A story out of California discusses how municipal disincorporation is being considered by California cities under financial duress. Thankfully, Missouri is generally in much better fiscal shape than California or our neighbor to the east, but disincorporation is still a rarely considered option for small Missouri towns. There are a number of small towns in St. Louis County that contract for the county to perform many town services. The cities tax the residents, and use those revenues to pay the county to provide specific services. That is certainly more efficient than every small city providing every service themself, but the kicker is that the county would provide these services to town residents anyway, out of their general county taxes, if the town didn’t exist as a political jurisdiction in the first place. In many instances, tiny cities exist only as middle-men for many public services, which the residents would receive from the county anyway if the town didn’t exist as an intermediary — and they’d have lower tax bills.

You may be asking, “Wouldn’t the county have to increase taxes to fund services to more people if the city disincorpoarated?” In many Missouri counties, the answer is “maybe.” But in St. Louis County, it is “no.” This is because of the county’s sales tax pool. If smaller cities disincorporated, the sales tax money that previously went to the cities would be redivided. The county’s share is based on its unincorporated population, which would rise if cities disincorporated, so the county would get more money from existing tax payments, and probably not have to raise other taxes.

I don’t want any state or county laws changed in a way that would mandate disincorporation. I just want the residents of smaller towns in Missouri, and especially in St. Louis County, to know that it is an option worth considering as cities face budget difficulties.

As the end of the year draws nearer, the expiration of tax cuts passed in 2001 and 2003 also begins to creep over the horizon. As this happens, our federal government continues to spend what seems to be an infinite line of credit. Recent financial and health care reforms bring with them cost estimates that undoubtedly understate true costs. The same can be said about unemployment extensions.

The egregious amount of deficit spending is leaving taxpayers with a sizable bill. The federal government would like the “rich” (those that make more than $200,000 in pre-tax income) to pay a higher proportion of that bill, making them the lucky recipients of a tax rate increase. The politics of the tax cuts have already begun. It seems like an impossible task for Washington to divorce the economics from the politics. At this point in history I’m betting that that those individuals and families in the highest tax brackets will certainly see a tax increase come January.

The president recently said, “There will be no more taxpayer-funded bailouts. Period.” But, as Dan Henninger of the Wall Street Journal points out, “Raising taxes to cut the deficit is a bailout for the spenders.”

I’m beginning to think that an effective training regimen for politicians would include an undergraduate degree in linguistics.

Maybe I am missing something. Maybe classical microeconomics has become outdated and doesn’t adequately reflect decisions in the real world anymore. Maybe the nuance of their arguments is too much for me. Or maybe they’re wrong.

Economists have been developing mathematical equations since the days of Adam Smith, attempting to ascribe reality to a system of variables that can be changed and tweaked to more accurately reflect what economists empirically see. The problem with these equations is that they are not reality. That being the case, it is best to avoid needless complication.

Someone best illustrated this to me using the game of billiards as an analogy. Hitting the cue ball into the eight ball in an effort to send the eight ball into a corner-pocket requires skill and accuracy. Ricocheting the cue ball off the rail into the three ball which then will kiss the nine ball on its way into the two ball which will subsequently fall into the pocket is an entirely different problem. The more complex the system gets, the more accuracy is required, and initial mistakes are magnified further down the line.

Intertemporal decision making can be a complex problem to study, but most of the world makes such decisions intuitively — we are all practicing economists. The amount available for future consumption is future income plus savings plus the amount of interest earned on savings. If savings are negative, the person is borrowing and must pay back the amount borrowed plus the interest in the second period. This has the effect of reducing future consumption.

Future Consumption: P₂C₂ = M₂ – M₂t + S + iS

This means that today’s purchases change tomorrow’s parameters.

Current Consumption: P₁C₁ = M₁ – M₁t – S

Reality is an integration of these two equations. We do it constantly, and instantaneously most of the time. Income (M₁ & M₂) is a function of spent spent in leisure and work, and wages. People often decide how much they will work based on how much they plan to consume and how long it will take them to achieve the desired amount of income for that consumption (this also allows income to implicitly represent labor decisions in these micro equations).

Enter government, with a budget constraint that looks very similar. What is different is that the government doesn’t have to make labor decisions; it makes taxing decisions, and consumes through expenditures.

Government Expenditures: p₁E₁ = M_G + S

Government Revenue: M_G = M₁t (this form represents an income tax)

Taking from the income produced by others is the government’s only real source of revenue. This has two very obvious implications: 1) Taxation has an obvious impact on private consumption decisions, because it subtracts from real income (this also affects savings and consumption patterns, both now and later); and, 2) tax rates and government expenditure choices signal to the public the likely outcome of future taxation and expenditure decisions. This model of the aggregate economy suggests that eliminating the tax cuts will have deleterious effects on output and employment.

For some reason, Keynesian economists believe they have the power to affect the M₁ variable in this equation on a massive scale. The government is just adding pool balls to the equation. When the government decides to increase expenditures, it also has to increase revenue, by increasing the tax rate (t) now or in the future (after borrowing). This will have a negative effect on personal income, which translates to a decrease in personal consumption. The government has also decided to implement a progressive income tax structure. This means that, as M₁ increases, so does t. Because people tend to make decisions based on marginal welfare at their original consumption pattern, the last unit of consumption is roughly equal to the leisure that a person gives up to work that extra little bit so they can afford that last bit of consumption. With a progressive income tax, or an increase in the tax rate on any person, production is decreased at a marginal rate. When this happens to 300 million people at the same time, we begin to see problems.

The opponents of tax cuts often ask: What is the difference between swelling the public sector and cutting taxes, in terms of the federal government’s deficit? The answer is that they have different compensation structures and lead to different production decisions. Public money doesn’t force firms (whether they are public firms, or private firms contracted by the government) to make marginal decisions that maximize efficiency. Unfortunately, this means that public money is attached to inefficiency margins for anyone accepting it. Raising taxes therefore has a double whammy effect: Private production slows based on marginal decisions, and when it is converted to public money, it integrates inefficiency into each dollar.

Does this sound like a good prescription for an ailing economy?

In the short run, government has three ways to react to a budget deficit: raise taxes, borrow money, or reduce expenditures. In the long run, the government has to increase taxes in order to pay back the loan plus interest, so government has only two ways to react: raise taxes or reduce expenditures.

