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More Fiscal Headwinds in the Sunflower State

Regular Via Meadia readers know that we often describe America’s woefully underfunded state and local public pension systems as characteristic of “blue model” governance. The conditions that set the stage for the crisis—the prevalence of secure lifelong employment at a single institution, generous benefits packages, heavy regulation, and politically powerful unions—first came into place during the heyday of the blue social model, or the 1950s economic system that many modern Democrats now wax nostalgic for. And, not coincidentally, many of the states and localities facing the most acute crises of governability—in particular, union capture of the political system, and pension-driven fiscal insolvency—have traditionally been controlled by Democrats.

But that doesn’t mean that Republicans aren’t capable of creating or exacerbating blue model crises of their own. Kansas Governor Sam Brownback’s starve-the-beast tax-cutting regime has left the Sunflower State unable to support its basic infrastructure and educational obligations, and imperiled the stability of its public worker retirement programs. Pensions and Investments reports:

Moody’s Investors Services revised the outlook of Kansas’ issuer rating to negative from stable, the ratings agency announced on Tuesday, citing in part the underfunding of the state’s pension plans.

The rating remains at Aa2, but Moody’s said in a statement announcing the action that “the revision of the state’s outlook to negative from stable reflects the ongoing difficulties it is having restoring structural balance to its budget and getting on a path to sounder funding of its pension liabilities.”

As we’ve said before, aggressive, front-loaded tax-cuts are probably the wrong avenue for pursuing limited government objectives in a GOP-controlled state like Kansas. Instead of cutting taxes and hoping that the resultant fiscal shortfall will force government to shrink in the future, red reformers should focus on uprooting regulatory barriers to growth—NIMBY zoning restrictions, guild and licensing rules protecting entrenched interests, onerous tort laws—and on lowering the cost of government by streamlining bureaucracies and reforming public pension systems. Once these policies deliver growth and savings—but not before—the dividends should be returned to taxpayers in the form of tax cuts.

The doctrinaire right-wing governance of Kansas has, by virtually all measures, yielded disappointing results. It’s time for the state’s Tea Party leaders to start looking at different approaches if they want to go beyond protest politics and reform government in a lasting and productive way.

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  • f1b0nacc1

    You apparently know comparatively little about Kansas. While there are certainly some legitimate criticisms of Brownback, suggesting that he has had a free hand here is simply nonsense. The legislature is hardly doctrinaire hard-right, it has a very large number of ‘moderate’ GOP that is indistinguishable from the Democratic minority. This, combined with an activist liberal state Supreme Court (which has mandated numerous spending priorities) means that they are getting Blue State spending with Red State taxing. Suggesting that this is some sort of pure policy test is simply not true.

  • qet

    Agree completely with the regulatory relief, but making that a precondition of tax relief merely ensures the latter will never happen (and by “never,” I mean in my lifetime, which is the only relevant measure in such matters). Existing taxes lose much of their sting in a strong economy, and the most that tends to happen is that they are merely slushed into “rainy day funds” that get the editorial boards of Big Newspaper all euphoric.

    The Left often says “don’t let the perfect be the enemy of the good” when flaws and undesirable consequences in their policy prescriptions are pointed out. I don’t see why that sort of simplistic dismissive retort can’t be used here. Oh, right, I forgot: that’s not how the Right operates. The Right is actually attempting something in Kansas, unlike the Left in, say, Illinois. We should allow it more time. After all, it took us 50+ years to reach the present crisis. It would be unreasonable to expect a few years is enough to cure it.

    I live in a Democrat-headlocked state with healthy taxes and crumbling infrastructure and cuts to educational funding. This fact alone refutes TAI’s argument. When I moved here over 30 years ago, tax rates were much higher and the infrastructure was still crumbling and inner city education was still just as bad. We, too, spend far too much on lifetime pensions for people who retired in their 40s. But the government of this ideologically-committed deep Blue heaven actually, decades ago, reduced taxes in order to spur growth. And it actually worked. And now we have as fine a condition of inequality as you can find anywhere. Even at the reduced tax levels (although, I’m sorry to day, they did rise a bit this year), we have plenty of tax revenue to spend on “core government functions,” but that’s not where the votes are.

    Until existing pension liabilities are reduced, there is no hope, regardless of tax levels. State pensions must be viewed as sovereign acts that do not bind future legislatures and not as contracts that may not be impaired or as prohibited ex post facto laws. Whatever legal precedents exist to the contrary can simply be overruled a la the Tushnet Rules. But permitting people to keep more of their own money is never the wrong decision, and those people can abandon the ruins of our once great cities (like has happened in Detroit) and found new ones.

  • Andrew Allison
  • FriendlyGoat

    But, “aggressive front-loaded tax cuts” are the only goal of those who try to sell them on “limited government”. You can make your next-to-paragraph recommendations, and there is not a small-government person in the United States who is interested in hearing them. None. Zip. Nada. Let me know when you get the Tea Party leaders to “start looking at different approaches”.

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