President Biden and Congressional Democrats have proposed roughly $6 trillion in new spending over a decade of hard-earned taxpayer dollars. To put this into perspective, this exceeds the economic output of every country except the U.S. and China, matches the $6 trillion authorized for COVID-related items since the pandemic—with nearly $1.5 trillion unspent—and exceeds the annual federal baseline budget of $4.8 trillion.
To put it bluntly, this reckless spending will destroy America’s fiscal and economic institutions by pushing us toward insolvency, dependency, and insanity.
The first proposal that the Senate, with some Republican support, recently passed a motion to proceed on is a mostly a progressive wish list of spending. It’s $1.2 trillion on “infrastructure,” with an unfunded $550 billion of it being new spending as the rest are funds previously authorized but not yet spent.
But it has just $110 billion, or less than 10%, for what’s historically been considered infrastructure—roads and bridges. The other 90% is to fund mass transit waste, green energy nonsense, and more items that the states or the private sector could do.
This first proposal should die or at least be cut down to actual infrastructure projects.
The second proposal is a reconciliation package deemed as “human infrastructure” at an astronomical cost of likely $5 trillion over a decade (with little backing documentation on what human infrastructure is).
This proposal will not only dramatically expand the federal government’s role in everyday American life but will contribute to stagflation not seen since the 1970s. It would fundamentally expand people’s dependency on the federal government and destroy the potential of Americans.
Here’s how it spends money we don’t have and turns America into something she is not.
Authorizing Runaway Government Spending

• Congress has already authorized almost $6 trillion in new spending, allegedly due to Covid-19, and executive actions by the Trump and Biden administration has authorized almost $1 trillion
• As a result, the federal deficit tripled to $3.1 trillion in 2020 and is expected to be in the same ballpark this year.
• Instead, we need less spending in the short term and a spending limit imposed based on the Foundation’s Responsible American Budget.

Raising Taxes

• Raising taxes on corporations and investment by $3.5 trillion will decrease our global competitiveness, decrease investment in America and result in less economic growth, fewer jobs, slower wage growth, and higher taxes on many Americans. Despite Biden’s promise to not raise taxes on those earning less than $400,000 a year, this proposal will raise their burden both directly and indirectly, especially for low-income earners.
• These taxes disincentivize saving and investment so much that some tax increases will result in less tax receipts.
• Instead, faster economic growth, more job creation, and faster wage growth can be achieved by reducing taxes and spending.

Driving Higher Inflation

• The general level of prices (CPI) rose 4% over the last year—the largest 12-month increase since August 2008. Meanwhile, real wages fell 1.7% indicating that consumers are worse off.
• More government spending when the Federal Reserve has already doubled its balance sheet and is purchasing over a trillion dollars a year in Treasury bonds will exacerbate existing inflationary pressures and make things even worse.
• Instead, there should be strict fiscal and monetary rules to return to policy normalcy.

Disincentivizing Work

• Much of the newly printed money has subsidized the unemployed, giving the average family of four more than $109,000 in government assistance through September 2021.
• In 19 states, a family of four can currently receive the equivalent of over $100,000 in salary with no one working. Some in Congress want to further expand these handouts and make them permanent, but this will redistribute more from the private sector and trap many people in a cycle of dependency.
• Instead, we must stop disincentivizing work by not extending the federal enhanced unemployment payments and by not making permanent the enhanced child tax credit.

Interfering with Health Care

• The package imposes socialist price controls on prescription drugs which will reduce the number of new drugs introduced into the U.S. market.
• Congress already expanded costly Obamacare subsidies in the last 18 months and expanded Medicaid through emergency powers, and now it plans to expand Medicare. That’s despite Medicare Part A being on track to become insolvent by around 2024.
• Instead, we should increase price transparency, remove unnecessary regulations on prescription drugs, and use alternatives like direct primary care to provide better health outcomes at a lower cost.