According to a recent article in Governing, Minnesota and Wisconsin, my two home states, are choosing the second strategy. Their state governments are starting to share services as a means to cut expenditures. From the article (link via the Wall Street Journal’s Real Time Economics blog):

The Gopher and Badger states are looking to find efficiencies and save money on everything from sharing amusement ride inspectors to buying ammunition and tires. The task has not been easy, but in the year and a half since the report’s release, Minnesota and Wisconsin have shared resources, consolidated services, bartered and even joined forces on contracts for package delivery, software and institutional food.

The Show-Me State would be wise to follow the example of the Badger and Gopher states. Missouri borders eight states, so certainly there exist many opportunities to consolidate services in the style of Minnesota and Wisconsin. Raising additional tax revenue may be a simpler strategy to implement, but it doesn’t result in the same long-term savings and efficiency gains as sharing programs across state borders.

Hiking tax rates on cigarettes and alcohol would negatively affect businesses in Missouri, so the fact that the editorial board at the St. Louis Business Journal is promoting this paternalist policy is perplexing.

Raising the tax rates on “sin” products would be particularly harmful to convenience and grocery stores close to the state border, because they would lose business to states that assess lower tax rates relative to Missouri. As a similar consequence of this policy, fewer people and businesses would locate to Missouri because the costs of living and doing business would be higher here. By keeping its tax rate low relative to other states, Missouri can help ensure that its residents will shop within the state, and it can incite individuals located near the border to shop here, as well. As a consequence, Missouri can generate a higher amount of revenue.

Missouri residents and businesses would be better off if the state government pursued alternative strategies to address the budget deficit than increasing selective sales taxes on cigarettes and alcoholic beverages (or on fatty foods, soda, and tanning). If it created a low-tax environment instead, Missouri would attract more businesses and individuals to the state, and they would contribute additional tax revenue. Alternatively, if the state government stopped carving out large sections of the tax base and subsidizing the favored few, it would have fewer expenditures to cover.

Read this short article from the Springfield News-Leader offering an encouraging account of politicians avoiding partisan wrangling and getting along at a recent Springfield announcement. Then read the quote by William Graham Sumner from which the title of the The Forgotten Man by Amity Shlaes is taken (or re-read it, given that many of you have probably read Shlaes’ book):

As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X or, in the better case, what A, B and C shall do for X. As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law, but what I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. [...]

He works, he votes, generally he prays — but he always pays — yes, above all, he pays.

Don’t take this as a specific criticism of any of the officials discussed in the News-Leader article. Even more so, don’t take it as a criticism of the programs discussed in the story, especially the great people in the Missouri National Guard. The deal to lease part of the airport may well be a good deal for taxpayers.

However — and I want subtlety to be my friend here — is it really that amazing that politicians will get along at an event where they are all either spending or receiving other people’s money? State tax dollars are being used to lease local government property, and it is supposed to be noteworthy that all the politicians are happy? It does not matter that the expenditure in this example is an arguably fully legitimate use of public money. (I’ll leave aside for a moment that it could be even better if the Springfield airport were privatized, like its competitor to the south in Branson.)

Anyone who sees public officials getting along in an instance like this and thinks that it is a notable example that bears repetition lacks an understanding of public choice economics and interest group politics.

Thanks to johncombest.com and derrickjeter.com for the story links and quote.

Medicaid is one of the largest expenses in Missouri’s budget. In fiscal year 2008, Medicaid spending in Missouri totaled more than $7.09 billion. The federal government pays for the lion’s share of that, but Missouri taxpayers were still on the hook for $2.66 billion, or just over 12.5 percent of the state’s total $21.2 billion budget. As Peter Suderman points out in a new article for Reason, Medicaid has gone from an initial inflation-adjusted price tag of $9 billion in 1965 to more than half a trillion dollars just 45 years later. Moreover, those costs are only likely to rise during the coming years:

Just yesterday, the Senate voted to put $16 billion toward extending a temporary boost in Medicaid funding contained in the stimulus; the House is expected to follow sometime next week. Meanwhile, the Obama administration’s signature achievement—the new health care law—relies on an expansion of Medicaid for fully half of its projected increase in insurance coverage. According to the Congressional Budget Office, thanks to the Patient Protection and Affordable Care Act (PPACA), 16 million new individuals are projected to enroll in Medicaid by the end of the decade, and many experts believe that those estimates are low.

To add injury to insult, the health care that people get through Medicaid appears to be pretty bad:

Numerous studies show that, on an array of specific maladies, Medicaid’s health outcomes are dismal—and in some cases worse or no better than the outcomes for individuals who lack health insurance entirely. A University of Pennsylvania study, for example, reported that colon cancer patients in Medicaid have a 2.8 percent mortality rate, compared with 2.2 percent for the uninsured. A study of Florida’s Medicaid patients found they were more likely to have late-stages of prostate cancer, breast cancer, and melanoma at diagnosis than the uninsured.

It’s also worth noting that poor Americans received medical care before the advent of Medicaid. In his history of 1960s liberalism, The Unraveling of America, Rice University historian Allen J. Matusow wrote that poor patients were typically treated by charitable doctors for free. Matusow concluded that “[a]side from middle-class old persons protected from the financial ravages of long illness, the clearest beneficiaries of Medicare-Medicaid were doctors, who, according to one estimate, enjoyed an average income gain of $3,900 in 1968 as a result of these programs.” I don’t know how the medical treatment that poor patients received before the passage of Medicaid compared to that received by the middle class, but it’s historically inaccurate to argue that the poor would not have health care absent a government program.

Still, given that Medicaid is unlikely to be repealed anytime soon, what is the best solution to its spiraling costs and poor service? Suderman argues that it should become a temporary safety net instead of a permanent entitlement. Unfortunately, most politicians seem determined to keep expanding the program. If continued indefinitely, that will lead to both low-quality health care for all and fiscal catastrophe.

U.S. Sens. Tom Coburn and John McCain just released “Summertime Blues,” a report chronicling 100 wasteful uses of stimulus dollars. Let’s leave aside the question of whether the entire thing has been a waste, and tacitly agree that some types of stimulus spending can be relatively better than others. Spending $1 million for a highway that people need and use is better than spending $1 million for a highway that people don’t need and don’t use. But on to the waste and pork!

