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Federal funding: far from free

Recently, the Tax Foundation released a study showing which states rely most on federal aid and what percentage of their budgets come from these federal dollars.

States receive a significant amount of assistance from the federal government in the form of federal grants-in-aid. In fact, when averaged together state governments relied on federal money for almost one-third of their general revenue in 2014.

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This dependence diminishes local priorities in favor of national special interests, incentivizes unnecessary spending at the state and local levels, mandates burdensome regulations, and leaves states vulnerable to future federal spending crises. Simply put, these dollars aren’t free – and the economic, social and financial costs are passed along to taxpayers.

Sutherland Institute wrote an article a year ago about the negative consequences of federal aid in an op-ed in the Daily Herald titled The Myth of Free Federal Money:

“No such thing as a free lunch.”

“If it sounds too good to be true, it probably is.”

“You don’t get something for nothing.”

We know all this. Yet the allure of “buy one, get one free!” “no money down!” and “get 6 months free!” still draws us in.

We see this natural impulse at work when “free” federal money is offered to our elected officials. With billions of tax dollars dangling in front of state and local governments, the sales pitch of better schools, stimulated economies and improved roads usually proves too enticing to turn away.

Unfortunately, this promise is based on a misconception. Federal funding isn’t free at all. In fact, according to new research, it costs Utah taxpayers hundreds of millions of dollars per year.

A new study from Economics International (EI) reports that each additional dollar of federal grant money to the states is associated with an average increase of 82 cents in new state and local taxes.

In Utah, the extra tax burden from every dollar of federal funding is 72 cents. To illustrate, a hypothetical 10 percent increase in federal grants to Utah ($560 million) would be associated with approximately $400 million more in spending from state and local government — an additional tax burden of about $140 per Utahn.

That’s slightly below the national average, but it is cause for genuine concern. It means Utah’s elected officials are being manipulated by the federal government into increasing the financial burden on Utah taxpayers in ways they wouldn’t do otherwise.

We encourage the public and policymakers to reread this op-ed and reject federal funding’s empty promises.

Fundamental reform must precede increases in generally applicable taxes

Reymerswaele_Two_tax_collectorsSome Utah policymakers are proposing legislation this year that would increase generally applicable taxes on income and gasoline. Not surprisingly, these proposals have drawn the attention of the media and Utah pollsters, who have found that Utahns oppose raising income taxes for education.

Utahns’ hesitancy regarding tax increases is well founded. Government has a history of inefficiency (driven by a relative lack of systematic accountability for government-funded programs) and seemingly endless expansion (due to natural political forces). So it is very reasonable for Utahns to balk at the idea of giving more of their hard-earned money to government.

On the other hand, meaningful freedom requires limited government – or good government, in other words. And that has to be paid for with taxpayer dollars. Given the natural conflict between the freedom-based need for tax dollars and the reasonable impulse to be skeptical of tax increase proposals, how should Utahns and Utah policymakers evaluate such proposals?

One fundamental question (but certainly not the only question) to ask is: “Will this tax increase proposal bring fundamental, beneficial reform to government that serves the common good?” If a proposal to take more money from taxpayers cannot answer at least this question with a clear and convincing “yes,” then it is probably not a proposal worth considering further.

So take the proposal to raise individual income taxes by 20 percent (upping the rate from 5 percent to 6 percent). The money generated by this proposal (estimated to be $585 million in 2016) would go mostly toward providing bonuses to teachers based on performance, with the remainder being invested in digital learning.

Certainly, these reforms are steps in the right direction for public education. But are they truly fundamental and beneficial reforms that merit a tax increase? Read more

‘Cromnibus’ and the emergent courtier society

"Prince Salim with a courtier and attendants in a tent," circa 1600, by Sur Das. (Source: Smithsonian's Museums of Asian Art.)

“Prince Salim with a courtier and attendants in a tent,” circa 1600, by Sur Das. (Source: Smithsonian’s Museums of Asian Art.)

Holiday feasts always remind me of that old Twilight Zone episode where aliens with sparkly robes, big eyes and knowing smiles show up with a book called “To Serve Man.” Everyone naturally assumes the book is a primer for saving us silly humans from our own ignorance and evil natures. This is during the Cold War, remember, when we all assumed we were going to blow each other to smithereens at any moment.

