BuckeyeBlog

While I have issues with some of Governor Strickland’s decisions, he hit the nail on the head with his recent comments about tax increases, as quoted by Gongwer News Service($):

Maybe in their ivory towers a tax increase seems like something that would not be painful or harmful. I have said that I think a tax increase could – could – have the effect of deepening the recession and causing it to last longer. And I continue to hold to that belief….I think those who believe that higher taxes are the answer to Ohio’s economic needs and economic recovery are flat out wrong.

He said this in response to Senator Voinovich’s glee over the idea that the slots plan may be killed and thus taxes may have to be raised. As the governor told the Columbus Dispatch:

If I were to have to ask the people of Ohio, as they are struggling to survive in this economic recession, to give even more of their resources to the state, it, in my judgment, would not be the best course of action…. [Senator Voinovich] has a right to his opinion, but he is not the governor. I’m the governor, and I will make the decisions that I consider in the best interest of the state of Ohio.

In this case, the people of Ohio are lucky that Strickland, not Voinovich, is governor. Strickland understands that taxes take the resources of Ohioans and that there are negative economic consequences from raising taxes. Sure, Ohio would be in a better position if Strickland had clamped down on spending more in his first few years in office, but he deserves credits from all fiscal conservatives for holding the line on tax increases.

Harvard economics professor Edward Glaeser has a series of posts on the New York Times Economix blog taking apart the case for high-speed rail. This series should be required reading for all Ohio policymakers, especially those like Governor Strickland who are so enamored with high-speed rail.

What were Glaeser’s conclusions? Costs are high and benefits are minimal. That is, high-speed rail costs a lot to construct and operate and it offers little in the way of environmental benefits nor will it do much to help “sprawl” (if you think that’s a problem).

Crunch the numbers any way you want, but it’s hard to make a case that the benefits of high-speed rail are worth the costs.

The headline in the Columbus Dispatch trumpets Governor Strickland’s talking points that more people will gain health coverage because of a variety of new regulations in the state budget. A more accurate headline would have indicated that these changes will actually raise health insurance rates in Ohio, leading to more Ohioans going without insurance.

By imposing government price caps on how much insurance can charge those who have pre-existing conditions, legislators and the governor have mandated that everyone pay more for insurance. People with pre-existing conditions are guaranteed to cost insurance companies a lot of money, almost certainly more money that these individuals pay in premiums. Insurance companies must pay for that coverage by raising the rates for everyone else.

The Dispatch story goes on to discuss how rates for health insurance premiums are increasing dramatically. The regulations being celebrated in this article are a huge part of why premiums are going up. It’s unfortunate that the reporter didn’t make this elementary connection.

As the article also points out, many of the uninsured are young adults. Let’s consider why a young adult wouldn’t want to buy insurance. For one, young adults are a pretty healthy group. They don’t go to doctors or use health care as much as older people. So they have less need for insurance than others. Two, with insurance rates going up, it costs a lot to pay for that insurance. So healthy people don’t want to pay a lot for something they have little chance of using? Makes sense to me (and it did when I was a twenty-year-old and I decided I wasn’t going to purchase health insurance. As a result, I went without for two years). The only way to tempt these people into paying for insurance is to keep its cost down. Too bad the governor and General Assembly didn’t do that.

Looks like Governor Strickland is supporting Medicaid cuts and re-thinking his Medicaid expansion because the state isn’t receiving enough tax revenue.  Two years ago, when policymakers in the General Assembly almost unanimously (there was only one dissenting vote) expanded Medicaid at the request of the governor, I wrote this:

Expanding Medicaid can lead to large increases in Medicaid spending when states can least afford it –during recessions. Ohio saw this earlier this decade when Medicaid spending increased dramatically during the recent recession. Spending grew at 11 percent annually during 2001 and 2004, squeezing other budget priorities at a time when the state was seeing reduced revenue. Expanding Medicaid now will only repeat this cycle during the next recession.

Oh, so now Governor Strickland gets it, huh? I guess I was just two years too early.

I’m not a prophet, folks, I’m just someone who actually remembers the events of 2001 through 2004. State policymakers who are grappling with the state’s current deficit chose to ignore the lessons of the recession earlier this decade and expanded spending in a variety of areas, not just Medicaid. Now they are reaping the consequences of their bad decisions. I’ll wager (based on past experience) that soon Ohio’s taxpayers will be reaping the consequences of these bad decisions when these same policymakers raise taxes.

