Bacon's Rebellion

Bill Bolling – Apologist for Big Government?

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by

James A. Bacon
in

I’ve always thought of Lieutenant Governor Bill Bolling as a low-tax conservative, but he sure didn’t sound like one in the Feb. 28 edition of the Bolling Report. In the newsletter, he raises the question: Where does all the money go?

Over the past 10 years, state spending has increased 80 percent, from $16 billion in 1996 to $29 billion in 2005. The average annual increase during this period was 7 percent. That sounds like a lot, he says. But it’s not as bad as it seems. When you adjust for inflation and population growth, he notes, state spending has increased only 3 percent annually.

Oh, I feel a lot better now. Actually, I don’t. Has the average paycheck increased inflation+3% a year over the past 10 years? No, not close. Most Virginians are lucky if their paychecks kept up with inflation.

Bolling is saying that state spending increased “only” 30 percent over 10 years adjusted for inflation and population growth. That sounds like a lot of growth to me. Even more alarming, the state’s appetite for money hasn’t slakened in the slightest. Now the Political Establishment wants to raise another $1 billion a year!

(Bolling does make one legitimate point. A big chunk of the increased state “spending” consists of payments to localities to reimburse taxpayers for the car tax. Take that out of the equation, and real, adjusted state spending may have increased “only” 20 percent or so, I’d guesstimate, over the decade.)

Bolling gives a laundry list of all the core functions that the state undertakes — roads, K-12, higher education, public safety, Medicaid, mental health, etc. These are all very important things. But he implicitly accepts the notion that there’s not much that we can do about the ever-escalating expenditures. He passively accepts the idea that Virginians must continue providing these core functions as we always have. There’s no mention in his missive about restructuring, re-engineering or re-thinking the way in which the state meets any of these core needs.

Here’s the brutal fact: At the end of the day, if Virginians bite the bullet and pay the taxes, nothing will change. When there is no pain, the Political Class feels no pressure to undertake fundamental reforms of any kind.

To his credit, Bolling concludes his letter by saying that, with record revenues, Virginia should not be raising taxes now. “We can have the best of both worlds,” he writes. “We can invest in the things that help improve our quality of life and keep taxes as low as possible. These goals are not mutually exclusive. It’s all about leadership.” But it’s the wimpiest case against raising taxes that I’ve seen in a long, long time.

(Thanks to Phil Rodokanakis for passing along the Bolling Report.)

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16 responses to “Bill Bolling – Apologist for Big Government?”

  1. James Atticus Bowden Avatar
    James Atticus Bowden

    Jim: I was taken aback by the tone of the letter in attempting to explain away much of the increase.

    An alternative would be to say,

    “Here is the increase the GA and Gov have imposed on The People – it is x%. There is no excuse for it from inflation, population growth, transfer payments, unfunded mandates or phases of the moon.”

    “Furthermore, that % = $billions.”

    “So, we can cut taxes $billions – at least. If we do nothing else. No reforms. No vision. Here is how much we can cut.”

    But, ta da, the GOP Senators are pushing for another tax hike. The GOP House has to keep their wobbly delegates on board to just NOT have a tax increase. That political reality is probably behind his speaking on behalf of the behemoth of greedy government.

  2. Anonymous Avatar
    Anonymous

    There is not one dime of increased REAL spending which was not either (1) mandated by our friends in Congress or (2) included in the budget at the request of some major lobbying group, special interest group, or some beloved museum or symphony. I am sure JAB has never asked his congressman or legislator to do something for him in the budget — but he is in a small minority. I am not defending the legislative inability to say no, but this does not happen in a vacuum,

    FYI Bolling is just rewriting that JLARC state spending report that Bacon has cited recently.

  3. Anonymous Avatar
    Anonymous

    Bolling has always said one thing and did another in his years in the Senate. He voted for every Virginia budget except 2002, which seemed heroic until you realize that in 2003 he voted to spend all the additional tax revenue generated by the 2002 tax increase.

    Words and actions are two different things.

  4. Jim Patrick Avatar
    Jim Patrick

    Jim – there’s a problem you don’t take into account here; one that I’ve never seen addressed.

    Inflation rates are based primarily on the price of goods. As you’ve pointed out repeatedly, in different context, the economy is shifting to services. This economy is growing, which is accepted as a GoodThing®.

    In practical terms, inflation-adjusted gasoline, food, clothing etc is as cheap or cheaper than it was 30 years ago. Inflation-adjusted salaries, the ability to pay for goods, has increased over thirty years ago.

