“No Man’s life liberty or property is safe while the legislature is in session”.

- attributed to NY State Judge Gideon Tucker

Monday, December 20, 2010

Capping States' Spending: What Works & What Doesn't

Two weekends ago, the Wall Street Journal published a fascinating piece by Matthew Mitchell, "a research fellow at George Mason University's Mercatus Center," entitled How to Control State Spending.

I wouldn't have given this topic much thought, as I assumed that the states which had passed constitutional amendments or had laws to this effect more or less all took the same path. But that's wrong.

Mitchell writes of failures, like Florida, which used a cap based on "the sum total of residents' income" growth.

In contrast, he writes,

"Another variety of TEL (tax-and-expenditure limitation), which limits spending, according to the sum of inflation plus state population growth, has a better record."

Colorado successfully used this approach and is now "experiencing the country's fastest economic growth between 1995 to 2000."

Mitchell continues by observing,

"Six other states have enacted a TEL like Colorado's. My research shows that- after controlling for other factors, including per capita income and the unemployment rate- this type of TEL reduces state and local budgets by 3%."

He mentions three tools with which Florida, and other states, could improve their control over state spending:

-item-reduction veto
-a supermajority requirement for tax increases
-stronger balanced-budget laws and practices.

What's interesting about Mitchell's work, besides the obvious lesson that some approaches to state spending control work better than others, is the lesson of Federalism.

That is, by allowing the 50 states to vary their approaches to problems, it's possible to observe and discover which approaches work best, and, through work like Mitchell's, allow those to be adopted by all interested states.

Yet another reason for a limited Federal government, and more robust, stronger state governments.

And another reason to repeal Wonderboy's draconian, top-down federal health care legislation, in order to allow continued experimentation with solutions at the state level.

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