Naturally the best and the brightest humans line up for a trip to the home planet where further enlightenment undoubtedly awaits, and a select few will be chosen as mankind’s benevolent overlords: to serve their fellow man.

Unfortunately, though, “To Serve Man” turns out to be a cookbook and the best and brightest are on the menu instead of the guest list.

Maybe it’s just the Christmas sugar rush talking, but I think that’s where this country is headed as people and businesses line up for special treatment from an increasingly centralized, opaque and powerful federal government. At some point they’re going to find out that they’re dinners instead of diners.

Last weekend’s Cromnibus is a case study in how this happens. A huge unreadable bill covering everything from national defense to prairie chickens is ginned up behind closed doors and presented as a “must-pass” piece of legislation that no one will either read or debate before heading home for Christmas.

And who’s behind those closed doors? Only those who can afford their own D.C. lobbyist or, better yet, politician. The result, besides more spending, is a pact with the devil filled with restrictions, regulations, and costs that disproportionately fall on small businesses and families, and favoring inside interests and their benefactors.

Packing bills with favors has been going on for years, but it really reached an art form during the financial meltdown with Dodd/Frank. This “reform” resulted in taxpayers bailing out big banks to the tune of billions of dollars and includes massive increases in compliance, insurance and capital costs, along with giving politically favored large institutions a de facto “too big to fail” designation.

It’s a law that was written for big bankers by big bankers. They can absorb the increased compliance costs while small banks with much lower margins can’t. They can meet the capital and insurance requirements that stifle small banks’ ability to make local loans to farmers and homebuyers. And of course with an implicit government guarantee, big banks enjoy lower borrowing costs than small banks, giving them even more of a competitive advantage.

Big banks, like most big businesses, can absorb and pass along compliance costs and other regulatory burdens while smaller businesses, often operating on razor-thin margins as it is, cannot. That’s why box stores and big hospitals like Obamacare, why drug companies like the FDA, why big banks like Dodd/Frank. Expensive and byzantine regulations erect barriers to new companies entering the market and drive smaller players out completely.

But that’s not my point.

My point is that by centralizing and expanding government power we’re creating a courtier society, one where access to the King’s court is more vital to success than merit is. Read more

Is Healthy Utah a good idea? More information changes people’s minds – Sutherland Soapbox, 9/16/14

Man-inside-note-headThis post is a transcript of a 4-minute weekly radio commentary aired on several Utah radio stations.

Sutherland Institute commissioned a poll by Magellan Strategies that was released yesterday about Utah voters’ support for Medicaid expansion in its various forms, including Governor Gary Herbert’s preferred “Healthy Utah” form of expansion. The question we aimed to address was this: “What do Utah voters think about Medicaid expansion when they are informed about the issue in a way that is comparable to Utah legislators?”

Utah voters’ answer was to reluctantly say “Utah should probably do nothing on expansion for now, and should instead start looking for better ideas.” But before I dig into that, I think it’s important to understand why we thought to commission a poll at all.

Multiple polls on Medicaid expansion in Utah have been published and reported on in the press. These polls reported that somewhere between 70 and 88 percent of Utah voters support either traditional Medicaid expansion, or the Healthy Utah version – overwhelming support by any reasonable standard.

But think for a minute about whether those numbers make any sense. If these numbers are accurate, it means that a higher portion of Utah voters support expanding Medicaid than supported Utah’s marriage amendment in 2004. Now, does anyone really believe that’s true? Yeah, neither did we.

Rather than accepting hard-to-believe polling results at face value, we thought it better to commission a poll that gave more complete information and context to Utah voters about the costs, enrollment, and uncertainties of Medicaid expansion in Utah.

What happened is that voters said that none of the Medicaid expansion options merit majority support. In fact, the only one that received positive net support was the “do not expand Medicaid right now” proposal, with 45 percent in favor and 26 percent opposed. For comparison, Healthy Utah got 32 percent in favor and 40 percent opposed, traditional Medicaid expansion got 21 percent in favor and 49 percent opposed, and partial Medicaid expansion got 19 percent in favor and 48 percent opposed. Thirty percent of Utah voters on average said they were unsure or didn’t know whether they supported or opposed each proposal. Read more

New poll shows Utahns reluctant about Medicaid expansion proposals

Study tableThe results of a new survey conducted by Magellan Strategies seem to contradict other recent polls on the topic of Medicaid expansion in Utah.