Pushing the Green New Deal

• The plan aims to cut total U.S. carbon emissions in half by 2030 and to have 80% of the nation’s electricity come from zero-emission energy sources.
• Fossil fuels currently provide 60% of U.S. electricity, with another 20% coming from nuclear. Completely eliminating fossil fuels from electricity generation by 2030 would reduce global temperatures in 2100 by an immeasurable 042 degrees Celsius.
• Instead, these efforts should be trashed, and an all-of-the-above energy production strategy should be supported that removes obstacles to innovation and adaption.

“Free” Community College

• Tuition at community colleges is relatively low and programs like federal Pell Grants are already available to those who cannot immediately afford the tuition.
• Subsidizing community colleges further will only make these schools more inefficient, just as federal funding for other tertiary schools has caused their costs to explode, especially at the administrative level.
• Instead, students should find paths that best meet their unique needs and that meet the skills demanded by employers. This includes career and technical education along with apprenticeships that typically don’t burden students with debt without job opportunities.

Ultimately, these big-government, green-energy boondoggle, dependency-inducing, tax-and-spend proposals coming out of D.C. should be rejected; They will weaken families, destroy jobs, and hurt our future. Instead, Congress should focus on removing obstacles hindering opportunities for Americans to flourish.

Commentary

​Every dollar the government spends comes from taxpayers. The late economist Milton Friedman said, “The burden of government is not measured by how much it taxes, but by how much it spends.”

Taxes should only fund limited government at the least economic harm, which Texas does well by depending mostly on sales taxes—though local property taxes also impose a hefty toll.

Therefore, to keep state taxes lower than otherwise so Texans can reach their full potential, sound fiscal policy must begin with spending restraint, which the Foundation’s Conservative Texas Budget has helped achieve.

But that fiscal restraint in Texas was limited from at least 2004 to 2015. The average growth of the six two-year budgets then was 12% compared with just 7.3% in population growth plus inflation, which measures the average taxpayer’s ability to pay for government. This excessive spending compounded over time, resulting in even higher taxes and less prosperity than otherwise.

A clear break in the state’s budget happened in 2015. The average biennial growth of the four budgets since then for 2016 to 2023 has been 4.8% (less than half of the prior six) compared with population growth plus inflation of 6.2%. And the 87th Legislature finally passed a stronger spending limit in SB 1336 sponsored by Sen. Kelly Hancock and Rep. Greg Bonnen.

Texas is now leading. How?

One answer is new leadership. After the 2014 election of Gov. Greg Abbott and Lt. Gov. Dan Patrick, the Republican-led Texas Legislature had a mandate for fiscal conservatism. Consider how in 2015 the state passed a budget for 2016-17 below population growth plus inflation along with a historic $4 billion in tax relief. That fiscal restraint continued over much of the next three budgets providing opportunities for $5 billion in property tax relief in 2019 with a 7-cent compression to the school district maintenance and operations property tax rate.

Another answer is that even before the 2014 election, the Foundation had created the Conservative Texas Budget (CTB) as a clear and achievable standard for lawmakers.

The CTB sets a maximum threshold on the total budget based on population growth plus inflation over the last two fiscal years before the regular session. We release it early to provide a limit for state agencies to have available for their legislative appropriation requests and then for legislators to use during the appropriations process. Then there’s keeping it on the minds of legislators and taxpayers through testimonies, commentaries, and more, so that Texans can keep more of their money.

The real reason for Texas’s fiscal success is the internal and external institutional pressures around the Texas Capitol and across the state. That’s why Texas is leading in sound fiscal policy.

The latest 2022-23 CTB set a maximum threshold of $246.8 billion on the state’s budget based on a 5% increase in population growth plus inflation. Surprisingly, because even though they had more revenue to appropriate, both chambers’ introduced budget versions were below the CTB, with the House’s version being exactly $246.8 billion.

Ultimately, the state budget passed by the Legislature and after Gov. Abbott’s vetoes was $4.8 billion below the CTB at $242 billion (a 3% increase above 2020-21 appropriations for an apples-to-apples comparison), excluding the $6.1 billion.

In this total budget, education ($93.5 billion) and health care ($86.7 billion) consume 73%. Compared with 2020-21 appropriations, the combined net increase in these two large areas of the budget were essentially flat. But in general, these are rising at a rapid rate and need structural changes. There was also $1 billion toward SB 321, the result of an effort that made the Employees Retirement System a cash-balance plan for new employees, which is a good step toward a defined-contribution system.