The report includes two examples in Missouri. Really, though, one should have been counted for Illinois rather than Missouri, which leaves us with only one citation for the Show-Me State. The expenditure that I dispute should be classified for Missouri — but without any dispute over its uselessness and absurdity — is the $430,000 given to the Army Corps of Engineers to enhance a museum about the Army Corps of Engineers. It’s no. 27 on p. 24 of the report. The museum, which I sheepishly admit I had never heard of (I go to the East Side Metro East for one thing and one thing only), is dedicated to the Mississippi River and the Army Corps of Engineers, and is in East Alton, Ill. So, that’s $430,00 more in spending so that the Army Corp of Engineers can tell the public what a good job they do.

This is not to say that the Army Corps of Engineers doesn’t do a good job. Rather, they should just do a good job without feeling the need to tell us about it. If I lived in Louisiana in 1927 or 2005, though, I might feel differently.

The Missouri example is $180,000 for scientists at the University of Missouri to deal with the pressing problem of why rat sperm becomes less useful when it is thawed after freezing. (This is example no. 95 on p. 45.) Apparently, this is exactly the type of project for which the stimulus was designed.

All in all, it could have been worse for Missouri. Many of the projects in other states cost millions of dollars more, and most closely resemble a project akin to: dig hole; fill in hole; repeat. Example no. 10 is one of my favorites: $100,000 for “Town replaces new sidewalks with newer sidewalks that lead to ditch.”

No matter where this spending occurs, though, we all pay taxes for projects like this, and elected officials all (or almost all — there are a few exceptions) fight for local spending and spoils.

New Jersey’s governor is pushing for the privatization of numerous public services as a means to trim the state’s budget. These services include car inspections, state parks, psychiatric hospitals, and turnpike toll booths. Furthermore, preschools would no longer be constructed on the public dime, public employees would be required to pay for their own parking, and the cafeteria, education, and health care programs in prisons would be handled by private vendors.

Some estimates project that the proposal will save New Jersey $210 million annually in taxpayer funds. From the article:

“The question has to be, ‘Why do you continue to operate in a manner that’s more costly and less effective?’ rather than, ‘Why change?’ ” said Richard Zimmer, the former Republican congressman who chaired the task force.

By and large, privatization lowers costs and raises quality. Unlike the government, which can continually operate in the red, a private firm must turn a profit to stay in business, a fact that makes private service providers much more accountable to consumers. The unresponsiveness of public service providers is especially evident when spending hours in line at the DMV or post office. A private firm with a similar service record would either have to take steps to become profitable, by increasing service and lowering costs, or face going out of business.

Missourians would benefit if state officials followed New Jersey’s lead by finding ways to privatize services and save taxpayer money. The efficiency gains that privatization bring would provide a means to cut costs without cutting services. Missouri could do well for itself by entrusting responsible private businesses to help carry some of the state’s fiscal load.

The state government is facing a dilemma over whether to cut spending or raise taxes because of a constitutional requirement that the governor sign a balanced budget. It seems like a rather easy decision to cut spending, especially in the midst of an economic downturn, but others do not agree. A letter to the editor published in the St. Louis Post-Dispatch argues that Missouri’s budget problems would best be solved through higher taxes, saying that “the cuts have inflicted irreparable damage on the citizens.”

The faltering economy has certainly made it tough for Missouri, but raising taxes is the last thing we should do. Cutting the budget obviously hurts some state programs but it is a far better option than tax hikes. Higher taxes would lead to fewer productive jobs and less economic growth — this is not a remedy for a healthy recovery. Increased taxes would take more money out of the pockets of individuals and feed it to the wasteful beast that is government. At a time when Missouri’s families are tightening their belts, the Missouri government should follow suit. Missouri and its citizens would be better off if the government let the people of this state keep more of their own money, allowing them invest and grow Missouri’s economy.

Hat tip to John Combest for the link.

Last Thursday, the governor cut $47 million from the state’s annual $600 million tax credit program. This program grants incentives to businesses that officials deem as providing some benefit to the community. The cut was made in an effort to balance the state budget in the face of decreasing revenues from Missouri’s slow economy.

Only two weeks ago, though, the governor advocated an incentive package for Ford Motor Co. worth $15 million per year for the next decade, aiming to keep Ford in Missouri. Ford’s Claycomo plant employs 3,700 Missourians, jobs that no politician wants to lose to another state, especially when Missouri is facing unemployment between 9 and 10 percent. The governor said he may call the legislature into a special session to pass the the package, even before receiving assurance from Ford that the plant will stay if the bill passes.

Tax credits generally entail some amount of dead-weight economic loss, as has been extensively discussed on this blog before. By subsidizing those industries or companies that state officials view as most important, tax credits will tend to distort natural aggregations of supply and demand. And no matter how carefully they choose which companies or industries should be the recipients of tax credit policy, public officials have no special ability to choose the right mix of industries or predict which one might maximize economic growth.

Many companies have come to rely on maintaining their profits through use of those tax credits that have been subject to recent cuts. Telling them to tighten their belts while at the same time handing out $150 million in incentives to Ford just isn’t fair. Tax credit cuts are necessary, and more cuts are needed, but simultaneously crafting a piece of legislation full of tax incentives for Ford makes it look like the state is just playing favorites.

The Washington Examiner has an excellent column by Timothy Carney about a subject that just drives me nuts: government using tax dollars to lobby other governments for more tax dollars. We have written about the issue of government lobbying before here at the Show-Me Institute, but I can honestly say that few things make me angrier. (Be sure to check out the comments from the last link!) From the Examiner piece:

State governments have overspent, largely on salaries that far exceed those in the private sector and benefits packages that dwarf what most Americans get. So now those governments are spending their money on powerful high-dollar lobbyists, with the paramount goal of getting access to more federal money. But the federal government is hopelessly in deficit.

The result is this: Local government officials are using your money to hire former government officials to ask current federal officials to give local governments more federal money — and future taxpayers will foot the bill for this whole racket.

Forbes recently published an article that praises Gov. Jay Nixon, and describes him as “cutter-in-chief”:

Nixon proposed to “right-size” government by merging agencies, eliminating state holidays, laying off more employees, getting rid of state vehicles, scaling back employee pension and health benefits, privatizing child support collections and curtailing Missouri’s expansive tax credit programs.

He may talk the talk, but he doesn’t consistently walk the walk — he has continued to support giving tax credits to specific businesses. Here, I reference the $28 million in state incentives that the Missouri government is giving to IBM to locate in Columbia, Mo., or the proposed $15 million in tax credits to support the Ford plant in Claycomo, Mo.

