Political Amnesia

Gubernatorial aspirant Greg Gianforte, whose only discernable and dubious claim to political fame is that he will do miracles for Montana’s economy, has a problem.

It turns out that during most of the time that Steve Bullock, his opponent, has been governor, the Montana economy has done pretty well. Employment growth has been robust, the unemployment rate is well below the rest of the country’s, and the state’s budget has been managed sensibly. More people than ever have health insurance. Child welfare has improved significantly. And we lead the nation in business startups. With Bullock’s record looking like that, there’s really not much for Gianforte and the Republican Party to hang their hat on when they say they’re going to make things all better.*

So it was no surprise when the Billings Gazette reported last week that a couple of Republican legislative bigwigs – Sen. Fred Thomas and Rep. Jeff Essmann – seized on the news that the state’s economy had shrunk over the past six months** to go after Bullock. The downturn in the economy, which resulted mostly from declines in energy production, agriculture, and transportation, also means that tax collections are lower than expected, that the state is spending more than it takes it, and that we’re going to have less money in the bank than we thought when we close the books next June.

And all of this, according to Thomas and Essmann, is Steve Bullock’s fault.

Yep. According to Thomas, whose economic theorizing is always inventive (to put it charitably), “over the last 12 years, the environmentalists have occupied the governor’s office and the chickens are coming home to roost.” Exactly how the “environmentalists” managed to drive the world price of oil from $100 to $40 a barrel, or produce the cheap natural gas that’s pushing coal out of the market, or depress grain prices, or strengthen the dollar and weaken exports, Thomas, if he knows, isn’t saying.

Thomas claims that "if we’re going to have a natural resource state, we need new leadership at the helm.” But the new leader in question is obviously Greg Gianforte, whose economic strategy so far appears to consist exclusively of big tax cuts for big businesses and wealthy taxpayers. That has even Thomas hemming and hawing a bit: given the current decline in tax revenue, Thomas tells us that he has cautioned Gianforte that he needs to show some “flexibility” in implementing tax cuts. The only problem with that is once he’s been flexible on tax cuts, Gianforte’s got nothing.

Thomas’ take on how the economy works and what Gianforte can do about it may suffer from incoherence, but when it comes to budgeting, Essmann appears to suffer from flat out politically inspired amnesia. According to the Gazette, Essmann “singled out spending based on ‘overly optimistic’ governor’s office revenue projections” as the reason the state has a deficit and is running through its cash reserves.

Well, no, not really.

When the legislature sets the level of spending and builds a budget, it develops its own revenue estimate; it doesn’t rely on the governor’s. And in 2015, when the legislative staff and the governor’s budget guys were coming up with wildly different numbers for revenue, we set up a special joint subcommittee (full disclosure: I was a member) of the House and Senate Tax committees to reconcile the differences and come up with an estimate of our own. We hammered away at it and in the end we – not the governor - created the revenue number that drove the level of spending. And the chair of that special joint subcommittee was none other than -  wait for it! - Sen. Fred Thomas! It’s astonishing that Essmann seems to have forgotten how that all happened.

And if that's not ironic enough for you, consider that throughout budget deliberations the governor kept insisting that whatever the revenue estimate, we needed to limit spending enough to keep $350 million on hand, just in case anything went wrong. Well, something has gone wrong, we’ve needed the money, and we should be glad we have it. Bullock was pushing fiscal responsibility. Without it, by now we’d be slashing programs, laying people off, and making a bad situation worse. And there were a whole bunch of Republicans running around the Capitol in 2015 saying that keeping that much cash on hand was a bad thing – that we should give it back, a la Gianforte, or spend it on infrastructure.

Thomas and Essmann should thank their lucky stars – and Steve Bullock - that that didn’t happen.

*Well, there’s always Donald Trump. Oh wait…

**To be precise, the decline in gross state product occurred in the last quarter of 2015 and the first quarter of 2016. The data are not yet in to tell us what has happened since March of this year.

The Twenty Percent Factoid

One thing you can count on with an election around the corner is that  Republican politicians will trot out a bunch of numbers that supposedly demonstrate that growth of government is “out of control.” And the other thing you can count on when you hear those numbers bandied about is that they will be a bunch of hooey. Consider, if you will, the Twenty Percent Factoid.

Back in March, Tom Burnett, a Bozeman legislator whose antipathy to government is always on display, produced a calculation in a letter to the Bozeman Chronicle that purported to show that total state spending had increased by 20.6% between this biennium and the last. Now that number is big and scary (but not at all consistent with the facts, which I’ll get to in a moment), and it appeared to go viral among other Republicans, particularly those on the right. Soon enough, Greg Gianforte was claiming that “We have had massive growth in state spending; up over 20 percent in the past three years.” Gianforte assured us that, as part of a bizarre budget plan based on the fact that our area code happens to be 406, he was going to bring that growth down to zero. And hard on the heels of that announcement, the Beaverhead County Republican Central Committee censured Reps. Jeff Welborn and Ray Shaw, on the grounds that they had voted for bills that “increased state spending over 20 percent for the biennium,” thereby flunking the Central Committee’s test of Republican purity. And so the Factoid took on a life of its own.

