The Texas Public Policy Foundation recently released the Responsible American Budget, a plan for the federal government to limit the out-of-control spending that threatens the prosperity of future generations. The key component of the proposal imposes a successful spending growth formula that has kept the budget in states like Texas from spending more than its taxpayers can afford. 

The Responsible American Budget has received high praise from members of Congress, top economists, state policymakers, and experts from across the country:   
​

• Dr. Arthur B. Laffer, Presidential Medal of Freedom recipient: “Government spending is taxation, and we cannot spend and tax our way into prosperity. The Responsible American Budget is a terrific way to rein in this government waste by imposing fiscal limitations on the profligate spenders in Washington.”
• U.S. Senator Mike Braun: “I ran a business for 37 years before running for Senate, and I can tell you that spending in Washington, D.C. is just as out of control as you might think. The Responsible American Budget is a good framework to throw the brakes on this runaway train before it derails our economy.” 
• U.S. Representative Chip Roy: “Right now the American people are hurting because out-of-control spending has set off inflation across the board. Meanwhile, we’re hurdling toward $30 trillion in debt with no end in sight. That’s why the work of Dr. Vance Ginn and my friends at TPPF is critical. The Responsible American Budget would be a solid step in the right direction to provide a clear, measurable threshold to rein in Washington’s fiscal insanity.”
• Texas State Representative Matt Schaefer: “It’s time to make big spending bad again, which is what the Responsible American Budget will help do as a guide to effectively restraining federal government spending. This is something that fiscal conservatives ought to recall and re-emphasize. This preserves freedom and provides more economic opportunities when more money remains in the private sector.”
• Texas State Representative Tan Parker: “Our Nation is on an unsustainable financial path, and the burden we are imposing on the future generations of America’s children is unconscionable. A sound plan for the road ahead is needed now more than ever, and the common-sense ideas offered in the Responsible American Budget from the Texas Public Policy Foundation will help put America’s prosperity back on track.”
• The Honorable Jim DeMint, Chairman, Conservative Partnership Institute: “We are saddling our children and grandchildren with crippling debt that threatens to destroy their future unless we start taking serious steps like those outlined by TPPF to restore fiscal sanity in Washington.”
• Steve Moore, Economic Contributor, FreedomWorks: “Spending in D.C. is simply out of control, and we have to act now to stop it. Fiscal restraints like the Responsible American Budget will go a long way to preserving our freedom and unleashing prosperity.”
• Dr. John Merrifield, CoPI – vetfiscalrules.net, Professor of Economics, Emeritus: “The RAB concept, combined with well-crafted fiscal rules, provides the simple basis needed to pressure lawmakers into reining in spending growth and sustaining responsible approaches through multiple congresses and administrations.”
• Grover Norquist, President, Americans for Tax Reform: “There has been success in reducing federal tax rates in recent years, which President Biden and congressional Democrats are now trying to undo. Where we’ve yet to make sufficient progress is reining in federal spending. With the Responsible American Budget, the Texas Public Policy Foundation has laid out plan to get federal spending under control.”
• Jonathan Williams, Chief Economist, American Legislative Exchange Council: “The destructive combination of excessive spending and the accumulation of massive new debt in Washington, D.C. cannot continue. It’s time to take some important lessons from our 50 states – the “laboratories of democracy” – and develop meaningful protections at the federal level to safeguard hardworking taxpayers across America.”
• Genevieve Collins, State Director, Americans for Prosperity—Texas: “Texas can teach Washington a thing or two when it comes to spending tax dollars wisely.  We urge Washington to pay attention to what we’re doing here in Texas: prioritizing spending, keeping the tax burden low on families, and proposing fiscally responsible budgeting rather than trillion-dollar bailouts.”
• Matthew Dickerson, Director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation: “Even prior to the pandemic, the federal budget was growing unsustainably, threatening America’s prosperity. The Texas Public Policy Foundation’s Responsible American Budget highlights the need for spending restraint, which would ensure more opportunity for all Americans.”
• Bethany Marcum, Chief Executive Officer, Alaska Policy Forum: “America’s spending and debt trajectories are alarming, particularly in the last year. Congress should cap the growth of government spending by adopting the Responsible American Budget so that taxation can be limited, and the job creators in the private sector can grow our economy.”
• Kendall Cotton, President, Frontier Institute “If Montana can balance the budget and hold the line on spending growth in 2021, why can’t Washington? By adopting common-sense fiscal restraints like proposed in the Responsible American Budget, the federal government can start putting taxpayers first.”
• Dr. Orphe Divounguy, Chief Economist, Illinois Policy Institute: “There’s no incentive for the federal government to find savings in departments or to appropriately allocate dollars to projects that yield the biggest returns for Americans. The spending limits proposed in TPPF’s Responsible American Budget would likely induce more serious consideration over how taxpayer resources are allocated.”
• John Hendrickson, Policy Director, Tax Education Foundation of Iowa: “The Responsible American Budget is a blueprint for solving the dangerous out-of-control spending that has plagued the federal government for decades. The RAB demonstrates the need for fiscal responsibility, but also for a recommitment to the constitutional principle of federalism to follow the many states using prudent budgeting and fiscal rules to keep their budgets balanced.”
• Dr. Alexander W. Salter, Associate Professor of Economics, Rawls College of Business, Texas Tech University: “Federal government spending is out of control. The Responsible American Budget is an effective way to protect taxpayers while ensuring the public sector can get the resources it needs.”
• Manfred Wendt, Executive Director, Young Conservatives of Texas: “TPPF is once again leading the fight to ensure the financial future of all Texans by restraining the federal government’s out of control spending.”
• Dr. Charles F. Beauchamp, Associate Professor of Finance, Mississippi College: “For nearly 20 years Congress has abdicated its responsibility of passing a proper budget. The result has been runaway spending and unsustainable increases in the federal debt. It’s time to end the process of budgeting via continuing resolution by adopting a budgeting practice based on established metrics. TPPF’s Responsible American Budget presents a framework of metrics that can usher in much needed fiscal discipline to Washington. ​