Even though the incentive package for Ford’s Claycomo plant didn’t pass the state legislature, the governor strongly supported the proposal. According to the Kansas City Star:

The bills’ failure was a disappointment to Democratic Gov. Jay Nixon, who had pushed hard for both the jobs bill and retirement reform, and worked through the day Thursday and Friday to make a deal on their passage.

“Unfortunately, the General Assembly missed a critical opportunity by failing to pass this package,” Nixon said.

The recession has provided a new opportunity to evaluate the appropriateness and the effectiveness of specific government programs. I do give credit to the governor for communicating his commitment to reduce state expenditures. However, I wish that he would advance a consistent message regarding tax credits.

Sunday’s Post-Dispatch had an excellent story about the use of taxpayer-funded cars for public officials. In past decades, when government employees really did make a lot less than private-sector employees, a perk like the car might have made sense. Now, with the growth of public sector salaries, it is a practice that really should be abolished. I highly recommend that you read the Post story, but keep in mind that the people cited in it are not to blame for a practice that has been going on for a long time.

The real purpose of this blog post is to note that there is a private-sector solution to this issue. The Reason Foundation has done some great work on the subject of private companies managing government vehicle fleets. It might be the right time for state, county, and city governments in Missouri to give this idea serious consideration.

The New York Times ran an excellent article on Friday critiquing the idea that all students should attend college. A college education can certainly lead to a better career and higher pay for those who prosper in that academic environment, but for millions of others, it is ultimately a very expensive distraction:

The idea that four years of higher education will translate into a better job, higher earnings and a happier life — a refrain sure to be repeated this month at graduation ceremonies across the country — has been pounded into the heads of schoolchildren, parents and educators. But there’s an underside to that conventional wisdom. Perhaps no more than half of those who began a four-year bachelor’s degree program in the fall of 2006 will get that degree within six years, according to the latest projections from the Department of Education. (The figures don’t include transfer students, who aren’t tracked.)

For college students who ranked among the bottom quarter of their high school classes, the numbers are even more stark: 80 percent will probably never get a bachelor’s degree or even a two-year associate’s degree…

College degrees are simply not necessary for many jobs. Of the 30 jobs projected to grow at the fastest rate over the next decade in the United States, only seven typically require a bachelor’s degree, according to the Bureau of Labor Statistics.

Among the top 10 growing job categories, two require college degrees: accounting (a bachelor’s) and postsecondary teachers (a doctorate). But this growth is expected to be dwarfed by the need for registered nurses, home health aides, customer service representatives and store clerks. None of those jobs require a bachelor’s degree.

Despite the steady drumbeat from politicians and educators over the last 50 years, college is not the one true way in education. Training in a skilled trade and on-the-job experience are just as valid educational paths as college, and can be just as lucrative — often, more so. Government policy, both at the federal level and in Missouri, encourages people to attend college instead of pursuing other routes. We could both save money and achieve better outcomes if the government were to cut back on spending for colleges and shift some of that funding to need-based scholarships for trade schools.

The near single-minded focus on college as the best educational path is just another example of government’s tendency to impose a monolithic solution for a host of varied and complicated problems. Such problems can best be solved by a greater role for the market, which offers numerous alternative strategies for achieving similar goals.

This blog has had favorable things to say about the governor’s hard choices and tough decisions when it comes to the Missouri budget, so a bit of mild criticism on another issue is probably fair — just to even things out, for the fun of it. Today’s Kansas City Star has video of the governor visiting the famous Claycomo Ford Plant. (The city really is named Claycomo, as in Clay County, Mo.) The governor calls for the legislature to pass a tax credit for companies that invest in plant equipment directly leading to Missouri jobs. He explains in the clip that this credit would be different than the other types of tax credits he has said need to be cut, as the Show-Me Institute has also argued. 

Be that as it may, I still think I have a better idea. If you want to help the Ford plant in Clay County, make it easier for officials there to lower the enormous commercial property tax surcharge that county businesses pay. Clay County levies the third-highest surcharge in Missouri, at $1.59 per $100. Compare this to the GM plant in St. Charles County, which pays only $0.53 per hundred. Making it easier for the Clay County legislature to lower that rate, and changing the surcharge so that it rolls back as assessments increase, would benefit all the businesses in Clay County — the Ford Plant in particular.

For more background on the commercial surcharge in Missouri, check out this article, this testimony, and this House Resolution, which has been introduced in an attempt to make these important changes.

This post actually has nothing to do with Matt Holliday, but it does regard holidays in general, and I thought adding him into the title of this entry would be good for the ‘ol Google hits. I love the Freakonomics franchise: books, blog, lectures, and all. But today I came across a post I thoroughly disagreed with, and one that also directly relates to a policy debate in Missouri.

Daniel Hamermesh, whose short posts on microeconomics-related subjects I really enjoy, writes that we need more national holidays because Americans deserve more time off of work, like Europeans. To this, I say: If you want more time off work, start your own business, hire employees who can do the work when you are out, and take as many — or as few — days off as you like. The idea that it is the role of the government to give us more time off just buys into the idea that the government should serve as mother-protector, and the rest of us as dependent children. (Yes, I do sometimes work on the national holidays that we have. At a prior job, I used to work on holidays regularly.)

This question applies here in Missouri because our state government has long taken off Truman’s birthday. That is one of the issues surrounding lesser national holidays (not naming any examples, lest I upset some overly profound interest group): In reality, legislating additional holidays would only lead to paid days off for government workers and bankers. Most of us would still have to work or use a vacation day if we wanted to take that day off, as well.

But back to Truman Day. It has been proposed that the state should cut its budget by eliminating Truman Day as a state holiday. It is my understanding that this would save money because some state workers are still required to work on that day (like prison guards and highway patrolmen), and they are currently paid time-and-a-half to do so. The Associated Press has reported that state employees will still get Truman Day off next week, no matter the final decision, but I support the effort to eliminate it as a state holiday. If state employees really want to take that day off, they can use some of their generous vacation time. Otherwise, go to work like the rest of us.

Thanks to Combest for the AP link.

This month, the Cato Institute published a bulletin titled “Employee Compensation in State and Local Governments,” in which the author examines state and local compensation costs:

State and local governments face large budget deficits as revenues have stagnated and spending has remained at high levels.

