Perry vs Romney: Both Big Spenders, History Shows…

As the media, and the Republican Party establishment, continue their attempt to make the contest for the 2012 GOP Presidential nominee a two person race between Mitt Romney and Rick Perry, it is interesting to look at the fiscal records of these two candidates while they held office as Governors of Massachusetts and Texas, respectively. We’ll here look at a topic of great interest to the Tea Party set particularly, and Americans generally, in light of the current state of the United States federal government: given the US government now spends substantially more than it takes in (north of 40% of expenditures are made with borrowed money), how did these candidates fare on the issue of state spending while they were in charge?

The picture isn’t pretty:

• While Governor of Massachusetts, Mitt Romney increased spending substantially: when Mr Romney took office in 2003, state spending for that year totaled $26.27 billion. During his final year in office in 2007, state spending had ballooned to $34.69 billion. This represents more than a 32% increase in spending over a four year period;
• Meanwhile, during his time in office as Texas Governor since 2000, Rick Perry increased state spending from $44.19 billion in 2000 to $80.40 billion in 2010, an astonishing 81.94% increase;
• Keeping the time periods consistent, while Governor Romney was increasing Massachusetts’ spending by 32% between 2003 and 2007, Governor Perry increased Texas’ spending by 16.36% during that same period (from $59.05 billion in 2003 to $68.71 billion 2007).

Both of these candidates are running to be the Presidential candidate of the Republican Party, a party which ostensibly favors reduced government spending. That’s particularly the case for Tea Party supporters and libertarians, who favor a substantially reduced government role. Judging by their history, it is difficult to consider either of these candidates disciples of a “small government” philosophy: while in office they took a combined $85.32 billion in taxpayer-supported spending and turned it into $103.40 billion in spending.

Here’s a chart of Mr Perry’s and Mr Romney’s work:

What if we look at state spending as a function of state GDP? Here, Mr Perry fares significantly better than Mr Romney: Texas, under Mr Perry’s leadership, was unable to grow spending of taxpayer dollars as fast as their GDP was growing, whereas in Massachusetts, under Mr Romney, state GDP was unable to keep pace with Mr Romney’s spending of taypayer money. The share of state spending as a portion of GDP in Texas reduced from 7.14% to 6.03%, while Mr Romney increased state spending from 8.84% to 9.81% of all economic activity in the state (nearly one in ten dollars produced by economic activity is redistributed by the state government):

How does all this compare to the federal government during the same period? Federal expenditures as a percentage of GDP under George W. Bush decreased 4.58% between 2003 and 2007, from 8.77% to 8.37% (but by 2010 had risen 8.38% under President Obama, to 9.07%) :

Sarah Palin’s Fundamental Problem…

UPDATE: supplementary data from Mrs Palin’s time as Alaska’s Governor:

Mrs Palin never once cut spending during her tenure as Governor. During Mrs Palin’s first year as Governor, the Alaska state budget remained identical to the prior year, at $17.67bn. During that same year, federal transfer payments to Alaska increased 2.56% to $10.68bn. The next year, the Governor increased spending by 0.57%, while federal transfer payment increased by 2.56%. The following year, Mrs Palin increased the state’s spending by over ten percent; 10.57% to be exact (to $19.57bn). That same year federal transfer payments increased yet again, and massively: this time transfer payments from the federal government went up an astonishing 32.4%, to $14.65bn (see below – it seems Mrs Palin’s gift for extracting federal money translated very well from her time as mayor of Wasilla). All state statistics can be found at usgovernmentspending.com; federal payments to Alaska can be found at census.gov.

All told, with Mrs Palin at the helm, the state spent 10.75% more by the end of her tenure than it did when she took office. During that same period, federal payments to Alaska by the federal government rose an incredible 40.74%.

All those extra dollars, of course, come from the taxpayers.

We’ll leave it to you to decide whether increasing state spending by over 10% and enjoying over 40% more federal largesse is the mark of a fiscal conservative…

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CNN today published a press release on behalf of Sarah Palin. What we mean by “press release” is that the “story” is simply about a speech Mrs Palin is planning to give in Iowa tomorrow, Saturday September 3, 2011. As such, it is a story advising readers that there is a story forthcoming at some future date. The article does, however, speculate (as these articles always do) about Mrs Palin’s ambitions to stage a run to become the President of the United States. The article goes on to state that Sarah Palin will potray herself as an “outsider” to the Washington establishment in the forthcoming speech.