Originally posted at TPPF.

The very popular narrative is that Republicans only care about budget deficits and the spiraling national debt when Democrats are in charge. Writing in the Washington Post’s “The Fix” column, J.M. Rieger says that “Republican mea culpas on the national debt follow years of demands for spending cuts to reduce the debt.”

But I was there in the Trump White House, in the Office of Management and Budget. The truth is that the President’s FY 2021 federal budget proposed a record of $4.6 trillion in less national debt over a decade, made most of the Trump tax cuts permanent, and would have balanced the budget over time.

In my work since then at the Texas Public Policy Foundation, we have helped other states move toward our model of a Conservative Texas Budget, and now—working with the Republican Study Committee and many others—we’re doing the same for the gargantuan federal budget. The proposed path to bring fiscal sanity back to Washington, D.C. is the Responsible American Budget.

Here’s what we know: Irresponsible government spending damages the productive private sector through redistribution of resources, higher taxes, higher price inflation, and higher interest rates, reducing Americans’ real incomes, job opportunities, and prosperity.

At the state level, Texas has addressed this with the Conservative Texas Budget. Its main premise is that government shouldn’t grow any faster than the average taxpayer’s ability to pay for it. To provide a bright line marking the limit, we use a proven, simple formula: population growth plus inflation.

This simple formula provides a view of the budget from the taxpayers’ perspective, which is essential given the government has no money but rather collects taxes from us to fund limited roles given to the federal government.

By combining the fact that Texas has an increase of about 1,000 new Texans per day and Texans’ wages are correlated with price inflation, more people and higher wages can support more government provisions, as necessary. This doesn’t mean that government must grow by this simple formula but rather this is the maximum growth each year to avoid further burdening Texans.

As Milton Friedman noted, “the true burden of government is not how much it taxes, but by how much it spends.” Any growth in government spending that exceeds our simple formula represents the kind of growth that means a heavier burden on taxpayers.

That kind of expansion is bad for working families, who pay a larger portion of their income in state and local taxes. In Texas, we have successfully kept the state’s budget below the CTB limits, on average, for the last three legislative sessions, and look to do so again during the current session.

While there have been several attempts to reduce the excessive growth of federal spending in the U.S., these attempts have had limited success, if any, as indicated by the $28 trillion—and quickly rising—national debt and its $350 billion—and skyrocketing—interest payments.

And despite the attempts by the Trump administration to rein in excessive government spending, Congress wasn’t interested and ran up massive spending that led to annual deficits. And then any movement toward reducing it was negated by the COVID-19 pandemic and ensuing fiscal profligacy. It led to appropriations outside of the normal federal budget process of at least $6 trillion over a decade during the Trump and Biden administrations. While some of these appropriations may have been necessary, it clearly made the fiscal path substantially worse.

In addition, the Biden administration has proposed the American Jobs Plan and the American Families Plan that would increase spending by more than $4 trillion over a decade, bringing this administration’s passed or proposed spending to $6 trillion in just the first 100 days.

Clearly, it’s time for fiscal sanity.

Based on the fiscal problems facing the U.S., the federal government needs an annual budget benchmark. We offer such a benchmark in the form of the Responsible American Budget (RAB). The RAB provides a maximum threshold to freeze real (inflation-adjusted) per capita spending, which is simply a limit based on population growth plus inflation.

What would this look like? According to our calculations, a RAB for fiscal year 2022 would be no higher than $4.88 trillion, representing a 1.37% increase over FY 2021, excluding the extraordinary pandemic-related expenditures to not inappropriately inflate the baseline budget to allow for excessive spending later.

The costly effects of these fiscal and subsequent monetary policy excesses challenge Americans’ opportunities to improve their communities’ as well as their future by owning a business, having the dignity of work, saving for a rainy day, and donating to institutions throughout civil society.