I used the Show-Me Institute’s newest web tool, Interactive Database for Economic Analysis by State, to isolate state and local government employment and payroll data from U.S. Census. Next, I used this inflation calculator from the Bureau of Labor Statistics to adjust the data to 2008 dollars.

The following graph shows this information for all states for 2008. Wyoming has the highest number of public employees per capita, at 927, and Nevada had the lowest, at 437. Missouri was in the middle — it was ranked the 29th highest (alternatively, the 23rd lowest) in this category:

The data for Missouri reflect the general growth in the size of government described in the Cato bulletin. From 1993 to 2008, the number of total employees grew by 29 percent, the number of full-time employees grew by 27 percent, and the number of part-time employees grew by 44 percent.

The data also show that payroll is growing at a faster rate than the number of employees. From 1993 to 2008, after adjusting for inflation, total monthly payroll grew by31 percent, full-time payroll grew by 30 percent, and part-time payroll grew by 55 percent:

Given this rate of growth in monthly payroll and number of employees, Missouri’s present budgetary problems are no surprise to me.

Initially, when I saw the title of this piece from the Missouri Budget Project, “Missouri should close tax loopholes,” I expected to agree with the article’s arguments. After all, tax credits and loopholes are inefficient and counterproductive for economic growth. But the piece goes on to call for increasing state revenue as the solution to Missouri’s budget issues.

The author emphasizes the problems with Missouri’s budget by repeatedly comparing it to a “sinking ship.” She calls for tax credit transparency, but taxpayers would benefit even more from tax credit limits or reductions, as the governor has suggested.

The author also suggests raising taxes. At any point, but especially during a recession, taxes impinge on further economic growth because an increase in the tax burden decreases compensation for additional time spent working. The decision to work or not work is a marginal trade-off; the lower per-hour compensation makes other activities — like leisure or spending time with family — more appealing. Economists have shown that economic growth occurs when production increases, but taxes decrease the incentive to work and save.  A recent study released by the Show-Me Institute demonstrates this inverse relationship with taxes and economic growth. Spending cuts are better for Missouri’s overall fiscal health than tax increases because they promote growth and allow money that would have gone toward government spending to instead flow toward generally more efficient market uses.

The 2011 budget relies on $7.22 billion in tax revenue, which is lower than the $8 billion collected before the recession, in fiscal year 2008, but still higher than the $6.97 collected in fiscal year 2010. Within that budget is room to pay for the vital services the author calls for, like schools, roads and health care for the elderly. It is a matter of prioritizing and “rearranging the deck chairs.” If tax credits are not the most efficient expenditure of resources, as the higher education system is currently contending, as the recent audit suggests, and as Show-Me Institute scholars have repeatedly pointed out, then it makes sense for Missouri to place more stringent limits on tax credits. In any case, Missouri’s present and future economy would benefit the most from lower taxation and spending rates, which would promote future growth and higher living standards for the state’s residents.

On Monday, Missouri State Auditor Susan Montee released a study of tax credit cost controls. The audit’s conclusions have been covered by the media, as well as on Show-Me Daily. The audit seems to affirm much of the Show-Me Institute’s scholarly work on tax credits; it reports that the economic impact of tax credits is routinely overestimated and their costs underestimated. Some key findings from the audit are outlined below:

Fiscal Notes

Fiscal notes tended to understate the cost of tax credits, some of which underwent further expansions after their initial passage. Of the 15 tax credits reviewed, the fiscal notes underestimated their total cost by $1.1 billion over a five year period. This is not surprising given the tendency that Show-Me Institute research assistant John Payne noted for politicians to overestimate the impact of their policies and underestimate the costs.

Four of the five tax credit programs for which fiscal notes underestimated the amount that the credits would disperse were new. They had lower participation than expected, as well as annual limits on the amount that could be redeemed. (See page 8 of the audit for a table displaying the projected and actual costs for all 15 of these tax credit programs.)

The audit notes that the short time frame — three years — of the cost estimates limits their ability to predict long-term effects. On the flip side, the audit also notes that even longer estimates are inaccurate and unable to predict true costs. Given that the fiscal notes had poor predictive power, the audit suggests that limits and sunset clauses may be necessary methods to limit the costs of tax credits.

Annual or Cumulative Limits

Annual or cumulative limits cap the amount of tax credits that can be redeemed from any particular program. This is one measure that the audit suggests be put into place for all tax credits, although 23 of the 53 programs redeemed in 2009 did not have annual or cumulative limits.

Some tax credit programs have seen their limits increased substantially, like the Missouri Quality Jobs program, which initially had a $12 million annual limit and currently has a $80 million limit. Officials’ ability to increase these limits through committees or departments, without having to go through the full legislative process, circumvents the purpose of limits.

Sunset Provisions

In 2003, Missouri passed the Sunset Act, which stipulated that each program must be reauthorized after six years. This allows the economic impact to be evaluated before further extensions are granted. Of the 18 tax credit programs passed after 2003, only 10 have sunset provisions. The audit suggests that sunset provisions be included in every new tax credit.

Conclusions From the Audit

Sunsets and both annual and cumulative limits could substantially control the cost of tax credits. As the audit points out, it is difficult to predict the long-term effects of specific tax credits; with a sunset provision, the effects are reviewed and evaluated before a program is continued. Annual and cumulative limits would hold tax credits to the amount specified by the bill, which would discourage underestimates as well as control tax credit expenditures. Currently accounting for 7.8 percent of the 2009 Missouri budget, tax credits will continue to grow if cost-control measures are not better implemented.

How has the legislature responded to the audit’s pronouncement on tax credits? The speaker of the House issued a press release disagreeing with its conclusions:

“Auditor Susan Montee and Governor Jay Nixon are playing a dangerous and damaging political game creating a fictitious conflict between education and Missouri jobs. Education and economic development are mutually beneficial, not mutually exclusive,” [the speaker] stated. “In the House, we have always welcomed independent, objective scrutiny on how to best reform and enhance tax credit programs. Missourians need jobs. Therefore, the Missouri House will continue to protect responsible economic development programs that create those jobs. And we will have the last word on this matter.”

With all of the evidence that tax credits cost more than anticipated with less impact than predicted, greater scrutiny is warranted before the state considers passing any further credits. The audit brings to light important issues that proponents of tax credits must face in order to bring greater fiscal responsibility to Missouri’s budget.