First, the good news: Although it’s not ideal that legislators have advanced a bill to impose a foreclosure mortorium, they did remove the egregious (and unconstitutional) “cramdown” provision that would allow judges to modify home loan contracts. As the Buckeye Institute’s Maurice Thompson said in his testimony about this bill: “House Bill 3, as currently written, would clearly raise interest rates for prospective homeowners, thus harming more Ohioans than it would help, and enhancing the likelihood of increased delinquencies.” The removal of the “cramdown” provision lessens the harm to Ohioans but does not eliminate it.

Now, the bad: Get ready for your taxes to go up. As the Toledo Blade reports, “Gov. Ted Strickland yesterday said he won’t take the possibility of a tax increase off the table as he negotiates with legislative leaders over how to deal with the state’s budget woes.” It does go on to say that the governor doesn’t think such a hike is a good idea. At least he’s paying lip service to keeping taxes in line, but the amount of spending he supports makes it a virtual necessity, unfortunately. As I pointed out a couple months ago:

When there were rumbles in the air of an impending recession in 2007, the governor and legislators could have done the prudent thing: limit spending growth, refrain from creating new programs, and planned for the future. Instead, with only one dissenting vote, the Republican General Assembly sent a big-spending budget to the Democratic governor that, among other things, created a new middle class entitlement to government health care.

Now taxes will need to be raised to pay for this fiscal recklessness. In the past the governor has denied the need to do this and, in an attempt to avoid making the hard decisions, got the federal government to pony up billions of “stimlus” dollars to cover the state deficit. Now it appears he can no longer avoid the issue. Too bad it’s the taxpayers who will, literally, be paying for the bad decisions in Columbus.

If the stimulus money being dumped into the states was being used for one-time use infrastructure projects or to pay off the massive state debts that some states (like Ohio) seem to be racking up, that’d make a little more sense than the current idea. As of right now, it looks like Governors are going to invest the money into programs they won’t be able to sustain when the money dries up. Governor Strickland was on Face The Nation and outlined part of his “plan” for the stimulus money:

“We will use those resources to make sure that college tuition doesn’t explode, that we are going to invest in elementary and secondary education, to provide quality child care for our kids,” said Democratic Gov. Ted Strickland of Ohio, who said his state will receive about $8.2 billion. “We need these resources. And I’m very happy that the congress and the president is providing this resource to our states.”

How exactly do you invest in education with money that’s a one-time shot? If you expand programs, or make schools dependent upon this money for resources or salaries, aren’t you setting the state up for a future budget shortfall? What happens next year Governor?

At a time he could surely use it, Governor Strickland garnered some good press coverage for his decision to forgo a hotel room in Washington, D.C., while attending President Obama’s inauguration. Instead, he and his entourage slept in Ohio’s Washington, D.C., office. Left out of this story, however, is the fact that Ohio taxpayers are shelling out a pretty penny to maintain that office and engage in other federal lobbying efforts. Around $800,000 a year is being spent on these efforts, part of which goes to pay for Ohio’s DC office. Another chunk of that goes to pay for Ohio’s membership in the National Governors Association (the Buckeye Institute has a few words on this expenditure here).

Now, some will surely claim that this money isn’t wasteful. After all, Ohio needs a presence in Washington, D.C., right? True, and the Constitution provides for this — that is why we send Senators and Representatives to the nation’s capital. Ohio’s DC office is a lobbying shop which seems mainly focused on securing more federal money for the state. So your tax dollars are being used to try and get the feds to spend more of your tax dollars. Using tax money for this type of advocacy seems pretty fishy to me. But, what the heck, some good came of it, right? Ohio taxpayers didn’t have to spend any money for a hotel room for the governor. Personally, I’d have preferred that the governor shell out $500 to stay the night at a Howard Johnson’s in DC than have the state’s taxpayers shell out $800,000 a year to pay for this office and its activities. But that’s just me, I guess.

The Cato Institute recently released its Fiscal Policy Report Card on America’s Governors: 2008. Ohio Governor Ted Strickland received a letter grade “B” for his taxing and spending records. According to the report:

Governor Strickland succeeded in his goal of passing an expanded homestead exemption under the property tax. He is also following through on a phased-in replacement of Ohio’s corporate franchise and business property taxes with a gross receipts tax. The plan is supposed to result in a large net tax cut for businesses. On spending, the governor supports large increases in the education budget and is pushing an expensive debt-financed energy plan. But with the state facing a budget deficit this year, the governor is taking steps to trim spending.”