    Government is mostly a consumer of services, not goods. Even VDOT, a producer of ‘things’ called roads, primarily pays for the people it employs. So any government’s challenge is to pay comparable wages –some wage within range of private sector wages—yet hold that spending below the prevailing rise in wages.

    It’s a conundrum.

  5. Jim Bacon Avatar
    Jim Bacon

    Jim, You have a valid point: Inflation in services is different from inflation in goods. Government, I suppose, bears greater similarity to the service sector of the economy than the goods-producing sector. But I don’t regard that as a valid excuse for state/local government any more than I would deem it a valid excuse for a service company. There’s also a thing called productivity. And productivity has been making tremendous gains in the service sector in recent years. I’d like to see comparable gains in the government sector, too.

  6. Ray Hyde Avatar
    Ray Hyde

    In 2003 the median household income in Virginia was $54,783. In 1993 it was 36647, an increase of 49%. And that was just the reported income: there is probably another 20% under the table.

    So family incomes are going up 4.9% a year and state spending is going up 7% a year. On the face of it, it would seem that JAB is right – this can’t continue without cutting into the personal pocketbooks of individuals, and eventually the economy.

    And it doesn’t stop there. I don’t know about anybody else but everything I own has more than doubled in value in ten years, stocks and bonds included. So, in addition to paying more to the state, I’m paying more to the locals, and the feds as well. Overall, I am wealthier, but I am able to do less and achieve less with my remaining money as time goes by.

    How do they say it? The rich get richer?

    On the other hand, personal income is only part of the story. Agood deal of state spending does not come out of my pocket. The Gross State Product has increased faster than state spending. If the state gets a share of that action, the the overll burden is not any greater. but since more of GSP is services, which are not taxed, it is not clear if the burden is greater or not.

  7. James Atticus Bowden Avatar
    James Atticus Bowden

    Ray, say it ain’t so. You didn’t read my piece in this week’s Rebellion?

    There is a Harvard study published in the Harvard alumni magazine (Jan-Feb) which shows that the average (median = 50th per centile family) from the 70s to 2004 went from one worker to two. Income increased substantially but discretionary income decreased $800 @ year.

    The real difference was taxes. There were other differences, too. But the delta between the 24% rate of the average income (all sources) in the 70s and the 30% of the average income in 2004 is > $4k.

    A fee here, a fee there, the progressive Federal tax, and sooner or later its real money to real families.

  8. NoVA Scout Avatar
    NoVA Scout

    Mr. Bollig finds himself in the awkward position of having time on his hands and little of substance to say. The latter attribute has not hindered him much in his political advancement to date, but he and his handlers now face the challenge or re-tooling the candidate into someone who may face the necessity of meeting an opponent who has more to offer Virginia than did Bella-Abzug (politically, not physically) impersonator Leslie Byrne. In other words, any opponent at the statewide level. Just as dinosaurs may have noticed that there was something in the air after the asteroid strike, Bolling’s team sense that some adjustments are probably necessary. They know that Bolling has to find a way to mitigate the Northern Virginia demographic that came within 1.15% of putting him our of business in November. But he also knows that stalwarts like Phil R expect more of the sweet nothing low tax/no tax rhetoric that was the pony that Bolling rode to where he is now.

    So what we’re seeing is a groping toward a new BB. It seems unlikely that these newsletters are going to be an altogether edifying experience for Mr Bill. It’s hard to start putting distance between yourself and the guys that got you this far. Moreover, Bolling had nearly ten years in the Senate to establish himself as a personage of policy heft and accomplishment. Nothing happened. If he had possessed the capacity to advance creative ideas about fiscal and tax policy, some of that would have slipped out, if not in the Senate, certainly during the primary or in the General Election campaign. But nothing did.

    Now he’s trying to at least look informed with these milquetoast missives. Already his homeboys are showing a little restiveness. It is a puzzlement. Randy Marcus is probably wearing out one of those old Identi-Sketch books trying to find just the right look for the future.

    There’s plenty of time for this metamorphosis to take hold. It helps that we’re starting with a clean slate. But there is also plenty of time to make mistakes, both vis-a-vis Bob McDonnell and also against the spectral candidates of Northern Virginia who are going to emerge from their present scenes of gainful and productive employment in business, law, and the military to apply with increasing force the changes that are fast at work in the northern counties of the Commonwealth.

    Mr. Bolling risks becoming Virginia’s Warren G. Harding. Of course, Mr. Harding parlayed rotund oratory coupled with very little substance into a great deal of political success. Mr. Bolling has already equalled that feat at a statewide level. He is not to be underestimated.

    In the meantime, we will have to endure quite a few of these newsletters until the Prom Theme for 2009 is decided. 2007 will stir things up even more than did 2005. The pols who will do anything to win, will then start looking like whoever won in 2007.

  9. too conservative Avatar
    too conservative

    GREAT POST.

    So true.

    I am about to link to you

  10. spankthatdonkey Avatar
    spankthatdonkey

    The 950 Million Dollars that Bolling labeled “an expense” constitutes the only real “tax relief” the citizens of VA has experienced since “W” gave each tax payer $300 each, plus a capital gains cut….

    How many gov. programs/departments (funded at say 950M), that constitute a real expense are going to get their normal alloted 3-5% increase in funding??? (all of them).

    Where are those to make the argument that with a 1.5 billion $$ surplus, and even more to come in additional taxes….

    That the car tax relief can not grow a lousy 5% this year??? If Pubs can’t make tax reduction happen, how can they be distinguished from Dems… and to grass roots people like me (peons), why even work for them??

    The Dems. take the House back and the citizens will be paying “full boat” again on the car tax… or of course the children will go uneducated, the roads unpaved and our bond rating falls (as per the last bogus smoke and mirrors taxcapade)

    This year could prove to be a “watershed” for the Pubs, forwards or backwards…

  11. Anonymous Avatar
    Anonymous

    When will everyone realize hat you get no car tax “relief”. Instead of paying the car tax you now just pay the 2004 tax increases, which come out to about $200/year more per family than the old car tax system.

  12. Ray Hyde Avatar
    Ray Hyde

    JAB: I’m with you, but we are not talking about since 1970 here, just the last ten years. The figures I quoted were the last ten I could get, household income may have increased more if I had the latest data.

    There is no doubt that taxes reduce spendable income. As I said, I am now able to do less and accomplish less with my remaining spendable income than previously.

    But where do the taxes go? They go to the government, which promptly spends them. Government expenditures are what, a third of the economy? Economic development types use a multiplier of three for the value of expenditures, so if you buy that, then government accounts for 90% of the economy. If we cut government, it could do more harm than good, except that private enterpris is probably twice as effective as government enterprise.

    On the other hand, we are buried in conspicuous consumption as it is, if you listen to some people. According to them, the last thing we need is more ability to produce unsustainable and unnecessary goods and services. It could be, that by providing goods and services that private enterprise cannot provide, the government makes us better off than we would be with more commercial services and goods that we don’t need.

    This conspicuous consumption is part of the reason that gross state product is so much higher. If gross state consumption is up, then it is contradictory to the idea that I, along with others, are able to do less with our money and therefore “deserve” a tax break. Maybe the economy has changes so much since the 1970’s that the state is now taxing the wrong sources. That problem would be repaired if we followed your advice and only tax income and sales.

    I agree with you, but in order to sustain that agreement, I have to keep challenging my own ideas. I guess I’m sceptical of ideologically motivated economics arguments, even when they are my own.

    ?????

  13. James Atticus Bowden Avatar
    James Atticus Bowden

    Ray, I learned my economics at the most Liberal universities in the country. Truth in science isn’t ideological. Rational empiricism rules!

    A dollar that goes to government becomes LESS than 23 cents of goods and services to the economy.

    A dollar that a person makes becomes 4 or 5 dollars back in the economy.

    That growth in dollars (subject to the rate you can expand the money supply without creating inflation) is the growing pie of capitalism.

    Whatever people choose to spend that money on isn’t the problem. Conspicious consumption is relative.

    I finished two great tomes on Civilization by McNeill and Braudel – two different perspectives, in addition to Bible reading, that point out the human proclivity to be greedy, flashy, etc etc name your adjective, when the difference among persons is only a carved wooden amulet on a leather string no one else has.

    The growth of capitalism may highlight the sinful nature of humans in different ways, but it doesn’t create that nature.

    What it does do is create opportunities for personal freedom that are absolutely unbelievable. Instead of everyone facing the backend of the plowing animal every day, anyone can find a niche and work at something they love and get by – not starve, go homeless or naked.

    Personal freedom and economic opportunity are twin helicals of Liberty’s DNA.

    Government should only do what it must do, not what it can do.

    The state taxes poorly and wrongly. I’ve written that tax reform should be based on principles. No one in the GA has expressed an interest in that fundamental arguement – draining that swamp – because they are fighting the pro-tax Republican alligators. One fight at a time.