Aside from the audit’s careful consideration of the unforeseen costs that tax credits entail, it’s also important to consider some of the broader economic reasons that such targeted industry credits are not as effective as their proponents suggest. As Show-Me Institute scholars have repeatedly pointed out, tax credits are less efficient than lower tax rates, both because legislators have no special talent for picking winners and losers in the economy, and because the credits distort economic incentives, causing a misallocation of capital — subsidized producers have an incentive to produce more than is efficient, and some other set of unsubsidized goods or services are slightly underproduced as a result.

Perhaps this audit will encourage a the legislature to consider lower tax rates in lieu of inefficient tax credits.

Missouri Auditor Susan Montee has found that fiscal notes relating to tax credit programs severely understate their costs. From the Columbia Daily Tribune:

The audit found fault with the legislature’s “fiscal note” system that estimates projected program costs.

“Fiscal notes associated with legislation establishing or modifying tax credit programs do not accurately project the financial impact on the state’s general revenue fund collections,” the audit said. “For 15 tax credit programs reviewed, the actual redemptions exceeded the projected long-term fiscal impact by a net amount over $1.1 billion for the five years ended June 30, 2009.”

Fiscal notes sometimes failed to accurately predict how many people and businesses would participate in the programs, the audit said. Sometimes agencies administering the credits would make changes that increased costs.

In 1997, the legislature enacted a tax credit for historic preservation, a program that offers subsidies to people refurbishing old buildings. The estimate of the program’s cost at that time was $14.3 million per year. When the legislature modified the program a year later, the fiscal note projected an “unknown” cost.

“Based upon our methodology, the projected fiscal impact was $14.3 million annually and $71.5 million over the 5-year period, while redemptions totaled over $637 million,” the audit said. “Recent tax credit program audits have shown agencies consistently overstate the economic benefit of tax credit programs.”

Of course, this is no surprise. On top of the difficulties inherent in projecting a program’s impact into the future, politicians always overhype a program’s benefits and undersell its costs. They will even use all manner of political influence and accounting chicanery to manipulate the projections produced by independent scoring agencies. Even at the federal level, where the highly respected and nonpartisan Congressional Budget Office does its level best to accurately project a bill’s costs and benefits, members of Congress frequently game the process by requiring the CBO to score unrealistic versions of bills. The most obvious recent example of this subterfuge is the last CBO scoring of the recently passed health care bill, which, in order to achieve the illusion of deficit neutrality, includes 10 years of taxes and only six years of spending — as well as cuts to Medicare that we all know will never come. Just remember that no matter how bad a government program sounds when a politician proposes it, the reality is almost certainly worse.

Link via John Combest.

As our regular readers know, we blog a lot about the Parents as Teachers (PAT) program here. It tends to generate a substantial number of comments, which is awesome. Sarah Brodsky has done most of the posting on this subject, but I will take a stab at it here — and I post this as someone who has been a defender of the program and its benefits previously (in comments, not my own blog posts).

Today’s Post-Dispatch has an article about the latest round of budget cuts in Jeff City. This round of cuts will apparently hit the PAT program hard. The national director of the organization, which is based in Missouri, is taking the cuts personally and hitting back hard:

“I have passed beyond astonishment at the governor’s actions to anger at this disparate attack on Parents as Teachers,” Stepleton said from the organization’s national headquarters in Maryland Heights.

I might understand her anger, but I have to come to the defense of the governor and legislature here. PAT is a worthy program, and by that I mean that I feel it serves its mission more effectively than many other social programs. My family uses it, and we pay for it through our property taxes. If we were asked to pay for it via both property taxes and additional fees, I readily admit we would not use it. But there is no reason PAT should not feel the cutbacks to the same degree as other programs — or, in certain cases like the Highway Patrol, more than other programs. There is nothing so important about PAT, compared to may other programs, that should make it immune to cutbacks when they are required. And I again remind you that I say this as someone who likes, uses, and supports the PAT program overall.

The governor has difficult choices to make, and he deserves credit for facing up to the task and making the hard decisions. The General Assembly also deserves great credit for working with him on many (not all, but many) of these choices, and refusing to raise taxes in these tough budget times. Raising taxes is the easy way out, not the hard way.

Other proposed cuts are positively exciting, such as reducing, even just temporarily, aid to Missouri’s insipid ethanol industry:

The state will delay paying $3.2 million in subsidies owed to biodiesel plants. Next year, they’ll get about 75 percent of what they’re owed, with the rest being deferred to future years.

Here’s hoping that they make the biodiesel cuts permanent, then cut it even further.

The Missouri Senate has given initial approval for a proposal by Gov. Jay Nixon to consolidate the Department of Elementary and Secondary Education (DESE) and the Department of Higher Education. Approaching the issue purely as a matter of spending, this looks like an obvious move. With one department, some of the redundant agencies and services can be rolled into one capable of doing the same work for less money. However, the effect that such a change would have on educational outcomes is far more ambiguous.

Once they are a single department, the management styles of the old departments will influence each other. No doubt the influence will flow in both directions, but ultimately either higher education will end up looking more like elementary and secondary education, even if only on the margin, or vice versa. I hope it will be the latter, because higher education gives far more autonomy to individual schools, instructors, and ultimately students, which I believe is one of the reasons that — for all its problems — the American higher education system remains highly touted.

That said, I fear DESE’s influence will win out. It is the far larger department, with a 2010 appropriation of more than $5.4 billion compared to Higher Education’s $1.3 billion. This will probably mean far more micromanagement of college curricula and a greater emphasis on pedagogy compared to content. That’s simply how DESE officials think; they create a statewide standard to make classes nice and formulaic. If this plan is implemented, I fully expect that within a decade there will be state-mandated standards for common courses (e.g., western civilization, macroeconomics, chemistry, etc.) similar to the Class Level Expectations (CLEs) in high school classes. Missouri will have a “seamless” education system, as one legislator describes it, but at the expense of the independence of our public universities.

According to an AP article dated yesterday:

Education officials from across Missouri joined Gov. Jay Nixon’s call to rein in tax credits, asserting Wednesday that escalating incentives are diverting money from financially strapped schools and colleges. [...]

Nixon, a Democrat who last year backed an expansion of state tax credits for businesses, now says tax incentives have grown so greatly that they are threatening other essential government functions. About $585 million of tax credits were redeemed last year — up 86 percent over the past decade, he said.