In the Magellan poll, conducted last week, no more than 45 percent of poll respondents favored any of four proposals once those proposals had been explained in detail.

Sutherland commissioned the poll because we wanted to see what Utah voters thought about Medicaid expansion when they were given more complete information about the costs, enrollment, and uncertainties of Medicaid expansion than provided in the previous polls.

In essence, the poll tackled the question: “When voters are informed about the options for Medicaid expansion on a level comparable to Utah legislators, what do they think the state should do?”

The voters’ reluctant answer was this: “They should probably do nothing for now and look for something better than the currently available options.”

In fact, the only proposal that had positive support was the “do not expand Medicaid right now” proposal, which was favored by 45 percent of poll respondents, compared with 26 percent opposed.

The other three proposals in the poll had more opposition than support: Traditional Medicaid expansion had 21 percent in favor, 49 percent opposed; partial Medicaid expansion had 19 percent in favor, 48 percent opposed; and the Healthy Utah plan had 32 percent in favor, 40 percent opposed.

The survey found that a sizable percentage of Utah voters are uncertain about what Utah policymakers should do, when they are given all of the information. On average, 30 percent of respondents were unsure if they favored or opposed the proposals when they were informed and asked about them in a stand-alone format.

After hearing all of the proposals described in detail, respondents were then asked to choose which plan they thought was best. The “do not expand Medicaid right now” proposal won a plurality of support with 31 percent, followed by “unsure or don’t know” at 20 percent, Healthy Utah at 17 percent, traditional Medicaid expansion at 15 percent, partial Medicaid expansion at 10 percent, and “don’t like any of the proposals” at 7 percent.

Put together, this means that only 42 percent of those polled said that some form of Medicaid expansion was the best option, compared with 58 percent who were either unsure or preferred something other than the proposals that would immediately expand Medicaid.

The poll was a landline and cell phone survey of 500 registered voters in Utah on Sept. 8 and 9. It has a margin of error of +/- 4.38 percent at a confidence level of 95 percent.

Click here to read the survey done by Magellan and see details about the questions and methodology used.

For crosstabs detailing information about subgroups within the survey population, click here.

The wrong Rx

A new study by State Budget Solutions shows our friends and neighbors in Utah would be devastated with the loss of 14,000-plus jobs in the state because of Medicaid expansion. We must do better!

You can read the study here.

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Deseret News op-ed: Healthy Utah plan would hurt the most vulnerable Utahns

Waiting Room, by Vincent van Gogh

Waiting Room, by Vincent van Gogh

Good public policy requires three elements: doing the right things for the right reasons in the right ways. These elements are the difference between good policy and bad.

The proposed Healthy Utah Plan does some of the right things and for the right reasons. It seeks to help uninsured individuals acquire private health insurance (the right thing) for the sake of their own health as well as that of Utah’s economy (the right reasons). However, Healthy Utah would do this by pushing the most vulnerable Utahns further back in the health care access line.

It also relies on federal funding that cannot be sustained — jeopardizing funding for government services like education and transportation. You simply cannot do the right thing in the wrong ways and make good public policy.

Healthy Utah proposes to subsidize private health insurance for some 55,000 uninsured Utahns in the Obamacare “coverage gap.” In short, it takes them from the back of the line for access to health care and puts them at the front.

But what does that mean for the more than 300,000 low-income children, single parents and disabled Utahns — the most vulnerable of Utahns — who are on Medicaid now?

Click here to read the rest of this op-ed by Sutherland’s Derek Monson on the Deseret News website.

Our generous presidential pensions

presidential sealU.S. presidents make a lot of money when they leave office, both in their private endeavors and in terms of government pension and expense reimbursements. Private wealth among presidents was never uncommon, but no post-presidency pension existed until 1958, when Congress passed the Former Presidents Act, providing a yearly salary equal to that given a current member of the Cabinet (currently about $200,000), as well as providing for office, travel and personnel expenses.