  14. Ray Hyde Avatar
    Ray Hyde

    I think we are saying the same thing, but you say it much better.

    Still, I can’t be dogmatically anti-tax. What if the government is doing something worthwile that PE won’t do? Does that worthwile thing have to be a MUST DO? Isn’t conspicuous consumption relative for government, too?

    What happens to the other 78 cents? Doesn’t it go back in the economy, too?

    Not disagreeing; just asking.

  15. Jim Bacon Avatar
    Jim Bacon

    Jaded JD digs up some interesting data to contest my argument in the original post. Says he: “What Mr. Bacon doesn’t include in his protest, though, is that … total Operating Appropriations as a percentage of Gross State Product was lower in 2004 than 1996.”

    Jaded’s post is worth reading. Refreshingly, Jaded resorts to the facts rather than rhetoric to make his case. Here is how I responded on his blog (with one small correction for the purpose of clarity):

    Hi, Jaded, It’s nice to encounter a blogger who actually shows a reverence for the facts! There’s nothing like a good debate over statistics. I would respond in two ways.

    First, you are captive to your data, which take you through 2004. But the 2004 tax increases took place in Fiscal 2005, which began July 1, or halfway through 2004, so the full impact of the tax increases was not felt until 2005. Further, your analysis omits entirely the $1 billion-a-year increase proposed for Fiscal 2007. Let’s see what your graph looks like a couple of years from now when the impact of both increases can be measured. Your chart will show that state spending jumped the track!

    Second, I would stand by the statement in my original post: Per capita incomes have NOT increased at the rate of 3 percent per year.

    Here are the numbers from the Bureau of Labor Statistics:

    1994 Virginia per capita income: $23,305
    2004 Virginia per capita income: $36,175
    Increase in the Consumer Price Index between 1994 and 2004: 27.5%

    Thus, in inflation-adjusted terms, Virginians’ incomes increased from $26,175 to $29,713 over 10 years.

    That represents a 2.46 percent average annual increase (based on a MoneyChimp rate of return calculator).

    I said the growth in Virginians’ incomes was “not close” to 3 percent. Is a 2.46 percent increase “not close” to a 3 percent increase? That’s a judgment call. I’ll leave it to the readers to decide. It’s closer than I thought it was when I posted the comments you critiqued, I’ll admit, but the difference still is not insignificant — especially when you consider that it doesn’t even take into account the full impact of the 2004 tax increase. My main point stands: State spending has increased faster than Virginians’ incomes; state taxes are eroding Virginians’ incomes.

    How do we explain the discrepency between my method and yours? I’m not sure – perhaps you have an idea.

  16. Ray Hyde Avatar
    Ray Hyde

    Good points, Jim. I guess we won’t know until the next data comes out. JD’s graph does show periodic wiggles as taxes get ahead of and behind the economy, we can’t expect to be dead on all the time.

    Your figures on per capita income are a lot different than my figures on household income. Where is the discrepancy? Your figures show an increase of more than 55% overall: that can’t be 2.46%. I work it out to be just over 5% per year: 2305* 0.0501 = 1167
    24742 * 0.0501 = 1226 etc.

    I don’t think rate of return is the right calculation. Anyway kids don’t pay taxes, I think a household figure works better. aUsing the figures below that comes out to be 4.5% a year.

    In 2003 the median household income in Virginia was $54,783. In 1993 it was 36647, an increase of 49%. And that was just the reported income: there is probably another 20% under the table.

    Inflation doesn’t need to enter into this because it affects government the same as households. We compare what households spent then for government compared to what they spend now for government. Anyway, you can’t relate CPI to income. Even if I buy the inflation indexed income argument going from 26175 to 29713 over ten years is an increase of only 1.4% a year. (????) Explain how you got from 23305 and 36175 to 26175 and 29713.

    That has to be a typo. If you inflate 23305 by 27.5% you get 29713. But the annual increase that gets you from 23305 to 29713 is 2.75% not 2.46%. Anyway the inflation argument is bogus: incomes went from 23,305 to 36175, not 29713. 29713 is what it would be if incomes went up only as fast as inflation, but that isn’t what happened.

    You wouldn’t take the 1994 budget, inflate it by 27.5 percent and say that is the real value of the budget today, would you? No, of course not, the budget is what it is today.

    Furthermore, state spending doesn’t all come from household incomes. How much of the increase in spending comes from corporate taxes and other sources?

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