I realize that education officials are self-interested, but I agree with their assertion here that Missouri’s tax credit programs are funded at the expense of other programs. When tax revenue is spent on subsidizing select businesses and industries, taxpayers cannot spend that money elsewhere, such as on education; they face an opportunity cost that at least equals the amount of the tax credit.

Additionally, the state shouldn’t carve out sections of its tax base to reduce tax burdens for a select few, because those who remain in the tax base have to pick up the difference. By having a broad tax base, Missouri can assess a tax rate that’s lower and more equal for all taxpayers. This low-tax environment would attract new businesses and individuals to Missouri better than any selective tax credit program could. This would result in a steady stream of more reliable tax revenues, so government in Missouri would not have to struggle to pay for itself.

Last week, I wrote that we needed many more options in education than the traditional public school. In his latest column, Steve Chapman echoes that sentiment but cautions that no single alternative is likely to bring revolutionary change. For instance, Chapman looks at the lackluster results from the voucher program in Milwaukee:

In 1990, in one of the most innovative developments in modern American education, the Milwaukee public schools created a parental choice system. Some low-income parents got vouchers that could be used to send their children to private schools.

It was a richly promising idea. The new option would let disadvantaged kids escape wretched public schools. Competition would force public schools to improve or close. Students would learn more.

Twenty years have passed. Last week, researchers at the School Choice Demonstration Project at the University of Arkansas published their latest assessment of the results.

What did they find? Something unexpected: Kids in the program do no better than everyone else. “At this point,” said professor Patrick J. Wolf, “the voucher students are showing average rates of achievement gain similar to their public school peers.”

Although I agree with Chapman’s main point, I think he is too critical here.  Voucher students score basically the same as public school students, but the graduation rate for students receiving vouchers is 77% to 65% for students without the voucher, which is hardly insignificant. Even more striking, especially in such a lean fiscal year, voucher students attain the same level of education as their public school peers for less than half the cost — $6,400 a year for voucher students against $14,000 for public school students. In other words, the private schools are doing the same job with half the resources. Cutting costs without substantially improving educational outcomes is not worthy of a standing ovation, but it at least deserves mild applause. The same point can be made about charter schools.

That said, Chapman’s conclusion is incredibly wise:

What should we learn from these experiences? Not that nothing works, but that few if any remedies work consistently in different places with different populations. We shouldn’t expect that broad, one-size-fits-all changes imposed by the federal government—such as those offered by the Obama administration—will pay off in student performance.

From the local school district to the federal Department of Education, humility, caution, and open-mindedness are in order. Because right now, the main thing we know about improving schools is that we don’t know very much.

This is why changes in the educational system should come from the bottom up. Students, parents, and individual schools and districts should be encouraged to experiment and imitate those experiments that work. Grandiose nationwide (and even statewide) plans, on the other hand, have a tendency to ignore local and individual particulars. Ignoring those particulars all too often leads to general failure.

Municipalities that employ tax stacking — levying multiple sales taxes above the state cap of 1.5 percent — may soon receive state protection. Missouri House Bill 1442 will protect municipalities, like St. Joseph and Joplin, that have already approved taxes higher than the state limit. The bill would allow them to keep any taxes already approved and would protect those cities from having to refund the relevant revenues.

Stacked taxes have been discussed at length previously here at Show-Me Daily. I agree that refunding the money that has already been acquired could be a counterproductive task. It would be difficult to redistribute previously collected sales taxes unless the affected municipalities lower sales tax rates for a specific amount of time. (Lowering the tax rate could also potentially bring in more revenue, if people take advantage of the lower rate through increased consumption. After all, raising taxes does not always increase revenue.)

At any rate, municipalities should not be allowed to keep the stacked taxes in place. The state capped municipal sales taxes at 1.5 percent for a reason: to prevent cities from raising taxes beyond a specified point. Municipalities need to find a way to use their funds more efficiently. Allowing them to keep the extra taxes without any sort of penalty sets a bad precedent for future behavior. Protecting the practice of tax stacking now only ensures that it will continue to happen in the future.

The Post-Dispatch had an excellent article Monday about the city’s issues with such a sizable proportion of land in St. Louis being owned by nonprofit entities, and thereby exempt from property taxation. The article discusses in detail the phenomenon of payments in lieu of taxes (PILOTs), which you frequently find in St. Louis County but not very often in the city. (I believe the Cardinals are making PILOTs to the city school district in exchange for their Ballpark Village TIF.) 

When I worked at the St. Louis County Council for Councilman (now judge) Kurt Odenwald, he chaired the council’s Revenue and Personnel Committee, which had as its primary role the study of tax exemption issues. You might be surprised to know that there is no hard-and-fast state law governing what gets to be exempt and what doesn’t. While it is obvious that a church or school is exempt, what about a nursing home that sets aside 5 percent of its rooms for charity cases? In cases like that, it is often up to the county in which the facility resides as to whether it is tax exempt. Sometimes, a promise by the applicant to make PILOTs that partially make up for the lost taxes can be an important factor in the county’s decision. I really remember this one example cited in the Post article:

Closer to home, Lutheran Senior Services, a nonprofit, gives Webster Groves $28,000 a year[.]

I remember it so well because when Lutheran Senior Services decided to make the first PILOTs to the city, school district, library district, and county, they didn’t know how to go about doing it, so they just mailed all the checks to Councilman Odenwald’s office. The next day, I had to hand-deliver all these substantial checks to various government officials — who were, not surprisingly, very happy to see me. (The process of making the payments was clarified the next year.)

A very important point in the story is found near the end:

He said cities that have an earnings tax typically don’t have PILOTs. Detroit and Pittsburgh are two exceptions.

I’ll point out that Pittsburgh depends primarily on its property — especially land — taxes, so tax exemption is particularly noticeable there. And I think that generally you always want to do the opposite of what Detroit does. Of course, St. Louis County has no earnings tax, so the PILOTs are more understandable there. (Do you ever notice that nobody ever expresses concerns about city residents who work in the county being free riders in the county? Why does it only come up as a defense of the earnings tax?)

My basic belief is that nonprofits generally receive the same services everyone else does, so I see nothing automatically wrong with them being required to pay some type of property tax. Although the Post article focuses on large nonprofits, I think it is the small nonprofits (the ones without their own security forces) that genuinely use government services like everyone else. But I would only really support these efforts if they entail broadening the property tax base so that the overall rate can be lowered — not as an excuse to raise additional taxes or fix a budget hole. Beyond that, I would only support something like it in St. Louis or Kansas City if the earnings tax is eliminated. But if that were to happen, I think requiring nonprofits to pay some type of property or land tax would be reasonable.