Because the regular session was “incomplete,” Gov. Abbott called a special session. Then Comptroller Glenn Hegar announced that with faster economic growth and tax collections, there is now an expected $7.85 billion surplus for the 2022-23 biennium, with $12 billion expected in the rainy day fund.

This means that whenever the Democrats return to work, the Legislature will likely appropriate some of that surplus. To help lower property tax bills now, which is what Texans want, at least $5 billion should go to property tax relief along with charting a path to eliminating nearly half of the property tax burden.  These appropriations, excluding property tax relief, will raise the budget closer to the CTB but will likely remain below it.

If that’s the case, the average growth over the last four budgets would be about 1-percentage point below population growth plus inflation. This extraordinary feat along with the stronger spending limit in Texas will help uphold fiscal responsibility to make up for earlier excesses. Still, there’s room to improve, as less spending can result in less taxing—so we can keep Texas Texan.

Commentary

​Many Americans have historically associated “socialism” with things like the Red Scare, Nazism, the Cold War, and McCarthyism. Today, that fear has largely faded—particularly among young people—and has instead become a love affair.

A recent Axios/Movement poll found that 51% of 18 to 34 year-olds view socialism positively, though the share is only 41% for all Americans. That poll also found that 49% of young adults viewed capitalism favorably—a decrease from 58% in 2019. However, across all Americans there is 57% support for capitalism with just 36% having a negative view of it, which is a slight decrease from the 61% to 36% split in 2019.

Many reasons explain these trends, but the fact that capitalism has lifted more than one billion people worldwide out of poverty is irrefutable.

Despite this reality, the alarming rise in support for socialism, particularly among young adults, begs the question: Do proponents of “socialism” really understand it, and will it ever invade America?

In short, institutions matter and we should understand them, because when we do, we have a better appreciation for capitalism and will reject socialism, even as socialism metastasizes throughout many sectors of our economy.

Socialism is an economic system in which government owns the means of production. Socialism is an extractive economic institution with redistribution of resources—not with market prices but rather by elite politicians who supposedly understand the collective desires of society.

Capitalism, on the other hand, derives its success from an inclusive economic institution with private ownership of the means of production in a free enterprise system. This institutional framework has strong private property rights allowing for a well-functioning price system in markets that allow efficient allocation of resources to those who desire things most with a profit-loss calculation to increase prosperity.

Many supporters of socialism believe society would be best served by a big government that oversees things like health care, food, employment, and transportation, with college and housing at no charge. Socialism’s enthusiasts also claim government-run societies would decrease income inequality and give workers a greater voice.

However, socialists fail to recognize the truth that nothing is free.

More precisely, scarcity means there are always costs, whether realized or unrealized. Free college and universal health care could be fantastic services if they were truly free, but the government doesn’t have its own money—it must extract resources from Peter to give to Paul, and “free” provisions like these have poor outcomes.

Moreover, the ideas of “tax the rich” and “give to the poor” are fallacies that don’t support lower poverty or less income inequality, as they reduce opportunities for success in the productive private sector while contributing to greater dependency on costly government redistribution. This intervention stifles consumer power, eliminates competition, and oftentimes contributes to greater poverty and income inequality.

History shows us that socialism has never worked and will never work well.

Cuba—a socialist country located only 90 miles south of Florida—first embraced socialism over 60 years ago under Fidel Castro. Cubans yielded enormous liberties to Castro’s government in exchange for promises of a better life. As Cuba now grapples with shortages of COVID-19 vaccinations, food, and other critical supplies, even President Biden recently denounced Cuba and its economic system as a failure.

Despite the growing disdain for capitalism in the United States, data from the Economic Freedom of the World report confirms that capitalist, free-market policies lead to the greatest prosperity.

Greater economic freedom under capitalism provides for a more robust economy and a well-functioning price system that yields higher life expectancies, higher incomes, greater per-capita GDP, and less poverty. And capitalism is also morally superior to socialism as it empowers people to make decisions that meet their needs rather than being told what to do through subjective determinations from elite politicians. Furthermore, socialism requires the immoral violation of personal property rights and individual freedoms.

