NH Sen Jeb Bradley - Making Tough Choices to Ensure A Strong Economic Future

By Jeb Bradley: June 25, 2011

On Wednesday, both the House and Senate passed a comprehensive two year budget that Governor Lynch has said he will not veto. Some have praised the budget’s fiscal responsibility while others have criticized the cuts it makes to services. From my vantage point, it is a budget that makes tough choices, establishes priorities, and makes long overdue reforms so that government services will be delivered in a more cost effective manner – all of which will enable NH’s competitiveness and future job growth.

Six months ago NH confronted a gaping $800 million projected budget gap. Despite a languishing economy, the previous two budgets had increased spending 23% from $9.36 billion to $11.5 billion. Prior budgets had relied on inflated revenue estimates that never materialized, borrowing for operating expenses, and one time federal stimulus dollars. Alarmingly, despite nearly 100 tax and fee increases, an $800 million gap loomed. Voters said enough last November.

The 2011 Legislature established two goals: NH would not raise taxes that would harm economic recovery and NH government would live within its means -- just as working families and small business owners have been forced to do in the current economic climate. Budget writers knew great caution was necessary in predicting future revenue and certainly the last six months have proven the wisdom of that caution as revenue has not met expectations. They also knew continued borrowing for operating expenses was unsustainable. Lastly, budget writers knew that with a $14 trillion dollar federal debt and trillion dollar deficits stretching as far as the eye can see -- federal largess was neither possible nor warranted.

Extraordinary tough choices had to be made and priorities established, which meant programs – many worthy -- were cut. Governor Lynch initially proposed significant reductions to hospitals for uncompensated care, cuts to programs that serve troubled youth, catastrophic aid for schools districts’ special education costs, Healthy Children, and to the Post Secondary Education Commission, as well as cuts to virtually every state agency except prisons. The Governor also proposed complete elimination of the 35% state assistance for cities and towns’ retirement costs which would have the effect of increasing property taxes by $85 million annually.

Governor Lynch also presumed that revenue growth would be a relatively healthy 3.5%. Unfortunately as winter turned into spring, revenue in the current budget was $42 million less than projected. Legislative budget writers had to make further spending reductions than those proposed by the Governor. NH has learned the hard way: spending that depends upon revenue that may never materialize is foolhardy.

When the budget reached the Senate, the chair of the Finance Committee, Chuck Morse, effectively established priorities. Senator Morse added funds back in to the budget for mental health programs, the developmentally disabled, Service Link, troubled youth, adoption initiatives, and catastrophic aid for special education. Morse proposed key reforms including allowing up to 600 inmates to be incarcerated at private prisons to create savings to pay for some of these adjustments. The Governor’s proposed elimination of retirement assistance to cities and towns was mitigated by pension reform legislation – benefitting hard pressed property taxpayers.

Given the significantly under-performing revenue, funding could not be restored for the University System or to hospitals. Some people have asked why then was the tobacco tax lowered and why were net-operating-loss provisions expanded. Supporters of the tobacco tax decrease believe there will be no net revenue loss as an increase in cross border sales will occur that will help small businesses. If there is a revenue loss, then the budget calls for the tax decrease to be removed in two years. The net-operating-loss provisions will only take effect in the next budget. These provisions allow business to better carry forward losses against future profits. This will improve New Hampshire’s business climate and has been an important priority for chambers of commerce across the state.

In total, spending has been reduced to $10.2 billion -- an 11% cut. Taxes have not been raised, borrowing for operating expenses has been eliminated, no federal bailouts have been assumed, and rosy revenue projections have been rejected. This budget does what small businesses, working families, and taxpayers have been doing for some time: making tough choices to live within their means.

While much has been written about the budget’s bottom line and the impact on particular programs, less discussed are the reforms that will enable state government to deliver services far more effectively and efficiently.

Medicaid – the largest cost item in our budget – will be delivered through managed care as a result of legislation I sponsored and Governor Lynch recently signed. Managed care will save millions without sacrificing quality. A new education funding formula maintains funding levels, holds communities harmless, eliminates donor towns, while mitigating large spending hikes in Concord. Bipartisan legislation I sponsored will curtail the practice of revenue auditors assessing what in essence is an income tax on the salaries small business owners pay themselves – a key reform to enhance NH’s competitiveness. I also sponsored bipartisan Shoreland Protection legislation which protects our shoreland while also simplifying the permitting process and helping homebuilders create jobs. Prison and retirement reforms will also clearly benefit taxpayers.

Voters sent a clear message last November – government had to live within its means and stop reaching ever further into taxpayers’ pockets. This budget makes the tough choices to do exactly that. By doing our job in the Legislature ending the climate of spending hikes, unsustainable borrowing, inflated revenue projections, and ever more tax and fee hikes; the stage is set for further job growth –and when job growth is sustained --- revenue will grow.

Tough choices, priorities, necessary reforms that will grow jobs -- or as President Kennedy said a rising tide that will lift all boats.

BEWARE VICTORY!

Advisory Note to the GOP

You know the old saw: “Beware of what you wish for.” We Republicans wished for a sweeping victory. We got it, nationwide. Now we need to govern.

Yet, “to govern” presents a high hurdle. For the problems to be faced and resolved are not only complex, they are wickedly so. The odds of failure over the next two years are high. As an economist, let me say that the odds are also high that the economy will be little better two years from now than now. Incomes will still be low and unemployment still unacceptably high.  For the economic grist for the GOP campaign mill -- “cut spending, reduce taxes” -- is not up to the challenges of our troubled economy. Thus, it is likely that another wave of resentment to “throw the bums out” will emerge during 2012. The “bums“, however, would be Republican bums, as in ‘06.

So what’s to be done so the Republicans can take some credit for economic revival, jobs’ creation and unemployment reduction over the next year or so? After all, we were largely correct in our claims that Osama’s “stimulus” has failed. Pure government spending, as if government is a productive sector, is largely waste from the standpoint of what are the three prime drivers of economic growth and development -- entrepreneurship, innovation and productivity. