief.
The Senate budget is noted second and is below our CTB limit for state funds but is above our limit for all funds. The Senate budget provides $6 billion in pub ed/prop relief to the tune of $3.7 billion for increased teacher pay ($5,000) and $2.3 billion for prop relief.
I've excluded $7.1 billion in federal funds from both chambers' 2020-21 budgets for disaster recovery after Harvey as these should be one-time, unexpected expenses.
Overall, the Senate budget is in better shape to meet the CTB limits to keep the average taxpayer's ability to pay for government from unnecessarily growth and doesn't include use of the ESF like the House does of $633 million.
Bottom line: There’s work to do to limit government spending and provide tax relief to #letpeopleprosper.
In this Let People Prosper episode 64, let's discuss the Texas Public Policy Foundation's Policy Orientation, which was a sold out event that helps define the narrative for the 86th Texas Legislature, and highlight the recent spending limit set by the Legislative Budget Board.
The following are the panels that I moderated or participated in some capacity and my key takeaways with resources:
The other big news on Friday was that the Legislative Budget Board (LBB) set the state's spending limit for the upcoming 2020-21 budget. This spending limit is on only general revenue not dedicated by the constitution which is less than half of the total budget. While statutorily the spending limit should be based on growth in personal income, last session the LBB chose the rate based on population growth and inflation. This time the spending limit is 9.89% for the 2020-21 budget, which is based on an increase of 8.39% in population growth and inflation and 1.5% for Harvey.
This is another good sign that the LBB continues to use a measure for the limit that better matches the average taxpayer's ability to pay than the inappropriate growth rate of personal income. This spending limit is in-line with the recent BRE increase of 8.1% in general revenue-related funds and provides funds available to cover needed expenses along with property tax relief. Specifically, the Legislature could use half of the funds of about $4.4 billion for spending and 90% of the rest of the funds of about $4.1 billion to buydown the school maintenance and operations property tax.
In this #LetPeopleProsper episode 62, I wish you all a Happy New Year! Thank you for watching this vlog, subscribing, and sharing it with your family and friends.
Each year I choose a word that keeps me on pace to reach my goals. My word this year is "flourish." I started doing this last year with the word "prosper," which last year was very prosperous for my family, and know that this year will be even better than the last. Try it!
2019 will be a busy year as the Texas Legislature will be in session starting January 8. I look forward to discussing the big issues, like property taxes and spending restraint, and providing updates here with guests along the way. We will also discuss interesting things in Congress with the Democrats taking over the House, President Trump will likely act on trade and regulatory issues, the Federal Reserve will be on the hot seat, and so much more.
May we learn more about our God-given world together. Please send me questions and show ideas along the way. You can always find the show notes on the blog page at vanceginn.com.
Blessings to you and yours! #LetPeopleProsper
There's been much discussion about international trade, particularly NAFTA with trade between the U.S. and Mexico, in the news and social media after President Trump's recent tweet-storm against the "bad deal."
But let's cut to the chase: people prosper from trade.
Sure, President Trump is correct that the U.S. is running a trade deficit with Mexico, whereby imports exceed exports, this year that looks to surpass the deficit of $71 billion last year (see charts below); but this net trade balance is useless.
True prosperity should be measured by the trade value of voluntary exchange of people importing and exporting products. This trade value between Americans and Mexicans was $557.6 billion in 2017 and is already $512.3 billion through just October 2018, meaning this year is likely to be even higher.
For another example, Texas has a trade surplus with Mexico, meaning Mexicans purchase more from Texans than Texans do from Mexicans (see figures below). Consider that in 2017 Texas exports to Mexico of $97.7 billion were greater than its exports to the next 10 countries combined. And Texas imports from Mexico of $89.8 B were greater than its exports to the next 5 countries combined. But again, Texas' net trade balance with Mexico of an almost $9 B surplus is useless.
True prosperity is the trade value of exports plus imports of $187.5 billion between Texans and Mexicans that year. In other words, through voluntary exchange people satisfy their desires or they wouldn't trade, providing a win-win situation, not a zero-sum game.
Comparative advantage discussed by economist David Ricardo in the early 19th Century explained that an individual (or country) will produce whatever she is relatively more productive compared with someone else (another country) and thing. This is similar to competitive advantage whereby an individual is not only more productive but can produce at a lower cost, which may not always be the case with comparative advantage. I explain this and more the Let People Prosper episode 46 above.
These concepts work in the real world to provide abundant human flourishing. Those people and countries that practice protectionist measures to limit trade have been poor or made poorer over time--even contributing to the failure of their nation such as in Rome or Germany.
What's important here is to be as competitive as possible so that one can continue to benefit from trade by increasing productivity and finding other ways to lower production costs. This can be done through policy such as reducing excessive government spending to lower taxes and cut onerous regulations--both tax and regulatory relief have been successes of the Trump administration. However, tariffs and other trade barriers and excessive government spending by the Trump administration and Congress continue to raise the cost of production and ultimately hurt all Americans as these policy actions reduce their purchasing power.
For example, the Tax Foundation notes that the Trump administration’s imposed tariffs have cost Americans $42 billion in higher taxes levied on thousands of products and threatened tariffs could cost them another $129 billion. This could total $171 billion in higher taxes which would be more than the average per year cut in taxes of $150 billion by the 2017 Trump tax cuts.
Adam Smith also taught us in the late 18th Century that the extent of the market determines the division of labor and specialization. So, expanding the extent of the market through trade with people in other countries improves both of these measure of worker productivity while holding down the cost of production and therefore prices so that the least among us and everyone else prosper over time.
Sure, some sectors, and the workers in them, that don't change course to compete in the expanded markets will be hurt, but people are still better off given more opportunities to work in other sectors and the advantages of an increased standard of living with more quality, affordable products and services.
For more on the economics of trade and the benefits of NAFTA and trade in general, please read my paper "People Prosper from Trade: NAFTA and Texas."
I also recommend reading papers presented at the Dallas Fed's recent conference on 20 years after NAFTA. The book "Economics In One Lesson" has great stuff on the economics of trade. Another good book that I read recently on trade was "Specialization and Trade" by Arnold Kling--I have a short review of it and other books at my Goodreads page.
In general, we need freer trade to let people prosper. Thanks for reading and sharing with others!
The latest BLS state-level jobs report for November shows that Texas continues to lead the way in job creation for the last 12 months and keeps the state record low unemployment rate of 3.7%. Here's my statement on the jobs report.
The presentation below provides an overview of Texas’ economic, labor market, and fiscal situation while also comparing Texas with other large states. There are also policy recommendations to strengthen the Texas Model of limited government so that it can foster more individual liberty and economic prosperity.
My prior research on how institutions matter takes a deeper dive into these figures. I recommend reading it along with watching my vlog on the subject. To summarize, Texas should increase economic freedom by eliminating unnecessary government barriers to competition to let people prosper.
Watch my explanation of previous state-level labor reports and other videos at my YouTube channel: Vance Ginn Economics.
In this Let People Prosper episode, I am interviewed by Liz Wheeler on her show the Tipping Point on One America News.
We discuss the high cost of deficits and debt and the need for government spending relief along with the latest farm bill which continues the expansion of welfare.
In this Let People Prosper episode 58, let's discuss education-related issues in Texas of school finance reform, property tax relief, and the Teacher Retirement System (TRS) of Texas pension solvency.
To sum up, taxpayers have increased funding for public schools for years (see here and here) and now it's time for those elevated current dollars to be spent wisely to the classroom for improved education outcomes. School finance also includes property tax relief which should be accomplished by following the TPPF plan of actually lowering property taxes. And the latest TPPF-Reason Foundation paper highlights the mounting problems with the TRS pension that must be addressed soon before the pocketbooks of teachers and all taxpayers are hit.
There's much on the line for education in Texas. Serious discussion about spending taxpayer dollars wisely, lowering property taxes, and assuring the TRS pension system is solvent through reform are essential elements of improving education in the Lone Star State.
In this Let People Prosper episode, let's discuss my recent trip to Washington D.C., where I spoke at the American Legislative Exchange Council's meetings about the importance of institutions and did an interview with Freedomworks, and then discussed the federal budget with Russ Vought, who is the Deputy Director of the White House's Office of Management and Budget.
Let's also discuss the latest economic reports about the continued strength of the U.S. economy in terms of GDP growth and personal income, and examine trade issues being discussed at the G-20 Summit.
Below are a few pictures from my recent trip to D.C.
In this Let People Prosper episode, let's discuss how the recent election gives us insight on how we need more civil discourse to find ways to strengthen institutions so people can flourish.
My recent paper on how institutions matter provides a good overview of what I discuss in this episode along with economic data to support the theory. Here is a graphic that explains rather well the ecology of human development.
The data provide overwhelming evidence that the Texas Model of inclusive institutions with a relatively low tax-and-spend burden, no individual income tax, and sensible regulation provides an institutional framework supporting more job growth, higher wages, lower income inequality, and less poverty than in comparable states and the U.S., in most cases. Texas is doing something right. Other states and D.C. would be wise to consider adopting Texas’ inclusive economic and political institutions that champion individual liberty, free enterprise, and personal responsibility.
This is a path to providing an economic environment that allows entrepreneurs the greatest opportunity to thrive and for prosperity to be generated for the greatest number of people. Despite this success, improvements are needed to keep the Texas Model competitive and create even more opportunities for all to flourish. These improvements to Texas’ institutional framework include:
• limiting the growth in government spending,
• eliminating the state’s onerous business franchise tax,
• reducing barriers to international trade,
• reducing the escalating burden of property taxes, and
• relieving Texans from burdensome occupational licenses.
Even with these improvements, the data overwhelmingly show it was not a miracle in Texas, but rather abundant prosperity generated by Texans from a proven institutional framework called the Texas Model.
By strengthening institutions to let people prosper, we can also engage in more civil discourse so that we have many opportunities to work together.
In this Let People Prosper episode, I discuss my latest published research on how institutions matter for prosperity in Texas and beyond. I compare multiple measures of economic freedom and economic results between the largest four states in terms of population and economic output of California, Texas, New York, and Florida along with U.S. averages. These data indicate that Texas has greater economic freedom and prosperity, which should be emulated by other states and D.C., but there's more to do to improve the Texas Model.
In this episode, I explore the following questions: What are claimed market failures? Do they exist? Can government intervention correct them? Is there such thing as government failure? It's important to ask these questions to determine whether or not market failure or government failure are the bigger problem in society. Much of this has do with the differences between Mainline Economics (my preference) and Mainstream Economics.
This enters controversial territory in economics and politics by discussing the myths of "market failure." Supposed market failures usually include problems with markets because of asymmetric information (occupational licensing and healthcare), monopolies (utilities and EpiPen), and externalities (pollutants) that can theoretically be corrected by government intervention.
However, I make the case that these issues in markets are generated by government intervention, not unhampered markets, and the introduction of government intrusion to attempt to correct these potential issues only expand government and make the problem worse.
Moreover, there are no free-market government solutions, which is why toxic pollutants should be dealt with by letting markets sufficiently price them or alternatively, though not recommended, by regulation. Policy solutions such as a carbon tax indirectly price externalities and the price will always be wrong because of the "knowledge problem" taught by economist Friedrich Hayek and the poor modeling that's done by so-called experts (see William Easterly's book The Tyranny of Experts). In general, the institutional structure of an economy should be supported by the government through upholding contracts, protecting people, and providing very few public goods.
Instead of resorting to government intervention to solve supposed market failures, we should first understand that the government is likely the problem and Let People Prosper by promoting institutions with strong private property rights and fewer barriers to entry and exit markets.
State of the U.S. Economy Including Strong Growth & Rising Compensation and Costly Tariffs & Budget Deficits: LPP EP 24
In this episode, I discuss the state of the U.S. economy, including the markets, rising compensation for Americans, Federal Reserve leaves target federal funds rate unchanged in the range of 1.75-2%, and costly federal budget deficits of nearly $1 trillion that will be a drag on economic growth unless government spending is reined in along with the cost of tax hikes from tariffs.
There is a clear path to more economic growth, job creation, and resulting prosperity: capitalism without government barriers to opportunity.
In other words, the federal government should uphold contracts through a justice system, provide a national defense, and deal with international commerce, but really not much more than that.
Let people prosper by letting them satisfy their desires within institutions of civil society that are the backbone of America's strength. Unfortunately, too many of those institutions are hindered because of excessive government intervention at every level.
Let's learn more about what we can do together.
In this episode, I give an overview of today's report by the U.S. Bureau of Economic Analysis that shows the U.S. economy expanded at a 4.1 percent annualized rate in Q2 2018, which is the fastest pace in four years.
