Louisiana’s budget at the beginning of fiscal year 2023 was $47 billion, which is an increase of 63 percent over the last decade. With a state population of 4.6 million, and shrinking, this is a spending burden of more than $10,000 per person. While nearly half of the money in the state budget comes from the federal government, Louisiana’s taxpayers are still on the hook for the total. This growth in state spending is unsustainable given the lack of growth in the state’s economy and a history of net outmigration. This report offers an overview and brief history of Louisiana’s operating and capital budgets and outlines how the state can begin to create a more responsible, sustainable budget over time that remains adaptable to the needs of citizens. Originally published at Pelican Institute.
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This Week's Economy Ep. 4: TRUTH On Inflation, Real Wages, Housing Market, TX Senate Budget, & CBDC4/14/2023 In "This Week's Economy" Ep. 4, I talk about new CPI inflation report, slowing housing market, Texas Senate Budget & tax relief efforts, school choice, & threats of central bank digital currency. Today, I cover:
An Overview
In Let People Prosper episode #39, I talk with Daniel Erspamer, CEO of Pelican Institute in Louisiana, about LA's economic issues, need for tax and budget reforms, and ways that let people prosper. Thank you for listening to the Let People Prosper Show podcast and for reading the newsletter for show notes and key economic insights.
On today's episode of the "Let People Prosper" show, which was recorded on March 31, 2023, I'm thankful to be joined by Daniel Erspamer, CEO of the Pelican Institute for Public Policy in Louisiana. We discuss the Pelican Institute’s “Louisiana’s Comeback Agenda” which includes:
Please like this video and subscribe to the channel if you enjoyed this podcast! Research: The Inflation Reduction Act's Costly New Tax Credits for Electric Vehicle Batteries4/10/2023 Executive Summary The U.S. Congress passed and President Biden signed into law the so-called “Inflation Reduction Act” (IRA) in August 2022. The IRA includes many provisions which are now estimated to cost $1.2 trillion over a decade per Goldman Sachs’ more recent analysis compared with the Congressional Budget Office’s (CBO) initial estimate of $391 billion. Part of this substantially higher estimated cost is because of the new cost estimates for tax credits for electric vehicle (EV) battery cells and modules manufactured in the U.S. Instead of the initially estimated cost of $30.6 billion by the CBO, new estimates based on more precise projections and growth in the EV market indicate that this could be as high as $196.5 billion (540% higher than initially estimated) per the Mercatus Center and Goldman Sachs. This higher estimate appears more accurate than the original CBO estimate given the large increase in the EV market and the expanding use of these tax credits. Given that the cost of these subsidies passed by Congress and communicated to the public appears to be substantially undervalued, the CBO and other nonpartisan agencies and committees responsible for providing Congress with accurate revenue estimates and sound economic analysis should reexamine their calculations. Originally published at Americans for Tax Reform. A new report by Dr. Vance Ginn, senior fellow at The James Madison Institute and president of Ginn Economic Consulting recommends that the state continue to limit the burden of government spending. The Conservative Florida Budget (CFB) sets a maximum threshold in all funds appropriations for FY 2024 of $116.2 billion. This maximum threshold is based on the 5.5% rate of the 3-year average of population growth plus inflation over the last three years from 2020 to 2022, which reasonably represents the average taxpayer’s ability to pay for government spending. “Legislators should use the CFB as a guide this session. Given the economic headwinds from the poor fiscal and monetary policies out of D.C. contributing to elevated inflation and risks of a deep recession along with past state budget excesses, the Legislature should pass a budget well below the CFB, similar to the Governor’s budget. Doing so will ensure a conservative budget that will help keep more money in taxpayers’ pockets through larger tax relief, so families and entrepreneurs have the most opportunities to flourish.” — Dr. Vance Ginn, Senior Fellow, The James Madison Institute; President, Ginn Economic Consulting. Originally published by James Madison Institute. This Week's Economy Ep. 3: TRUTH About New U.S. Jobs Report, Banking CRISIS Effects, & State Actions4/7/2023 In "This Week's Economy" Ep. 3, I note the weaker labor market in the latest U.S. jobs report, the continued banking crisis issues, and state actions in Texas and Louisiana. Today, I cover:
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Louisiana’s state government is the third most dependent state on federal funding. This is according to a report recently released by WalletHub that shows state rankings, with Alaska and Wyoming coming in at first and second. This follows another report release by the Tax Foundation that also ranks Louisiana as the third most dependent on federal funds, with only Montana and Wyoming ahead. This trend doesn’t appear to be getting any better. In 2014, federal funding comprised just 36% of the state’s total budget, whereas today, that percentage rises to 44%. The substantial increase in Louisiana’s use of federal funds from 2016 to 2017 is primarily due to Medicaid expansion. This program expanded the number of individuals eligible to receive Medicaid, and therefore increased the amount of money in the state’s general fund needed to match the additional federal funding. The match rate ranges from 30% to 40% per year based on personal income in the state. Disaster-related recovery has also contributed to the increased use of federal funds. Beginning in 2020 and 2021, Congress sent a large amount of federal funds due mostly to the COVID-19 pandemic response. There were also two major hurricanes, Laura and Ida, and numerous smaller hurricanes that also occurred in those fiscal years, which prompted an additional influx of federal funding from FEMA, HUD, and other agencies. Every program that is either partially or fully funded by the federal government comes with restrictions on its use – the “strings attached.” The substantial increase in Louisiana’s use of federal funds from 2016 to 2017 is primarily due to Medicaid expansion. This program expanded the number of individuals eligible to receive Medicaid, and therefore increased the amount of money in the state’s general fund needed to match the additional federal funding. The match rate ranges from 30% to 40% per year based on personal income in the state. Disaster-related recovery has also contributed to the increased use of federal funds. Beginning in 2020 and 2021, Congress sent a large amount of federal funds due mostly to the COVID-19 pandemic response. There were also two major hurricanes, Laura and Ida, and numerous smaller hurricanes that also occurred in those fiscal years, which prompted an additional influx of federal funding from FEMA, HUD, and other agencies Every program that is either partially or fully funded by the federal government comes with restrictions on its use – the “strings attached.” Most of the federal funding is used for social safety-net programs. Louisiana has the highest poverty rate in the nation, with nearly 20% of the population in poverty and even more on at least one safety-net program. State and local spending on these programs create an annual burden of nearly $3,000 per person.
To reduce the state’s dependence on federal funds for large line-items such as social safety net programs, the state must empower more individuals to realize their own self-sufficiency and ability to flourish. Work must once again become a priority. WalletHub’s report also compared states using their gross domestic product, or GDP, per capita compared to the amount of federal funds flowing into each state. Louisiana is placed in the “high dependency, low GDP” category, with a GDP ranking of 40th in the nation. Louisiana’s economy is not growing as fast as the rest of the country. With the highest poverty rate in the country, lawmakers need to pursue reforms that will make the state more economically competitive and increase opportunity for all Louisianans. Research has shown that more responsible state budgeting and spending, tax relief, and removing barriers for employers to start businesses and workers to work help reduce the number of people in poverty and reduce the dependency on the federal government by individuals and the state. According to WalletHub and the Tax Foundation, Utah is one of the least dependent states on federal funding. This is because the state reformed its social safety-net system decades ago, linking assistance with employment opportunities. This made Utah the state with the fastest economic and job recovery post pandemic. Louisiana should take a page out of Utah’s playbook and achieve the same. It’s time to reduce the state’s and individuals’ dependence on Congress and the national debt, which exceeds $31 trillion and is shared by all states including our own. And it’s time to get Louisiana off the top of another bad list and into a comeback story that we know is achievable. Originally published at Pelican Institute. In Let People Prosper episode #38, I talk with Annie Spilman, Texas State Director of NFIB-Texas, about regulatory consistency and tax reforms which will help businesses thrive and let people prosper. On today's episode of the "Let People Prosper" show, which was recorded on March 31, 2023, I'm thankful to be joined by Annie Spilman, Texas State Director at the National Federation of Independent Business (NFIB) in Austin, Texas.
We discuss:
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Vance Ginn, Ph.D.
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