While there had been talk of creating a presidential pension for some time, the impetus for passing it in 1958 was President Harry Truman’s financial struggles after he left office. In his final year in office, President Truman earned $100,000. The next year his income dropped to $34,000, and then to $13,000 the year after that. That is a precipitous drop in annual income. However, adjusted for inflation, $13,000 would be roughly equal to $114,000 today, putting Truman in the top 10 percent of earners of his day. He certainly wasn’t destitute. To his credit, Truman had numerous offers for executive positions and membership on boards of directors, but he turned them down because he didn’t want to profit from the office of the presidency after his term was over. Instead, he focused on building his presidential library, and in 1953 he sold his memoirs for what amounts to $4 million in today’s dollars.

There are four living ex-presidents today, each participating in the Former Presidents Act pension and expense reimbursement program. None of those ex-presidents is in dire financial straits. All were wealthy before assuming office, and all have remained so after leaving the White House. President Clinton, for example, made over $100 million between 2000 and 2007. Yet all former presidents ask for and are given their full $200,000 pension each year. And that’s not all. Taxpayers also pick up the bill for travel, rent, telephone, postage, and various other expenses incurred by ex-presidents, amounting to about $3.5 million a year. In all, since 2000 taxpayers have spent $60 million (adjusted for inflation) on presidential pensions.

Public office should be public service. While there are some expenses presidents incur after they leave office that are unavoidable and a direct result of their public service, why should taxpayers be footing the expensive rent bills of multimillionaires? Especially when those multimillionaires left taxpayers with a $17 trillion debt while they were in office?

Want to know more? Dig deeper here at Utah Citizen Network.

Twice as good, half as well, never enough

half loaf cornbreadIs it more important to stand on principle, or get while the getting is good? Is settling for half a loaf selling out, or a step in the right direction? Does mixing metaphors like concrete weigh prose down, or liberate the literary soul?

OK, no one but the grammar police really cares about that last one. But the first two will decide the limited government movement’s fate. That’s what’s splitting us right now, you see. Libertarian-leaners, classical liberals, and “establishment” conservatives are less divided by issues and objectives than we are about timelines and roadmaps. We all want to see the same movie, but we’re wearing ourselves out haggling over which showing and how to get there. And whatever we decide, the other guys will be there first. Let’s see if I can stick with one metaphor long enough to explain why.

The reason they’ll be there first is because they’re running the theater. Government employees are predominantly big government-type people. That’s not meant as a pejorative. It’s simple common sense. If you think government is the answer and you care about the question, you are more likely to migrate to government employment (it used to be government service, but the days of the dollar-a-year man are gone) than someone who sees government as the problem; or more likely, who sees private work or charity as the answer.

The simple fact is that when conservatives engage in the political and bureaucratic arena, it’s almost always an away game. One reason is noted in this excellent piece by Kevin Williamson: “[C]onservatives are forever in a position of running against handouts, and handouts are popular.”

Read more

Testimony regarding HB 311 (Budgeting Amendments) and HJR 11 (Budget Responsibilities)

sutherland file pictures 008Testimony presented by Derek Monson, director of policy, Sutherland Institute, before the House Revenue and Taxation Standing Committee regarding HB 311 – Budgeting Amendments and HJR 11 – Joint Rules Resolution on Executive Appropriations Committee Budget Responsibilities:

Thank you, Mr. Chair. My name is Derek Monson, representing Sutherland Institute. I am here to speak in favor of these bills. We view them being really about sustainability and the future. The information that HB 311 creates will create security in knowing we are making budget decisions in the context of the “big picture,” not just in the context of a couple years ahead or behind.

This better information will lead to greater prudence in budgetary decision-making than would be possible otherwise. And perhaps most important impact is that will create more public trust among both current and future generations that we are going to have the service which we all want from our government, including public education, transportation, and a social safety net.

As an example, as a young father I have one child; a 2-year-old girl. And now these issues are on my mind much more, given the world we live in with things like instability and gridlock in Washington, D.C., and other issues we have to deal with that have not existed at the same level in the past.

We think these policies are a step in a good direction to address these issues. And we would encourage your support of them. Thank you.