In his quest to balance the budget, Gov. Jay Nixon has proposed cutting tax credits drastically:

[Nixon's economic development director David] Kerr said that rather than just putting caps on tax credit programs, the administration wanted to “reform the whole thing from scratch.” Under the plan, the state would set a “global cap” of $314 million in tax credits that could be authorized next year. The number is pegged to 70 percent of the credits claimed last year.

Certain tax credit programs, like the Homestead Preservation Credit for the elderly, would be exempt from cuts and caps, but most of the others would be subject to the cuts. Tax credits are something that Show-Me Institute scholars have written about frequently in past articles and blog entries. Lower tax rates across the board are preferable to targeted tax credits, which can be used to help special interests. The governor’s drastic plan is a good step in the right direction toward decreasing dependency on these credits.

(To be fair, there are a few tax credits I personally think should be kept, namely the charitable contribution tax credit. It is not targeted at any one business, but can be used by individuals to benefit the causes they deem worthy of donation.)

In discussing the governor’s plan, Show-Me Institute staff writer Audrey Spalding made an interesting point: The fact that the governor plans to cut only half of the tax credit programs seems to imply that there is still some value in the 61 tax credit programs currently in place. She suggested that tax credits should be subjected to an appropriations process, an idea proposed in the General Assembly by Sen. Jason Crowell. This would force the real question of whether each program and tax credit is useful in and of itself in comparison to other possible avenues for government spending.

Up until now, the amount that the state spent on tax credits was not bound in any way. But every tax credit awarded is money that cannot be spent elsewhere. At any point in time — but especially during a budget crisis — these tax credits need to be subjected to great scrutiny, so that the cost-benefit analysis is able to weed out the least deserving programs. I applaud the governor’s efforts to reduce tax credits, but I hope that the process goes even further, and officials reexamine the value of each tax credit.

In an op-ed published today, the editorial board at the St. Joseph News-Press encourages Missouri’s legislators and leaders in economic development to “consider the competing needs” when deciding whether to continue financially supporting the Tour of Missouri. (Link via Combest).

Taxpayers understand you don’t add to your stock investments when you are struggling to buy food and pay for college tuition. Business owners rarely add a second location, no matter the potential, when times are tough and they have payrolls to meet.

So, too, the state’s legislators and economic-development leaders must choose between funding the cycling competition or fully funding such things as teachers and early-childhood education.

This is an example of the “hard choices” that Sarah Brodsky described earlier on this blog. Before they spend money on any program — be it a cycling competition, a light-rail expansion, or anything else — state and local governments should perform this kind of cost-benefit analysis to determine whether the money can be spent more wisely elsewhere.

Gov. Jay Nixon has proposed $120 million in cuts for the state’s Medicaid program. There has been a lot of talk on both sides of the partisan aisle about whether this was a good move, so I decided it would be useful to try putting that number into perspective.

These numbers, though, may not matter for too long. The federal health legislation, set to go into effect in 2014, is expected to expand the Medicaid pool drastically and add at least $1.34 billion total cost over 10 years.

The Kaiser Family State Health Facts website has data on Medicaid spending per enrollee, as well as on total state expenditures. Unfortunately, the site did not have both Medicaid spending data and total state expenditure data available for the same ranges of years, so my comparisons are not perfect. They do, however, serve to illuminate the spirit of the argument. The figures for Medicaid spending per enrollee are from 2006, the state expenditure figures are from 2004, and total Medicaid spending is from 2007.

Here are some spending facts for Missouri:

According to American Academy of Pediatrics in Missouri in 2007, the state will lose $1.60 in federal matching funds for every $1 it cuts from its state Medicaid budget.  The governor proposed a $120 million cut from the Medicaid budget, so assuming that proportion does not change, we can extrapolate that to be about $312 million total from the Medicaid budget.  As of September 2009, MO HealthNet had 865,477 enrollees, and $312 million averages to around $360.49 in cuts per enrollee.  This means that the cut amounts to approximately 8 percent of the 2006 amount per enrollee.

So, even without a close analysis of which services are being cut, it is clear that this amount is not as alarming as might be expected.  (It would place Missouri  43rd in the country on per-capita expenditure, based on the numbers from 2006.)

Frankly, I believe the real issue is how these cuts are made. Medicaid and Medicare are large black holes for resources that have the potential to swallow the state and federal budgets. It is not sustainable for them to grow continuously, and would be better if they could be shifted into the private sector via vouchers or well-designed cuts. Spending large amounts of money on Medicaid, if not spent in the right manner, can be even more detrimental than a smaller amount because it can distort the market and incentive structures. A closer analysis of how these cuts are being done is necessary to come to any distinct conclusions, but the numbers by themselves are not as frightening as some may believe.

There is a very weak letter-to-the-editor / small op-ed in the Springfield News-Leader today (hat tip to Combest) from someone with the state workers union, presumably some type of official affiliated with them. Here is the best part of the letter:

How does Missouri’s 48th worst pay for state workers in the nation contribute to our budget crisis? [...] It doesn’t make sense, and it doesn’t position Missouri for future prosperity and economic growth.

So, logically, if Missouri wants to position itself for future prosperity and growth, the first thing we should do is give our state employees a raise? Because taking more from the general public to give more to state employees will result in spending multipliers so grand that we’ll all be living the good life? I guess that is the logic. Thank goodness the governor and the legislature don’t seem to agree.

I truly believe that a large public employment sector is a real threat to our financial stability and our economic freedom. For every police officer, fireman, and teacher doing important work out there, there is a clerk who got hired because they were some connected person’s cousin. Most public employees then become part of a consistent movement for more government and higher taxes, as they are the ones who benefit from that. Unfortunately, it takes a recession to generally see layoffs in the public sector – which many of us would agree is not the best time to lay anyone off. (I do give credit to former Gov. Matt Blunt for reducing the state payroll during good economic times, but that is a rarity.) However, if it has to be done during a recession, then it has to be done. There is nothing special about government jobs. They should be maintained only as long as it takes someone 40 hours a week to perform a needed public service. Once the service becomes unnecessary, the revenues are not there to support it, or it turns out that certain people are not needed for 40 hours (impossible to imagine for bureaucrats, I know) they should be let go.