Relief of taxes and regulations has been a big part of that, but making those tax cuts permanent, reducing government spending, and relieving trade uncertainty would help sustain faster economic growth.
Hurricane Harvey brought devastation of catastrophic proportion. Reports note more than 80 deaths and around $150 billion in economic destruction. As someone raised in South Houston and with family and friends directly affected, it’s heart wrenching to see such damage.
Potentially adding to people’s pain was the possibility of scam contractors and price gouging. Scam contractors, also known as “storm chasers,” shouldn’t be allowed to prey on vulnerable people with fake promises of home repair or cheap cars.
What about the concept of price gouging? Is there a price that takes advantage of people who need resources for their livelihood in the wake of natural disasters? Answers to these questions are often not clear cut, as determining that a price is gouging the consumer could harm those that need the good.
Defined statutorily in Texas as “selling or leasing fuel, food, medicine or another necessity at an exorbitant or excessive price,” price gouging laws may help control consumers’ costs, but they can also have the adverse effect of deterring an increase in supply.
Low price mandates may make items more affordable, but are useless if items aren’t available. Elevated prices, on the other hand, attract more supply, preventing long-term shortages and ultimately driving the price back down.
Additionally, price controls can lead to hoarding, resulting in even fewer people getting supplies, potentially setting up costly price gouging in the black market. Allowing prices to rise discourages hoarding of supplies and encourages more rationed use of goods.
To put it simply, higher prices send signals to suppliers of where and how much to supply and to consumers of how much to purchase. Without these signals, the devastation from natural disasters will likely be much worse.
These principles could clearly be seen in the days following Hurricane Harvey. The storm shutdown roughly 25 percent of the nation’s refining capacity and transportation routes were blocked for days from flood waters. Fear of running out of gas naturally increased demand. Spooked consumers dashed to their nearest gas station to fill their tanks and other containers.
Gas prices jumped in Houston from an average of $2.10 per gallon to $2.50 within days after the storm, according to gasbuddy.com. But there were reports of some stations charging as much as $20 per gallon, and many stations there and statewide had no gas. The average price remained near $2.50 per gallon for a while, as it tends to track gas futures prices that soared after the storm, and most stations soon had gas available.
Gas markets work with higher prices sending signals to suppliers of where and how much to supply gas and to consumers of how much gas to purchase. Without these signals, the devastation from natural disasters will likely be much worse.
What if stations can sufficiently raise gas prices? Consumers use that information to ration purchases of gas to just what’s necessary, instead of hoarding it in multiple gallon containers statewide. Other suppliers use this information to dedicate more gas to that area now that they can cover increased costs of transportation, labor, and risk, which has been the case as refineries come back online.
Frivolous allegations of price gouging laws at the time, with 127 retailers eventually receiving notices of alleged violations after the storm, could distort market prices and deter charity thereby hurting those most the law is trying to help.
Let us be cautious about claiming negotiations of individuals in the marketplace are wrong so that Texans affected by this tragic event and statewide will have sufficient resources to recover and prosper now and in the future.
This commentary was originally featured in The Hill on January 4, 2018.
As 2018 begins, there’s chatter about what Congress will do after passing the Tax Cuts and Jobs Act. The Trump administration signaled a new bipartisan approach on infrastructure, a sentiment shared by Senate leadership. The House, however, seems poised to reform welfare through budget reconciliation.
Static analyses of the recently passed tax bill fail to capture the dynamic effects of increased economic activity and job creation that tax cuts generate. Regardless, fewer taxes will still go into the federal coffer, leading to larger deficits unless met with spending cuts. The biggest spending obstacles Americans face are the rising cost of healthcare and the rapidly escalating cost of Social Security and Medicare.
Although the tax bill appropriately repealed ObamaCare’s individual mandate, onerous federal health insurance regulations still remain, leaving patients and consumers again with double-digit premium increases, on average, next year.
Furthermore, the national debt is quickly approaching $21 trillion, or closer to $110 trillion including unfunded liabilities of Medicare and Social Security. In this environment, Congress’ 2018 priority must be to reduce government spending that’s contributing to higher costs of living, subpar healthcare system, and fewer Americans flourishing.
Congress will have to address the continuing resolution that funds the federal government in January. It should enact real reform that bends the cost-curve of Medicare and Social Security.