The problem Mrs Palin faces, however, is that she is a qualified “tax and spender”. Sarah Palin is the former Governor of a state, Alaska, where an enormous percentage of the population is anything but “outside” government. In fact, 31% of all workers in Alaska are directly employed by government of one level or another (Gallup). Additionally, as the New York Times correctly reports, Alaska received the greatest per-capita amount of the so-called “stimulus”: the equivalent of $3,145 for each man, woman and child. Further, Mrs Palin, as Mayor of Wasilla, hired a lobbying firm which in turn extracted $25,000,000 from the Federal Government. Wasilla is a town of less than 7,000 people, which works out to another $3,571 for every man, woman and child. Sarah Palin’s political background in Alaska (and in fact the entire background of the state she hails from) is almost entirely predicated upon extracting money from the federal government. Here’s a quote from Carl Gatto, Republican, 13th District, Alaska House of Representatives: “I’ll give the federal government credit: they sure give us a ton of money. For every $1 we give them in taxes for highways, they give us back $5.76.” Of course, the extra $4.76 Mr Gatto’s state receives comes out of the pockets of workers in every other state, by way of taxes.

At root, Mrs Palin, for all her constitutionalist, small-government rhetoric, is “tax and spend”, provided, of course, it is non-Alaskans paying the bill.

Yet somehow Sarah Palin appeals to a not-insignificant subset of the Tea Party movement. And she is largely perceived as anti-tax, anti-spending. Which is consistent with her actions, provided one doesn’t look beyond her home state, where her actions have demonstrably shown the real message: “I’m not in favor of taxes except for taxes on other people, and I’m not in favor of government spending, except when it is spent in Alaska and paid for by non-Alaskans.”

A very curious and mixed message indeed. And a difficult position to translate into national policy, where there isn’t a pool consisting of 99.77% of “others” to tax.

How FEMA Puts Americans in Harm’s Way…

NASA Satellite Image of Hurricane Katrina

The US’ Federal Emergency Management Agency, commonly known as FEMA, may seem like both a fundamentally necessary government agency and an example of a benevolent federal government institution: among other things, FEMA provides disaster relief and a flood insurance pool. Upon analysis, however, it becomes apparent FEMA contributes directly and materially to substantial property damage, increasing the magnitude of catastrophes while, much more importantly, leading directly to lost lives.

Here’s how:

Areas routinely hit by floods and hurricanes are typically completely unable to purchase from private carriers insurance against property damage from these perils. That makes sense: would you put up your money against exceptionally poor odds not only of seeing a return but of costing you many orders of magitude more? This is the consideration made by insurance companies: the amount of premiums generated will be dwarfed by resulting claims, therefore we refuse to risk our shareholders capital in these areas. This is a good thing, and an example of the market working properly: when insurance is flat out unavailalbe, the market is signalling that there is such great risk that no investor, at any price, is willing to take on that risk. This is an important signal to the market, including consumers, lenders and others: live in these areas at your own peril. The natural consequence of this would be few or no homes built or occupied in severely high risk areas.

Enter FEMA.

With presumably noble intentions, the agency underwrites flood insurance in the most catastrophically high risk parts of the United States. In so doing, FEMA makes it possible for people to place themselves directly in harm’s way – after all, without insurance, lenders wouldn’t lend to home owners or business owners or construction companies, builders wouldn’t build and no one would live in these places (which, not coincidentally, tend to house some of the poorest and least fortunate people), and we wouldn’t have catastrophes like Katrina (Katrina would, of course, still occur, but the resultant damage would at least be an order or two of magnitude less harmful).

It may seem like compassionate policy for the federal government to backstop insurance for people unable to obtain same from the private insurance market. However the actual unintended consequences are lots and lots of dead bodies, destruction and property damage, lives turned upside down and massive economic loss which flat out could not happen without FEMA’s intervention. The availability of flood insurance from FEMA actively encourages people to reside in the worst possible locations, from the perspective of routine disasters.

One important purpose of insurance is to affix a price to risk, and in the case of places like Florida and New Orleans, the market has determined that price to be infinity (or, more precisely, the price is greater than the value of the items insured). FEMA’s position is that the price of the risk is actually very reasonable (as expressed by the premiums they charge). FEMA is demonstrably incorrect, and the existence of its flood insurance program, in actively ignoring the signals from private insurers, leads directly to death and catastrophe.