​The RAB’s spending restraint and its fiscal benefits would allow for a more inclusive institutional framework that supports more freedom for people to choose their destiny and more opportunities to flourish.

https://thecannononline.com/deficits-were-always-bad-the-responsible-american-budget-addresses-excessive-spending/

Irresponsible government spending damages the productive private sector through redistribution of resources, higher taxes, higher price inflation, and higher interest rates, reducing Americans’ real incomes, job opportunities, and prosperity.
While there have been multiple attempts to reduce the excessive growth of federal spending in the U.S., these attempts have had limited success, if any, as noted by the $28 trillion—and quickly rising—national debt and its $350 billion—and skyrocketing—interest payments.

There is debate about whether deficits matter, and these days many from across the political spectrum suggest that they do not; they are partially correct. The part of fiscal policy that matters to our daily lives is government spending, which is the fundamental source of higher taxes, more regulations, higher debt, and more crowding out of the productive private sector.

Given these challenges, the time is now to address excessive government spending, and we need to promote sound fiscal rules that make the budget tangible for Americans to understand and to hold elected officials accountable for excessive spending. A bold way to do this is provided by the Responsible American Budget.

Originally published at TPPF.

The Responsible American Budget has received high praise from members of Congress, top economists, state policymakers, and experts from across the country:   
​

• Dr. Arthur B. Laffer, Presidential Medal of Freedom recipient: “Government spending is taxation, and we cannot spend and tax our way into prosperity. The Responsible American Budget is a terrific way to rein in this government waste by imposing fiscal limitations on the profligate spenders in Washington.”
• U.S. Senator Mike Braun: “I ran a business for 37 years before running for Senate, and I can tell you that spending in Washington, D.C. is just as out of control as you might think. The Responsible American Budget is a good framework to throw the brakes on this runaway train before it derails our economy.” 
• U.S. Representative Chip Roy: “Right now the American people are hurting because out-of-control spending has set off inflation across the board. Meanwhile, we’re hurdling toward $30 trillion in debt with no end in sight. That’s why the work of Dr. Vance Ginn and my friends at TPPF is critical. The Responsible American Budget would be a solid step in the right direction to provide a clear, measurable threshold to rein in Washington’s fiscal insanity.”
• Texas State Representative Matt Schaefer: “It’s time to make big spending bad again, which is what the Responsible American Budget will help do as a guide to effectively restraining federal government spending. This is something that fiscal conservatives ought to recall and re-emphasize. This preserves freedom and provides more economic opportunities when more money remains in the private sector.”
• Texas State Representative Tan Parker: “Our Nation is on an unsustainable financial path, and the burden we are imposing on the future generations of America’s children is unconscionable. A sound plan for the road ahead is needed now more than ever, and the common-sense ideas offered in the Responsible American Budget from the Texas Public Policy Foundation will help put America’s prosperity back on track.”
• The Honorable Jim DeMint, Chairman, Conservative Partnership Institute: “We are saddling our children and grandchildren with crippling debt that threatens to destroy their future unless we start taking serious steps like those outlined by TPPF to restore fiscal sanity in Washington.”
• Steve Moore, Economic Contributor, FreedomWorks: “Spending in D.C. is simply out of control, and we have to act now to stop it. Fiscal restraints like the Responsible American Budget will go a long way to preserving our freedom and unleashing prosperity.”
• Dr. John Merrifield, CoPI – vetfiscalrules.net, Professor of Economics, Emeritus: “The RAB concept, combined with well-crafted fiscal rules, provides the simple basis needed to pressure lawmakers into reining in spending growth and sustaining responsible approaches through multiple congresses and administrations.”
• Grover Norquist, President, Americans for Tax Reform: “There has been success in reducing federal tax rates in recent years, which President Biden and congressional Democrats are now trying to undo. Where we’ve yet to make sufficient progress is reining in federal spending. With the Responsible American Budget, the Texas Public Policy Foundation has laid out plan to get federal spending under control.”
• Jonathan Williams, Chief Economist, American Legislative Exchange Council: “The destructive combination of excessive spending and the accumulation of massive new debt in Washington, D.C. cannot continue. It’s time to take some important lessons from our 50 states – the “laboratories of democracy” – and develop meaningful protections at the federal level to safeguard hardworking taxpayers across America.”
• Genevieve Collins, State Director, Americans for Prosperity—Texas: “Texas can teach Washington a thing or two when it comes to spending tax dollars wisely.  We urge Washington to pay attention to what we’re doing here in Texas: prioritizing spending, keeping the tax burden low on families, and proposing fiscally responsible budgeting rather than trillion-dollar bailouts.”
• Matthew Dickerson, Director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation: “Even prior to the pandemic, the federal budget was growing unsustainably, threatening America’s prosperity. The Texas Public Policy Foundation’s Responsible American Budget highlights the need for spending restraint, which would ensure more opportunity for all Americans.”
• Bethany Marcum, Chief Executive Officer, Alaska Policy Forum: “America’s spending and debt trajectories are alarming, particularly in the last year. Congress should cap the growth of government spending by adopting the Responsible American Budget so that taxation can be limited, and the job creators in the private sector can grow our economy.”
• Kendall Cotton, President, Frontier Institute “If Montana can balance the budget and hold the line on spending growth in 2021, why can’t Washington? By adopting common-sense fiscal restraints like proposed in the Responsible American Budget, the federal government can start putting taxpayers first.”
• Dr. Orphe Divounguy, Chief Economist, Illinois Policy Institute: “There’s no incentive for the federal government to find savings in departments or to appropriately allocate dollars to projects that yield the biggest returns for Americans. The spending limits proposed in TPPF’s Responsible American Budget would likely induce more serious consideration over how taxpayer resources are allocated.”
• John Hendrickson, Policy Director, Tax Education Foundation of Iowa: “The Responsible American Budget is a blueprint for solving the dangerous out-of-control spending that has plagued the federal government for decades. The RAB demonstrates the need for fiscal responsibility, but also for a recommitment to the constitutional principle of federalism to follow the many states using prudent budgeting and fiscal rules to keep their budgets balanced.”
• Dr. Alexander W. Salter, Associate Professor of Economics, Rawls College of Business, Texas Tech University: “Federal government spending is out of control. The Responsible American Budget is an effective way to protect taxpayers while ensuring the public sector can get the resources it needs.”
• Manfred Wendt, Executive Director, Young Conservatives of Texas: “TPPF is once again leading the fight to ensure the financial future of all Texans by restraining the federal government’s out of control spending.”
• Dr. Charles F. Beauchamp, Associate Professor of Finance, Mississippi College: “For nearly 20 years Congress has abdicated its responsibility of passing a proper budget. The result has been runaway spending and unsustainable increases in the federal debt. It’s time to end the process of budgeting via continuing resolution by adopting a budgeting practice based on established metrics. TPPF’s Responsible American Budget presents a framework of metrics that can usher in much needed fiscal discipline to Washington. 

​The economic policies of the Biden administration—Bidenomics—is conspicuously marked by lofty rhetoric, grand promises, and the best of intentions. It espouses helping the poorest among us, along with amorphous but attractive values like “fairness.” But the results of these policies do not live up to their intentions. Here are just a few examples.

The American Relief Plan does not provide relief for Americans. Instead, it threatens states’ sovereignty and prevents Americans from receiving tax relief.

The American Jobs Plan does not create jobs, but green-energy flimflams. It stifles real job creation through perverse incentives and burdensome regulations. The expansion of unemployment payments is contributing to 6 million fewer jobs, because many people are making more on unemployment than they did while working.

The American Family Plan does not strengthen families, but government dependency. It weakens families by making people reliant on federal programs instead of each other. It also provides health care subsidies without accounting for income, meaning that the very wealthy can receive taxpayer-subsidized health insurance.

The idea of fairness has taken a conspicuous role in the current administration’s agenda, yet its proposed tax changes will result in lower wages, fewer jobs, and less savings, burdens which will fall disproportionately on low-income households.



Inside this Trojan Horse of fairness, Bidenomics seeks higher marginal tax rates on wages, dividends, and corporate income, along with higher death taxes, taxes on unrealized capital gains, taxes on retirement savings, and more.

Infrastructure is a key pillar of Bidenomics, but not the infrastructure you’re probably thinking of. The administration’s proposal allocates only a few percent of its infrastructure dollars to roads, bridges, electrical grids, water and sewer mains, etc. It pours money into green-energy boondoggles, and even seeks to bulldoze highways in perfect condition if they are too close to minority neighborhoods, among other outlandish plans.

To pay for record-breaking spending, Bidenomics relies on funding from the federal reserve, a surefire way to produce inflation. Nothing in this life is free, and we are witnessing those trillions of dollars in government spending fuel rising prices. Inflation is decreasing real wages, particularly among low- and moderate-income households. The very people whom these policies are supposed to help are instead being undermined economically.

If these policies worked only half as well as the names of the bills imply, economic growth would be breaking records, and no one would remain in poverty. Instead, these policies are holding back the recovery like a choke collar, and welfare rolls are swelling. Real private GDP is still about $200 billion below Q4-2019 levels, despite pouring previously unimagined quantities of money into the economy.

We should not be surprised by these results; the policies of Bidenomics—higher marginal tax rates, more government spending and regulation, excessive money creation—have been tried before and found wanting. Nevertheless, many so-called experts continue to push this agenda.

The experts were expecting almost a million jobs in the last jobs report, but we saw only a quarter of that. The experts were expecting 3.6% inflation, but we saw 4.2%. The experts were expecting Keynesianism to revive the economy, but we are seeing the economy sputter. When it comes to Bidenomics, the experts seem to be always wrong but never in doubt.

