| June 8, 2012
Don’t Read Their Lips—Read Their Budgets
For those whose fiscal conservatism is a matter of DNA (fundamental beliefs) rather than political opportunism, words seem inadequate to capture the breadth of policy failure in Oklahoma state government this year.
Let’s review the evidence, and look anew at the battle over our state’s possible futures.
Arguing for the majority party at the Capitol in Oklahoma City, the governor and legislative leaders point to a range of policy developments that they contend redeem the 2012 session of the Legislature.
In brief, passage of the justice reinvestment initiative (along the lines advocated by OCPA and others in the “Right on Crime” coalition) may, in the long run, save enough money to ratify a shift in criminal justice resources away from incarceration and into effective alternatives that include supervision. In addition, if voters agree to a constitutional measure this fall, the state will avoid disastrous taxation that courts seek to impose on “intangible” property. Voters will also have the final say on allowing a constitutional revision needed to allow governance reforms in the human services area—but spending is expected to accelerate over the coming decade, in any case. Finally, information technology reforms and consolidation of some administrative functions across state agencies may accumulate several million dollars’ worth of efficiencies—over the course of several years.
Nevertheless, when judged against our political leaders’ own campaign rhetoric, the 2012 legislative session—which produced higher government spending, no tax cuts, and no workers’ compensation reform—was an epic failure. Oklahoma City University law professor Andrew Spiropoulos, who also serves as OCPA’s Milton Friedman Distinguished Fellow, correctly called the session “an embarrassing debacle” (see sidebar on page 6).
Here and there, a few observers had anticipated this possibility. Back in August 2010, for example, a Marlin Oil advertorial predicted the November election would bring a “political tsunami”—the greatest shift in partisan power in Oklahoma history. That promise of joy included a prediction of possible peril: “Rather than triumphalism, Republicans must use any opportunities voters give to fashion effective policies. If they don’t, they will invite the rise of a libertarian or Tea Party-based alternative that many voters will be prepared to embrace.”
After the 2011 legislative session, journalist Patrick McGuigan warned in news analyses and on News9’s “Capitol Report” that Republicans had engaged in “tinkering, not right-sizing” of state government. And Al McAffrey, a liberal Democrat then in the House and now in the state Senate, observed critically that “the party of small government” had begun to expand government offices. He predicted Oklahomans would “continue to witness the unraveling of conservative principles in the face of political opportunities.”
Marlin, McGuigan, and McAffrey is not a law firm—but it’s jarring to put the three sets of ruminations together for purposes of analysis, and see just how right they were.
The biggest disappointments in 2012 revolve around taxing and spending. You’ll recall that the session began with great promise, as several measures were introduced to reduce or phase out the Oklahoma income tax. And as The Wall Street Journal noted in a May 16 editorial, “This historic achievement is in reach because Republicans control both chambers of the legislature and the Governor’s office for the first time.”
But it wouldn’t be easy. As the Journal noted,
A cavalcade of lobbyists, including local Chambers of Commerce, teachers unions, and welfare groups are fighting the tax cut. The Tulsa and Oklahoma City Chambers are pleading for corporate welfare that benefits politically connected large corporations, rather than rate cuts for all businesses. …
Ms. Fallin ran for Governor in 2010 on the “no income tax” platform and believes she has a mandate to cut the rate as “low as it can go.” She’s right. If the GOP can’t deliver a tax cut when holding all the levers of power, voters may conclude that their trust in Republican politicians has been misplaced.
The misplaced trust isn’t limited to taxes. As OCPA’s Jonathan Small told The Wall Street Journal’s Stephen Moore, the FY-2013 budget deal agreed to by our political leaders “spends every penny of the higher revenues. We didn’t get a tax cut because the Republicans decided they’d rather spend the money.”
Indeed, Republican state Rep. Earl Sears, the chairman of the House Appropriations and Budget Committee, praised the new budget—a budget which increased appropriations by $331 million over the previous year (an appropriations increase of 5 percent), spent all available certified revenue, took money from dedicated funds to use for other purposes, and left virtually nothing for personal income tax cuts. Said Rep. Sears, “You have a budget before you, members, that there’s no cuts! I’m proud of that.”
In short, GOP lawmakers were already the biggest spenders in state history (see chart). Then they spent even more—and pronounced themselves “proud of that.”
This is “change agent” conservatism?
Actions speak louder than words. It is an insult for leaders to say they are right-sizing state government when in fact they are super-sizing it. As one prominent conservative activist famously put it, “Don’t read their lips. Read their budgets.”
The winners in the 2012 legislative session? The status quo. The minority party. Big-government proponents. And skeptics who say that elections don’t really change much.
The losers? Taxpayers. Families. Entrepreneurs. And the idealists who assert elections do count and that this generation is capable of the sorts of policy shifts achieved in the Reagan years.
Although it was only 31 years ago that the largest income-tax reduction in American history passed, at least a couple of political generations have come and gone since then. Few now in power or positions of influence were active in the great “hardball” victory that came in summer 1981, when Reagan rolled up a massive victory in Congress (even though the other party controlled the House of Representatives). Even as he celebrated victory, he thought about his next moves.
Today in Oklahoma, only a handful of conservative legislators remember what it was like to serve in the minority. The failures of the Obama presidency, the comparative health of the Oklahoma economy, and predictions of yet another Sooner State electoral tsunami in 2012 have, perhaps, fed ill-placed tranquility and comfort with the status quo—for both leaders and rank and file.
Unfortunately, income taxes in Oklahoma remain just as much of an impediment to economic growth as they ever were. Now, instead of merely contending with no-income-tax Texas, Oklahoma must contend with Kansas, where suddenly the state income tax rate is much lower than here.
In the Sunflower State, Gov. Sam Brownback showed bold leadership, signing a bill which, by Kansas standards, is a breathtaking shift in priorities. As The Wall Street Journal editorialized May 29,
France’s new President wants to impose a 75% tax rate, and Washington is headed for a huge tax cliff in January, but some enlightenment reigns in the American heartland. Last week Governor Sam Brownback continued the post-2010 reform trend among GOP governors by signing the biggest tax cut in Kansas history. The plan chops the state income tax rate to 4.9 percent from 6.45 percent and eliminates income taxes on about 190,000 Kansas small businesses.
In other words, Kansas did what Oklahoma was expected to do. At the end of the day, Brownback faced the same choice our political leaders had in Oklahoma: Side with taxpayers, or side with tax consumers. Brownback chose taxpayers. His budget director, Steve Anderson (a longtime OCPA research fellow), told us: “It’s amazing what you can accomplish when you’re willing to cut spending.”
Oklahoma wasn’t willing to do that. Our political leaders chose government spending over tax cuts, leaving many voters to wonder if installing a new government in 2010 merely amounted to rearranging the deck chairs on the Titanic. The challenge in Oklahoma City—just as in Washington, D.C.—is still government spending.
Here’s the bottom line for the majority party in the Legislature, and 100 percent of the statewide elected officials: Is conservatism in your DNA, or just in your campaign rhetoric?