Texas’ public education spending, in inflation-adjusted dollars, has increased in recent years with little-to-no improvement in the quality of education received. A problem with the philosophy of throwing more money at the education problem expecting a different result is that it doesn’t work.
As you can see in Figure 1, per-student education expenditures have been volatile and are currently on the rise. This is interesting as a recent University of Texas study finds that 47 percent of Texas voters believe too little is spent on education.
Where is the money going?
From FY 1993 to FY 2015, student enrollment at public schools in Texas increased by 48 percent while non-teaching staff increased by 66 percent and teachers increased by only 56 percent. Public education spending should be dedicated to benefitting students, not excessively expanding administrative staff at schools.
Moreover, Texas teachers are only receiving roughly 21 percent of classroom expenditures, which is abysmal considering the importance of teachers. The average Texas teacher makes $51,891 per year, which may not be enough to attract the most talented teachers possible. If the increase in non-teaching staff had matched the increase in the student enrollment, Texas teachers could be earning an additional $6,318 per year.
Despite what a plurality of Texans think, Texas should not just continue increasing per-student public education expenditures without focusing on the level of student achievement. By making major reforms to the state’s school finance system through student-centered funding and considering a simpler funding source, more students, teachers, and Texans can flourish.
Just as Americans mutually benefit from voluntary exchange domestically, so can individuals in different countries within the rule of law. A perfect trade agreement would be one sentence that provides no more than a contractual obligation: “There shall be no trade barriers among countries X, Y, and Z.”
The Texas Public Policy Foundation (TPPF) recently held an event co-sponsored with The Heritage Foundation that discussed whether Texans gain or lose from the 1994 North American Free Trade Agreement (NAFTA). Panelists included Texas Comptroller Glenn Hegar, Dr. David Kreutzer of the Heritage Foundation, and Dr. Vance Ginn of TPPF, with moderator Drew White of TPPF.
NAFTA is an agreement among the U.S., Mexico, and Canada designed to reduce costs of exchange among Americans, Mexicans, and Canadians. While it’s far from a perfect agreement, as more than 1,700 pages pick government winners and losers, data indicates it at least benefits Texas and the energy sector.
In 2016, Texas exports totaled $231.1 billion and imports were $229.3 billion, giving a trade surplus of $1.8 billion. Instead of evaluating a trade deficit versus surplus, consider that people agreeing to each transaction benefit from more than $460 billion in foreign trade.
Texas’ trade total with Mexico resulted in a $10.8 billion trade surplus and with Canada a $4.7 billion trade surplus, so NAFTA contributes to a $15.5 billion trade surplus in a $1.4 trillion economy.
Texans prosper from each individual transaction through overall lower prices and a growing economic pie. Research finds that fewer trade impediments among NAFTA countries helped Texas become economically diversified and more resilient to oil price fluctuations over time.
Moreover, a Texas industry that should support NAFTA is the energy sector. In 2016, Texas exported $37.1 billion in petroleum and coal products, the majority of that sum going to Mexico and Canada.
Critics of NAFTA point to trade imbalances as a reason for dissolving the agreement. This reason can be discounted in the context of the energy sector: the U.S. energy sector had a positive trade surplus with Mexico of $11.5 billion.
The agreement is also credited as a driving force in the North American resurgence in energy production.
North American economies produced a total of 22 million barrels of oil a day in 2016, with the majority produced in the U.S. Although the U.S. is the leading producer of petroleum in the world, we demand six million barrels of oil and related products per day more than we produce. Canadian producers who export about three million barrels a day to the U.S. satisfy the bulk of this excess demand.
NAFTA benefits the construction of natural gas pipelines stretching from the U.S. to Mexico. This helps expand the market for excess natural gas production in the U.S. while allowing Mexicans to convert to cleaner-burning energy production.
Members of the energy sector should support the continuation of NAFTA as well as an updating of the section of the agreement dealing with energy production toward freer trade. If U.S. producers could more freely operate in Mexico, the U.S. energy sector, Texans, and Americans, could prosper more.
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 Dallas Morning News on January 6, 2018.
Texas' economic policies keep it near the top in economic freedom, but government barriers hinder more human flourishing.
The Fraser Institute gleans these insights in its recently released annual Economic Freedom of North America report. Based on variables related to government spending, taxes and labor market freedom, Texas and Florida tied for second place, behind only New Hampshire, where fewer than 1.5 million people reside.
Texas, with a population of roughly 28 million, has ranked in the top five for 11 straight years, and has its highest overall score since the report began. On the other end of the spectrum, New York ranked 50th and California 49th, as they have for three of the last five years.
This matters because residents and businesses frequently vote with their feet in favor of economic freedom.
Since the last national recession ended in 2009, population in the 10 most-free states has grown two-and-a-half times faster than it has in the 10 least-free states, and nearly three-and-a-half times faster in just the past three years. Employment and income, two key measures of economic prosperity, have also increased faster in the freer states.
More than 230 scholarly articles by independent researchers have used Economic Freedom of North America report data to examine economic freedom at the state level, while more than 400 articles have done the same at the national level (using its companion report that ranks countries).
Most of that literature finds that economically free areas tend to experience more broadly positive outcomes, including more economic prosperity. One reason is that high levels of spending, taxes and regulation make it harder for entrepreneurs to succeed. When businesses can't expand and hire new workers, everyone hurts.
States with the fastest economic growth, like Texas and Florida, tend to have a common focus in their economic policies: low taxes (including low or no income taxes), a fiscally conservative approach to spending, and a common-sense approach to regulation that makes it easier for entrepreneurs to succeed.
States that take the opposite approach, like New York and California, tend to experience much less economic prosperity and many more moving trucks leaving for greener pastures.
While Texas is ranked near the top again, it should be noted that the report grades on a curve, so there's plenty of room for improvement.
One step is to eliminate the burdensome gross receipts-style business margins tax. After multiple states eliminated such a tax because of the high compliance cost to businesses and its job-killing nature, only four other states (Delaware, Nevada, Ohio and Washington) still have it. This antiquated tax is a reason the Tax Foundation's State Business Tax Climate Indexranks Texas 49th on corporate taxes, better than only Delaware.
While Texas benefits from no personal income tax, another step is to reduce the burden of property and sales taxes; the Tax Foundation ranks both 37th. Reducing that burden would allow working Texans to keep more of their hard-earned money rather than leaving exorbitant amounts in politicians' hands.
In order to reduce the burden of taxation, of course, Texas must take the pivotal step in reining in excessive government spending. Allowing the budget to grow no faster than the population growth plus inflation, which has been done for a historic two straight legislative sessions, would make a big difference.
A good start would be to eliminate wasteful spending on corporate welfare programs, like the Texas Enterprise Fund, that put small businesses and businesses already in Texas at a disadvantage to businesses elsewhere. We should follow Florida's example, as the state zeroed out funding for economic incentives to individual companies in their similar fund two years in a row.
Taking the steps necessary to rank higher on the various measures of economic policies is a win-win for Texas (and all other states). Politicians can take the credit for improving the economy, and Texans can benefit from greater prosperity.
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.
Vance Ginn, Ph.D.