Government is not intended to dictate the lives of each individual, nor it is it supposed to control a society’s factors of production.

As former President Trump said, “America will never be a socialist county.” Socialism did not make America great, nor will it provide for a more perfect union. While we’ve moved further toward socialism in many sectors of our economy, which explains their poor outcomes, Americans should appreciate the many benefits of capitalism so that we can right the course toward more human flourishing.

​Commentary

​It happens on the first Tuesday of every month. Bidders gather at the west entrance steps of the Smith County Courthouse, looking for bargains. At 10 a.m., the sales commence—properties are auctioned off to pay the taxes owed on them. Some are vacant lots and some are homes. All were seized from their owners over delinquent property taxes.

This happens throughout Texas, and it’s big business. What it shows is that with property taxes hanging over them, every property owner in Texas is really just a renter. If they fall behind on taxes, they can lose what they worked so hard for.

But Texas lawmakers now have an opportunity to ease the burden on property owners—our plan would cut property taxes nearly in half over time, by eliminating school district maintenance and operations (M&O) taxes. We get there by holding down spending growth and using surplus taxpayer dollars at the state level to buy down those school district M&O property taxes over time.

Under this buydown approach, every tax dollar not spent by the state will produce a property tax cut for Texans. Following our plan would let the Texas Legislature keep its pledge to taxpayers by actually lowering property tax bills—something missing in most other plans.

School district M&O property tax is estimated to collect about $56 billion in 2020-21, making up nearly half of the hefty property tax burden Texans face. Putting this money back into the pockets of Texas families is the right thing to do.

In the regular session of the 87th Legislature, lawmakers passed another Conservative Texas Budget and put most of our formula into law. This stronger spending limit restricts growth of much of the state’s budget to the rate of population-times-inflation (6.38% biennially since 2012), a formula that helps ensure the budget doesn’t grow faster than the average Texan’s ability to pay for it.

Yet because state revenues have grown at a higher rate (9.02% biennially since 2012), we’re looking at a steady surplus in the state’s coffers. That surplus can be used to eliminate school district M&O property taxes over time. How? By increasing the state’s share of education spending, gradually replacing the M&O property tax burden.

School districts will have to do their part; they’ll need to lower their tax rates each year to match increased state funding, as well as keep their spending in check (they’re already limited to growth of no more than 2.5% per year without the okay of taxpayers).

If these revenue and spending growth rates hold, Texas could eliminate school district M&O property taxes in 20 years. What would that mean to Texas families? Their property tax burden would be cut from today’s high of about 2.3% of their home’s value to about 1.3%.

This buydown process could be started now by using most or all the Texas Comptroller’s expected $7.85 billion in surplus for the 2022-23 biennium and by passing a bill such as HB 122 during a special session, as soon as Democrats who left Austin return. To lower Texans’ property tax bills soon, at least $5 billion of the surplus should go to buy down school district M&O property taxes.

Lower-income families would benefit most from our plan, because a higher percentage of their incomes go to pay property taxes (that’s true even if they’re renters). Property taxes are beyond our control, unlike sales taxes. We can control what we buy, but our tax rates and taxable property values are set by others.

Our “Lower Taxes, Better Texas” plan would let Texans keep more of their own hard-earned money—and in many cases, their homes. The American dream of home ownership shouldn’t end on the courthouse steps.

Commentary

​History repeats itself, and at milestone intervals.

It was 100 years ago that President Warren Harding called for a return to normalcy. His vice president and successor, Calvin Coolidge, prickled at this loose expansion of the English language, but agreed with the sentiment.

After a series of traumatic events for the nation, including the Spanish flu pandemic, Harding knew that the nation needed to return to normal, starting with the government. In 1921, he called for a series of reforms which sound like they were written for 2021—cut government spending, cut taxes, and stop inflation.

Government spending is now, as it was then, out of control.

Federal spending increased by 89% during the pandemic and its share of America’s private sector output has skyrocketed to 45%, the highest since World War II before the latest shutdown recession. Despite tax receipts being at a nominal all-time high, the federal government is running record-breaking $3 trillion deficits with little help in sight.