Unfortunately, because it should have died a quiet death months ago.

Since the numbers are not in yet for the current, 2016, fiscal year, it really isn’t possible to compare this biennium to the last one. But we do know that in fiscal year 2015, the first year of this biennium, total state spending – including Federal dollars appropriated by the state for programs such as Medicaid – was $5.521 billion, and that back in 2013 it was $5.182 billion.* So over the two year period it increased by 6.5%. Not 20% or anything like it. And in fiscal year 2012 total spending was $5.092, so over the three year period between 2012 and 2015, which seems to be what Gianforte’s talking about, spending rose by 8.4%; again, not even close to 20%.

Okay, so 20% is a monumental error, but still: Are we looking at excessive growth of government? Is a 6.5% increase in spending from one biennium to the next a lot or a little? Compared to what? Should we be worried? Well, enter Art Wittich. Wittich, in a letter to the Belgrade News, doubled down on the Twenty Percent Factoid by claiming that “During the last three legislative sessions, the state budget increased three times faster than inflation, population, or the private economy.” Now that sounds pretty bad, but again, it’s not true.

It’s not completely clear what time period Wittich is talking about here, but let’s go back to fiscal year 2010, the last year before the 2011 Legislature’s budget went into effect. From 2010 to 2015, the price level rose 9.7%, population rose 4.2%, the state budget (including, again, the Federal component) rose 9.1% and total state personal income, which is as good a measure of the size of the private economy as we have, rose 26.3%. So over this period, the state budget did not expand “three times faster” than anything; in fact, it did not even keep up with the growth of prices or personal income.

The point Wittich is trying to make but badly mangling here is that the growth of government spending should be considered in relation to the prices of the things that government buys, the number of people it serves, and the amount of income those people earn. The right way to do that is to compare the growth of real (inflation adjusted) per capita spending to real (inflation adjusted) per capita personal income. When you do that, here’s the picture you get:

Over the long haul since 2002, the economy has grown faster than state spending, rather than the other way around. There's no "massive" growth going on here. Nothing is out of control. There was a time, during the Great Recession, when state spending grew rapidly while the economy was contracting. That was because the state spent a bunch of federal Recovery Act dollars. And that was not a problem: On the contrary, without that infusion of Federal money, the recession would have been a lot worse.

* The issue of expenditure growth is a perennial favorite, and it produces lots of arguments among legislators, and Amy Carlson, the Legislative Fiscal Analyst, published a report in 2014 intended to sort the whole mess out. You can access that report here. The numbers I cite in this post were used in the preparation of that report, and I thank Ms. Carlson and her staff for providing them, updated to 2015, to me. 

The Gun Nut

Donald Trump’s appearance before the NRA last week was a perfectly predictable olio of bloviation, narcissism, incivility and misrepresentation. It also revealed, although you probably knew this already, that the guy is a little nuts.

Trump told the NRA faithful assembled in Louisville exactly what they wanted to hear: that he was in favor of more guns everywhere. In schools. In high crime neighborhoods. In Paris night clubs. Everywhere.  Gun-free zones would become a thing of the past.

The reason for this frenzy is, of course, “self defense.” For Trump, and for the NRA, we live in a dangerous world surrounded by people who are out to get us. And the only way we can stop them in their tracks is to have guns; either, one hopes, to deter attacks in the first place or, if worse comes to worst, to shoot back. And for Trump, Hilary Clinton becomes “Heartless Hilary” because she would take people’s guns away from them and deprive them of their one opportunity to defend themselves. This is Trump at his adolescent best, lying and name calling in one fell swoop.

Of course it doesn’t bother Trump in the slightest that there is no evidence that having lots of guns around will deter gun violence. On the contrary: anyone paying attention knows that gun ownership is much higher in the United States than it is in other high income countries. And so is the probability that somebody will shoot you to death. The extent to which the United States is an outlier in both these regards is truly stunning. Take a look at this chart.*

What you’re seeing here is that in 2007, there were about 15 guns present for every 100 members of the population in 21 high income countries other than the United States. For the US, the comparable number was 113. In 2010 in those same 21 countries, there were a little more than .1 gun homicides per 100,000 members of the population; in the US there were 3.6. The probability of being murdered with a gun in the United States was 25.2 times as high as in other high income countries. Is it really possible to look at that number and conclude that having lots and lots of guns around is making us safer?**

Here’s where the question of Trump’s sanity rears its ugly head. In the face of overwhelming evidence that the accumulation of guns has not made us a whit safer in the past, Trump believes that more guns will make us safer in the future. And that, as a wise man once told us, albeit in more polite terms, is nuts.

* To prepare this chart I used data from two sources: the Small Arms Survey 2007 and “Violent Death Rates: The US Compared with Other High-income OECD Countries, 2010,” in the American Journal of Medicine, 2015.

** Don't be thinking that "Well sure, as long as we've got these guns around, we''ll use them when we want to kill somebody. Folks in all those other countries are going to use knives, or poison, or cricket bats or something." It doesn't work that way. Regardless of method, people in other countries murder each other at much lower rates. It's harder to get the job done if you don't have a gun to do it with.