Sadly, some want to use this opportunity to bail out health insurance companies and create new reinsurance programs that pilfer tax dollars while further diminishing the quality of healthcare.
Members should outright reject these bail outs. They must also resist the temptation to bust the budget caps or adopt a standard that for every dollar increase in defense there is a dollar increase in non-defense discretionary spending.
The Texas legislature recently provided a good example as it successfully adopted fiscally conservative budgets. Doing so means Texans pay lower taxes while still funding essential services, allowing the state to have an economic environment conducive to creating 25 percent of all new jobs nationwide since 2007.
The Texas model is a proven recipe that should be emulated in D.C. Congress should take a page out of the Texas playbook by using budget reconciliation to finally make good on the promise to fully repeal ObamaCare and curtail spending to empower people with more choices on how to satisfy their desires.
Welfare reform is also critical for empowering impoverished communities and providing a pathway to prosperity. This can and should be done through strengthening families and promoting the dignity of work. But the groundwork has simply not been laid, as far too often people rely on the government as the head of the household and choose to live on welfare instead of working.
Regardless, the Trump administration and Congress should carefully consider ‘bipartisan’ notions for a new $1 trillion infrastructure bill, which could serve as a remix of President Obama’s failed stimulus approach. Also, it should reconsider a new $1 trillion food and farm welfare bill without significant reforms to both the food stamp program and agriculture subsidies.
What’s needed is an agenda that unifies and empowers Americans by diminishing the power of Washington. Fully repealing ObamaCare, reforming Medicare and Social Security, enacting welfare reform, and cutting discretionary spending can achieve this agenda. It cannot come from increasing government spending and giving D.C. more control over our lives.
The administration and Congress have greatly boosted prosperity in America through regulatory and tax reforms, but they must now lay out the next steps of their vision that puts the American people first and the interests of the Washington cartel last.
The Texas School Finance Summit was recently hosed by the Texas Public Policy Foundation, Texans for Education Opportunity, EdChoice and Reason Foundation.
The purpose of the event included the following: To provide students with a 21st century education, Texas needs to modernize its broken school finance system. As the state’s school finance commission prepares to convene, now is the time to begin looking forward to the future of education funding in Texas.
Here are links to a video of each panel with a list of panelists:
AUSTIN – Today, the Texas Public Policy Foundation announced that Dr. Vance Ginn will serve as the director of the newly created Center for Economic Prosperity.
“Dr. Vance Ginn is one of the brightest economic minds in Texas,” said Dr. Kevin Roberts, executive vice president of TPPF. “This transition will give him an even larger platform from which to advocate for prosperity, liberty, and flourishing in Texas and beyond.”
A former university lecturer, Dr. Ginn’s passion for teaching carries through in his work today as he seeks to help Texans understand the real-life ways government policies affect them.
“It’s an honor to direct the Foundation’s new Center for Economic Prosperity,” said Dr. Ginn. “I am committed to conducting research based on free market economic principles and examining ways economic liberty can help individuals achieve their unique goals and dreams. I’m blessed to work with such intelligent and caring individuals here at the Texas Public Policy Foundation and look forward to contributing to our continued success in helping individuals and families prosper.”
Dr. Ginn is a first generation college graduate, eventually earning his Ph.D. in economics from Texas Tech University, and has published papers in academic journals.
Bill Peacock, who formally directed the Center for Economic Freedom, is now vice president of research for TPPF.
This press release can be found online here. The Center's research can be found here.
For more information or to request an interview with Dr. Ginn, please contact Alicia Pierce at email@example.com or 512-472-2700.
Kevin Roberts, Ph.D., is executive vice president of the Texas Public Policy Foundation.
Vance Ginn, Ph.D., is director of the Center for Economic Prosperity and Senior Economist at the Texas Public Policy Foundation.
Bill Peacock is vice president of research of the Texas Public Policy Foundation.
TheTexas Public Policy Foundation is a non-profit free-market research institute based in Austin. The Texas Public Policy Foundation aims to advance a societal framework that effectively fosters human flourishing based upon cooperation and mutually beneficial exchange of ideas and speech.
Facebook page: www.Facebook.com/TexasPublicPolicyFoundation
Twitter feed: www.Twitter.com/TPPF
Vance Ginn, Ph.D.