Governments at all levels in the U.S. are now taking 34% of our private economy. This means that every year we work from Jan. 1 to May 4 just to pay our taxes. Meanwhile, inflation is also getting out of control. It is not only high, but accelerating.

At the current rate, prices will double in less than 14 years. And yet wages are moving in the other direction. While the general price level in June rose 5.4% from one year prior, average hourly earnings in the private sector adjusted for inflation fell 1.7%, hurting families’ purchasing power.

Harding faced similar problems in 1921—government spending had ballooned because of World War I, taxes were punitively high, and the Federal Reserve (Fed) had caused rampant inflation. And yet, the Harding administration turned it around quickly. In the summer of 1921, exactly 100 years ago, Harding spoke using words that sound like they were written for today:

“There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures,” he said. “There has seemingly grown up an impression that the public treasuries are inexhaustible things, and with it a conviction that no efficiency and no economy are ever to be thought of in public expense. We want to reverse things.”

A good first step in reversing things would be to control the growth in government spending with passage of the Foundation’s Responsible American Budget.

This fiscal rule limits spending growth to a maximum rate of population growth plus inflation to keep federal expenditures below the average taxpayer’s ability to pay for them. This needed restraint would help curtail spending. Further cuts can then be made, targeting handouts that disincentivize work and welfare that traps people in poverty.

To provide tax relief at the federal level, Washington should cut marginal tax rates.

After Harding and Coolidge cut tax rates, tax revenue increased. The same phenomenon occurred when JFK, Reagan, Bush, and Trump cut tax rates, too. States should also move to cut taxes—and several states have already done so. Texas, with an abnormally high local property tax burden, should enact reforms to drastically reduce property taxes that are quite literally forcing Texans out of their homes.

To stop inflation, the Fed just needs to do what it did a century ago: It must stop furiously expanding the money supply.

Like it did in WWI, the Fed is currently acting as the financing arm of the radical growth in federal spending by purchasing a large share of government bonds—that should stop. The Fed also needs to return to its mission of price stability via a monetary rule, and nothing else. This means an end to targeting full employment and to engaging in social engineering, and a start to a monetary rule.

The effect of Harding’s and Coolidge’s reforms in the 1920s was a booming decade so prosperous that it resulted in the Roaring Twenties. The government ran a surplus and retired debt for every year of the decade. In the 1930s, the bad policies of the Hoover and Roosevelt administrations and associated Fed policy caused and prolonged the Great Depression.

If the nation implements similar reforms as those from a century ago, instead of the Biden administration’s proposals, then America can repeat her previous success. Reining in misdirected fiscal and monetary policy will bring a return to normalcy, so that we can let people prosper again.

Commentary

The way we levy and raise property taxes is not just unsustainable, it is unethical. Texans are being forced out of their own homes by insatiable local governments looking to squeeze every dime out of taxpayers. Texans literally can’t afford for the Legislature to wait years to address the issue or make small changes to the system. More than 70% of Texans say property taxes are a “major burden for them and their family” and want relief now. It’s time for bold action.

Lower Taxes, Better Texas* is a two-pronged approach that immediately cuts property taxes nearly in half and redesigns our system to protect taxpayers, provide a fairer tax system, and grow our economy. The plan not only gives taxpayers immediate relief, but it also makes structural changes to our system that prevent year-to-year spikes in tax bills, allow for a more equitable and transparent form of taxation, and rein in irresponsible local government officials.

Paper

​Overview: The COVID-19 pandemic and forced business closures by state and local governments over the last year left much economic destruction. Many Americans have been recovering as we near herd immunity and states reopen, but fiscal and monetary policies out of D.C. are distorting economic activity and the labor market. For example, the labor market has been improving at a slower pace in recent months, even as there has been at least $6 trillion in passed or proposed bills during the first 100 days of the Biden administration. The federal unemployment “bonuses” and even more in handouts have reduced incentives to work, resulting in a similar number of unemployed as the record high of 9.2 million job openings. Although the economy has withstood these headwinds for now, a pro-growth approach is necessary.