| August 6, 2012

Taxpayers Don’t Stand a Chance

I recently released a book, Taxpayers Don’t Stand a Chance: Why Battleground Ohio Loses No Matter Who Wins (and What to Do About It), focused on the state of Ohio. You might be asking yourself: “Why do I care about the problems in Ohio?” You should care for two reasons.

First, Ohio, for good or ill, decides who becomes President of the United States. With its 18 electoral votes, no Republican has won the White House without winning Ohio ever and no Democrat has won without winning Ohio since John F. Kennedy in 1960. Ohio’s economic health, therefore, drives voter sentiment, which determines who Oklahomans will have as President.

Second, Ohio’s plight serves as a warning to Oklahoma’s political leaders who fail to rein in government spending, taxes, and labor unions. Given their decision to choose spending hikes over tax cuts during the most recent legislative session, Oklahoma’s political leaders appear to be taking their eyes off the ball.

In the book, I walk readers through Ohio’s fall from being a leader to a laggard. One hundred years ago, Ohio was the birthplace of presidents (eight) as well as titans and innovative companies (John D. Rockefeller, Procter & Gamble, and the Wright Brothers). It was an economic power (per capita personal income was 21 percent above the national average).

Today, Ohio’s last president died in office in 1923, America’s business leaders hail from the South and West, and per capita personal income is 9.0 percent below the national average.

Oklahoma’s story is a bit different. In 1930, just before the devastation of the Dust Bowl and the Great Depression, Oklahoma’s per capita personal income was $366, which was the 13th worst in America and 33 percent below the national average. By 2010, Oklahoma had risen to $35,396. Though still 11 percent below the national average, Oklahoma is quickly closing the gap. From 2000 to 2010, the percentage change in Oklahoma’s per capita personal income was 43.9 percent—the 12th best in the United States.

Another key point I make in the book about Ohio is the abysmal job growth over the last 22 years. From 1990 to May 2012, Ohio’s private sector added just 245,600 jobs. Ohio hit a private-sector peak in March 2000 when it had 4.85 million jobs. As a percentage of population, 42.6 percent of Ohioans in 2000 worked in the private sector. By 2010, only 36.6 percent did. Based on historical job growth, Ohio’s private sector won’t get back to that 42.6 percent figure until roughly November 2021; meaning, a child born during the peak month will be nearly done with college by the time Ohio fully recovers.

For Oklahoma, in 2000, 34.0 percent of Oklahomans worked in the private sector. A decade later, the figure had fallen to 31.4 percent. Today, Oklahoma’s private sector has more private-sector jobs than it did in 2000. It also has almost 350,000 more people living in the state. To fully recover as a percentage of population, Oklahoma will need to hit 1,289,113 private-sector jobs. From 2000 to 2010, Oklahoma’s private sector grew by 6.1 percent; from 2010 to today, it has grown by 5.9 percent. If this growth pattern continues, Oklahoma will fully recover sometime in the next year.

With the darkening economic clouds globally, the odds of America entering another recession are increasing. Thus, Oklahoma’s political leaders must make sure that its private sector is positioned to suffer minimal harm. Two key ways to do this are to keep labor unions on the sidelines and to reduce the burden of government. Oklahoma does a fairly good job on the former, with only 7.7 percent of Oklahoma workers being represented by labor unions.

Unfortunately, the latter area is where Oklahoma is among America’s worst states. As Ohio’s government employment shrunk by 1.6 percent from 2000 to 2012, Oklahoma’s government rolls swelled by 19.5 percent, which was the 4th most in the United States. Big government requires higher taxes and undermines private sector vitality.

Oklahoma’s real Gross Domestic Product growth from 2000 to 2010 hit 21.37 percent. This growth put Oklahoma in the middle of the pack among the states. Real manufacturing GDP growth was slightly better at 23.94 percent (19th best).

Oklahoma, like Ohio, can do better.

Here are a few of the key reforms I propose Ohio needs to enact to shed its laggard ways and become an economic and political leader once again. Any state looking to improve its standing should adopt these reforms.

First, our political leaders must get spending under control. As the Tax Foundation noted, Oklahoma led the nation in government spending over the last decade. From 2000 to 2010, Oklahoma’s politicians jacked up spending by 74 percent. A key component of reining in government spending is to tackle the compensation packages of government workers across Oklahoma, including moving government workers from gold-plated defined benefit pension plans to the defined contribution plans that most private-sector Oklahomans have.

We also must dramatically reform higher education. As Rick O’Donnell found after analyzing the data at the University of Texas-Austin in his groundbreaking report, “Higher Education’s Faculty Productivity Gap: The Cost to Students, Parents & Taxpayers”:

  • Students and taxpayers are charged hundreds of millions of dollars more than necessary to subsidize low productivity;
  • Top scholars who bring in almost all the research funding see large amounts of their grants siphoned off to pay for the overhead of their less productive colleagues;
  • Thousands of students are deprived of opportunities to learn from the most senior faculty members, raising troubling questions about quality; and,
  • The faculty who do the most teaching perform under working conditions that make them second- or third-class citizens, with low pay, few benefits, and little, if any, job security.

O’Donnell came up with five classifications for faculty members: (1) all-around Stars (high teaching loads and high externally funded research dollars); (2) adjunct Sherpas (high teaching loads, but low externally funded research dollars); (3) research-focused Pioneers (low teaching loads, but high externally funded research dollars); (4) tenured and seniority-protected Coasters (low teaching loads and low externally funded research dollars); and (5), within Coasters, a subclass of Dodgers (low teaching loads, low externally funded research dollars, but high per student costs).

With higher education being one of the largest state budget items and with ever-exploding tuition fees, O’Donnell’s framework should be applied to all faculty members at Oklahoma’s four-year and two-year public higher education institutions to identify how to reduce costs and provide greater value to students by dealing with the latter two groups. This analysis is needed immediately to help bring down the cost for Oklahomans to attend public colleges.

Finally, as was made all too clear by the Supreme Court with its Obamacare ruling, we must reinvigorate the principle of federalism. Oklahoma does not need the federal government—or just five smart Ivy League lawyers in black robes—to tell us how to educate our kids, take care of our sick and poor, build or maintain our roads, or keep our air, land, and water clean. Oklahoma, like every state, should be able to keep a lot more of the money currently being sent to Washington, D.C., and should be free of the federal mandates so that our political leaders can directly fund and run education, Medicaid, transportation, and other programs with no federal involvement. Governor Mary Fallin must lead the charge by America’s governors—Republican and Democratic—to take back the power and money seized by the federal government over the last 70 years.

With these and other reforms, taxpayers will stand a chance.

OCPA research fellow Matt Mayer (J.D., The Ohio State University) is a former senior official at the U.S. Department of Homeland Security. Mayer also serves as a Visiting Fellow with The Heritage Foundation, where he heads the Federalism project. He is the author of Homeland Security and Federalism: Protecting America from Outside the Beltway.

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