An activist in economist’s clothing favorably characterized Bidenomics as “heads down, block out the noise, deliver timely help to the American people.” They have their “heads down” alright—like an ostrich with its head in the sand, oblivious to empirical evidence all around. And what is characterized as “noise” is not irrelevant distraction, but the practical feedback that should inform policy decisions. Lastly, the “timely help” is late to the game, with funds allocated in March not actually being spent or sent out to Americans until July.

It is reminiscent of the funding for “shovel-ready jobs” described in the 2009 rescue packages. Even former President Obama admitted that the funds he authorized took years to be spent, arriving far too late to achieve their stated objective.

While some economic policies, good and bad, take years to bear fruit, we are seeing the effects of Bidenomics sooner rather than later. Those effects do not at all match the goals and intentions of the policies, so we must judge according to effects, not the intentions. As the aphorism says, you shall know a tree by its fruit.

To learn more about Bidenomics, click here.
​

https://thecannononline.com/bidenomics-a-lesson-in-intentions-vs-results/

​Texas looks to receive $41 billion in taxpayer money provided by Congress in the $1.9 trillion American Relief Plan Act (ARPA). With $31 billion being sent to the state, this is 25% of the state’s annual budget. This excessive spending in D.C. has become the norm and now they’re trying to push their profligate spending onto Texas.

We must not let that happen, and here’s how to stop it.

ARPA funds to Texas include $11.2 billion already released to public schools. Soon, there will be $10 billion for local governments and $4 billion for only water, sewage, and broadband projects. And $15.8 billion in more flexible funding will head to the state in one payment, since Texas’s unemployment rate is more than 2 percentage points above the pre-pandemic rate.

Not only are these funds adding to the skyrocketing national debt, but they’re also more than what Texas needs. The state and local governments already have balanced budgets or surpluses. And to make matters worse, these funds come with strings attached which jeopardize state sovereignty and our republic’s future.

The U.S. Treasury recently released guidance (a Fact Sheet) for the restrictions on how state and local governments can use the ARPA funds. There will now be a 60-day period for public comments on this guidance before additional clarity will be provided.

In the meantime, it appears that the state cannot use these funds for deposits into pension funds or for direct or indirect state tax cuts, except for special cases that don’t seem to apply in Texas, even though cuts by state or local governments seem legitimate and advisable.

The tangle of strings attached to this ARPA money makes it almost impossible to shrink government. Furthermore, states with respectable fiscal track records, like Texas, are being punished while irresponsible state and local governments, like California and Austin, are being rewarded.

Given the strings attached, if the state accepts ARPA funds, Texas’ approach should be a pro-growth, long-term strategy to strengthen the state while assisting struggling Texans still affected by the pandemic and the shutdowns.

The strategy should strive to return these funds to taxpayers by reducing and keeping taxes lower than otherwise, funding only one-time expenditures, and rejecting all or most ARPA funds with strings attached.

This strategy would help avoid expanding government, reduce the impact on state sovereignty, mitigate the rising burden of the federal government’s high spending and debt, and provide relief to families.

Texas would recover faster, and would better withstand the Biden administration’s onerous policies by using the $15.8 billion in more flexible funding on the following options to Keep Texas Texan.

We should allocate $9 billion for federal unemployment trust fund loans and replenish the state unemployment fund to avoid massive tax hikes that would be needed to fund these.

We should use $5.1 billion in ARPA funds directly or those swapped out with state general revenue to complete the border wall and add border security to provide relief of the border crisis and stop using state taxpayer dollars every biennium for this purpose.

And with property taxes continuing to climb,  we should use the other $1.7 billion to provide a 2-cent compression of local school M&O property taxes for additional tax relief this session. Adding the extra $3 billion that Comptroller Glenn Hegar recently announced is available would mean there’s an opportunity to provide a 5.5-cent compression. Since these are technically local taxes, this could be a way to navigate around the unwise restrictions imposed by D.C.

These expenditures should be done in a way that ensures accountability and transparency to taxpayers.

There should be no ARPA funds for ongoing expenses to avoid fiscal cliffs that led to problems a decade ago, when Democrats argued there were “cuts” to public education when Obama’s one-time “stimulus” funds ran out. And these funds should be placed in a separate budget article from the base budget like the Foundation’s Conservative Texas Budget does. And spending should be posted on the Comptroller’s or Legislative Budget Board’s website.

There are other good ideas on how to use ARPA funds, but they may be restricted because of the many strings attached, which is why there should be more clarity from the Treasury. Thus, with so many hoops to jump through, Texas should strongly consider rejecting some or all the funds.

Particularly those with strings attached that would weaken the state’s fiscal and economic situation by creating fiscal cliffs in subsequent sessions, eliminating tax relief opportunities through December 31, 2024, and more. Rejecting ARPA funds would also give Texas an opportunity to help provide relief from the Biden administration’s gambit to bankrupt America with $6 trillion either passed or proposed in legislation during his first 100 days in office.

Texas is a sovereign state. It’s time D.C. recognizes that.

https://thecannononline.com/the-sovereignty-of-texas-is-at-stake-arpa-funds-come-with-strings-attached/

Background

Texas looks to receive roughly $40 billion in taxpayer money provided by Congress through the American Rescue Plan Act (ARPA). This includes $11.2 billion already released to public schools and soon to be released $10 billion to local governments and $4 billion to infrastructure projects (i.e., only water, sewage, and broadband projects). And $15.8 billion in more flexible funding to the state in one payment given Texas’s unemployment rate is more than 2 percentage points above the pre-pandemic rate.

Approach Given Restrictions

The U.S. Treasury recently released guidance (Fact Sheet) for the restrictions on how state and local governments can use the ARPA funds. There will now be a 60-day period for public comments on these restrictions before additional clarity will be provided. In the meantime, it appears that the state cannot use these funds for deposits into pension funds or direct or indirect state tax cuts, except for special cases that don’t seem to apply in Texas while local tax cuts by state or local governments seem legitimate and advisable. Given strings attached, if the state accepts ARPA funds, there should be a pro-growth, long-term strategy to strengthen Texas while assisting struggling Texans from the pandemic and shutdowns.

Recommendations

The strategy should strive to return these funds to taxpayers by reducing and keeping taxes lower than otherwise, funding only one-time expenditures, and rejecting all or most ARPA funds with strings attached. This strategy would help avoid expanding government, reduce the impact on state sovereignty, mitigate the rising burden of the federal government’s high spending and debt, and provide relief to families. Texas would recover faster and better withstand the Biden administration’s onerous policies by using the $15.8 billion in more flexible funding on the following options to Keep Texas Texan.

If Texas accepts some or all the funds, consider the following:

Provide Texans with Relief

$9 billion for federal unemployment trust fund loan and replenish state fund to avoid tax hike.
$5.1 billion for border wall completion and border security to provide relief of border crisis.
$1.7 billion for a 2-cent compression of local school M&O property taxes to provide relief.
Ensure Accountability and Transparency

No ARPA funds for ongoing expenses to avoid fiscal cliffs (e.g., pub ed “cuts” after ARRA).
Place funds in separate Article from base budget like TPPF’s Conservative TX Budget
Publish receipts and outlays of funds on Comptroller’s or LBB’s website.
Replace general revenue with federal funds for only one-time items.
Support Reform—May be restricted but possibly by swapping general revenue appropriations

Fund Other Post-Employment Benefits (OPEB) with reforms for sustainability.
Swap with GR to pay down state debt with a high interest rate.
Use to fund defined-contribution retirement accounts or similar reforms for new employees.
Swap with GR to fund expanded special education microgrants created during COVID.
Swap with GR to fund market-based healthcare with direct primary care and other options.
Texas should consider rejecting some or all the funds, particularly those with strings attached that could create fiscal cliffs in subsequent sessions, eliminate tax relief opportunities through December 31, 2024, generate school finance problems, and more.

https://www.texaspolicy.com/keep-texas-texan-path-for-covid-relief-funds/

Many Americans are recovering from the recession that began in March 2020 due to the COVID-19 pandemic and forced business closures by state and local governments. The economic expansion that began in the second half of 2020 continued in the first quarter of 2021 as many of those governments removed or reduced restrictions on the private sector. However, employment has slowed lately as some governments are still imposing restrictions and the federal government continues giving unemployment ‘bonuses,’ causing many people to choose unemployment over work. This has created a record number of 8.1 million unfilled job openings. Nevertheless, the economy is still growing, and more pro-growth policies should be implemented to support the tangible prosperity experienced until March 2020.

More in the brief below: 
​https://www.texaspolicy.com/an-insiders-insight-on-todays-economy/www.texaspolicy.com/an-insiders-insight-on-todays-economy/

By Vance Ginn, Ph.D. and Quinn Townsend

Families in Alaska, whether in good or bad economic times, practice responsible, priority-based budgeting. They must make decisions, often difficult ones, on how best to spend their hard-earned dollars. The same is true for small business owners who must prioritize their spending to keep their doors open, meet payroll, and provide for themselves.

Alaska’s government should do the same, and even more so given it’s not their money.

The way to do this is for the state to practice priority-based budgeting, whereby legislators take a close look at how every taxpayer dollar is spent. By doing so, state officials can allocate funding so that it doesn’t exceed the state’s ability to pay for it, as appropriately measured by population growth plus inflation.

Considering Alaska budget trends over the last two decades, there has been an improvement since 2016. During the period from 2001 to 2015, the average annual budget increased by 9.9%, which was three times faster than population growth plus inflation. Since then, the budget has declined annually by 7.3%, on average, while this key measure increased by just 1.6%, meaning that the recent growth of state government has helped to correct for prior excesses.

 



From 2001 to 2021, the budget grew on an average annual basis by 4.7%, which was nearly double that of population growth plus inflation. The excesses in the earlier period compounded over time to result in an inflation-adjusted state budget per capita in FY21 that is 10.9%, or $601 million, more than this key metric.



Some in Alaska have argued that there is no more fat to trim from the budget, that the state has cut everything it can since the highest spending years. But because the enacted budget, year after year, allocates more state funds than the state is able to sustain, it’s clear that difficult decisions are necessary. Just like a family or business prioritizes their budget based on necessities before wants, Alaska must be responsible and do the same.

This is why a fiscal rule of a responsible spending limit on state funds in Alaska is essential. This can be achieved by capping state appropriations to growing no more than population growth plus inflation every year.

As noted above, if the budget had matched population growth plus inflation over the last two decades, the state could have saved about $800 per Alaskan this year. This means the state would be budgeting about $600 million less in FY21 thereby helping to avoid its current attempt to dig itself out of a fiscal crisis and would probably not have drained its savings accounts either.

But we can’t change the past, only learn from our mistakes and do better. Much better. This will take responsibility and discipline, two things common to Alaskans.

Alaska Policy Forum’s Responsible Alaska Budget sets the maximum threshold on state appropriations based on population growth plus inflation over the last year, similar to what a meaningful spending cap should do.



Specifically, our maximum threshold on FY22 state appropriations is $6.18 billion after an increase of 0.92%. Achieving this feat and working to increase the budget less than this amount will help immensely in reducing the cost of funding government.

History has demonstrated that governments cannot spend and tax their way to prosperity. Alaska’s spending over the past two decades has proven that.

Policymakers should consider Alaska Policy Forum’s Responsible Alaska Budget and work to further limit spending. Keeping spending levels lower will not only serve Alaskans’ interests, but it will also make Alaska more economically competitive so that residents have more opportunities to achieve their hopes and dreams.

Vance Ginn, Ph.D., is chief economist at the Texas Public Policy Foundation based in Austin, Texas. He is the former chief economist of the White House’s Office of Management and Budget (OMB) during the Trump administration.

Quinn Townsend is the Policy Manager at Alaska Policy Forum based in Anchorage, Alaska. Previously, Quinn worked as the Economic Research Analyst at The Buckeye Institute. She completed her M.S. in Resource Economics and Management at West Virginia University.

https://www.texaspolicy.com/its-time-for-a-responsible-alaska-budget/

​The substantially weaker than expected U.S. jobs report was unfortunate for struggling Americans, but it should have been expected given the disastrous policy out of D.C. Fortunately, states can fix it.

Milton Friedman said that if the federal government oversaw the Sahara Desert, within five years there would be a shortage of sand. So inefficient and feckless is D.C. that we should never underestimate its ability to ruin good times and make bad times worse.

The 2020 recession and the current anemic recovery are a prime example.

State government-imposed shutdowns destroyed the greatest American economy in recent memory. Sure, the novel coronavirus played a role, but it was primarily imprudent policies which annihilated the best labor market in over half a century. On top of wounding that labor market so severely, the federal government then proceeded to poison the patient, ensuring a languid recovery.

The poison of choice? “Bonuses” for the unemployed.

At first glance, this hardly seems like an economic sedative. Why would it be harmful to help the unemployed? If anything, it sounds humane. The unemployed need assistance until they can find another job, and unemployment insurance (UI) payments partially or completely fills that temporary need, especially for those with little or no savings.

While that is true, new UI bonuses by the federal government haven’t been humane.

UI payments normally provide about half of what you earned while employed. However, in 2020—amid all the other decisions in D.C.—the federal government initiated a weekly bonus of $600 to everyone on unemployment. There were numerous reasons given for this enhancement, but they were all rather nebulous.

The actual effect was more people became unemployed and stayed unemployed.

Adding a weekly bonus to UI payments on top of what the unemployed already receive from the state frequently created the bizarre scenario wherein a person received more on unemployment than while working. Between April and July of 2020, 69% of those who lost their jobs had higher after-tax income on unemployment. (UI payments are not subject to Social Security tax, Medicare tax, nor income tax in some states.) Half of the unemployed were receiving at least 134% of what they earned while working.

If you are receiving more on unemployment than you did while working, why would you go back to your job? It’s one thing to expect people to be rational, but another to expect them to be saints.

Even after the $600 weekly bonus expired, D.C. instituted a $400 bonus, and now a $300 bonus. While the deleterious effects of the bonus have diminished with its size, the negative effect on unemployment is still potent. Some 6 million people are staying on unemployment because of all the government handouts they receive.

And although the businesses that didn’t fold during the lockdowns are finally able to reopen their doors with the lifting of government lockdowns in some states, those businesses are struggling to find people willing to work.

Unlike before the government shutdowns when the economy was roaring and businesses could not find enough workers because commerce was so busy, now businesses are contending with Uncle Sam’s generous handouts—an uphill battle to be sure.

There is now a chronic labor shortage of almost 7 million workers (and that number is rising) amidst massive unemployment. The incompetence of the federal government was worse than Milton Friedman predicted—in less than a year, it has produced this surreal and terrible scenario.

At least two states are telling D.C. that enough is enough. Montana Gov. Greg Gianforte will no longer accept the UI bonuses starting in June. And South Carolina Gov. Henry McMaster will do the same starting this week. However, these funds shouldn’t be used as a bonus to incentivize people to work as proposed in Montana, because nothing is free—whether it be handouts or precedence.

But regarding rejecting this federal expansion into the economic livelihood of Texas, Gov. Greg Abbott should do the same.

Texas currently has almost 1 million unemployed people—nearly twice the number from February 2020 before the pandemic—despite hundreds of thousands of unfilled job openings statewide. If the governor cancelled the federal unemployment bonuses, it would help alleviate this situation by removing the artificial incentive to remain unemployed.

This would not impact regular state-provided UI payments, so those who are truly struggling to find work will still receive those payments.

Opening the great state of Texas was the right decision, but it means little to businesses and economic prosperity if businesses are unable to find workers. Rolling back these injudicious UI bonuses will eliminate a reason for too many not to work and help Texas flourish once again while providing yet another model for the country.

https://www.texaspolicy.com/improve-the-labor-market-by-ending-federal-unemployment-bonuses/

​A recent Wall Street Journal article claimed “U.S. Debt Is at a Record High, but the Risk Calculus Is Changing.” But is that calculus really changing? According to some, the government can borrow and print all the money it wants without repercussions.

Modern Monetary Theory (MMT) advances the puerile notion that we have somehow moved beyond the antiquated restriction of scarcity under which our ancestors labored. This thinking is reminiscent of the childish fantasy that our actions will not have consequences, but realities like scarcity are inescapable.

What adherents of MMT have really done is determined their socialist agenda and then reconstructed the policy tools available to support the agenda. It’s a sneaky move but one not based on reality nor economics.

But our point is not to counter every flaw of MMT, but rather to note that similar bad economics is snake oil sold to us by those who supposedly have “better” economic theories.

The notion being peddled today is that D.C. can spend trillions of taxpayer dollars, run up massive deficits, fund most of it by the Federal Reserve through money creation, and voilà, no inflation—reminiscent of a bad magic trick. A growing body of political activists in economists’ clothing subscribe to this view. Inflation has become a dirty word, unbefitting modern discourse among intellectuals.

But ask yourself: Am I paying more for food and gasoline? Are home and rent prices going up, and property taxes with them? Are cars more expensive? Is lumber more expensive?

It seems everything is getting more expensive, and that is price inflation—a rise in the general price level of a basket of goods and services. But what exactly causes it?

You’ll hear all kinds of explanations. Some have blamed greedy businesses for raising their prices. Some have blamed grasping unions for demanding higher wages. Some have blamed the consumer-at-large for being a spendthrift.

Yes, businessmen are greedy—everyone is. Yes, unions are grasping—everyone is. Yes, the consumer is a spendthrift—everyone is. But they don’t cause inflation.

Inflation originates in one place: behind the façade of a Greek temple on Constitution Avenue in Washington, D.C.—at the Federal Reserve.

The Fed can create money out of nothing—or more technically, create money out of government debt. Only the Fed can churn out unlimited money, and that is why only it can cause inflation. Businessmen, consumers, unions, and investors do not have this magical printing press and so they cannot cause inflation.

But why does creating money cause inflation? Wouldn’t we be better off if we all had more money?

Imagine that Santa Claus writes you a check for Christmas equal to the amount of money you already have. You now have twice as much money! But imagine Santa does the same thing for everyone else. Shortly thereafter, the price of nearly everything you purchase would be about twice as expensive because there’s too much money chasing too few goods.

That is inflation—and the Fed has been playing Santa Claus.

As the big spenders in D.C. take the country further into debt, the Fed has been there to write trillion dollar checks to pay for it. Normally, the government would have to borrow money from the public—which doesn’t cause inflation but does crowd out private sector activity. But for more than a year now,  the Fed has kept its printing press in overdrive, thereby artificially holding down interest rates and distorting economic activity.

Initially, this appears to create an economic boom, as everyone thinks he’s better off with his government “stimulus” check and increased spending. But remember that nothing is free in a world of scarcity. Everyone discovers that others also have more money, and that prices are rising as more dollars chase fewer goods and services.

This inflation also acts as a tax on us as it reduces our purchasing power. Put simply, government uses inflation to confiscate a portion of your savings and your wealth.

If inflation averages just 2% per year (the Federal Reserve’s target), the government will have confiscated about half the value of your liquid wealth in just 36 years. For context, one measure of general price inflation was 2.6% for the 12 months through March 2021, but 4.1% in the first quarter of 2021 based on another measure. At a 4% average annual rate, the hidden tax of inflation will seize half of your money’s purchasing power in a mere 18 years.

Perhaps the Federal Reserve is not playing Santa Claus, but the Grinch. Instead of the massive spending boondoggles by the Biden administration and resulting costly repercussions, we need rules that limit excessive government spending and excessive money creation.

https://www.texaspolicy.com/a-tax-by-any-other-name-how-inflation-is-robbing-you-blind/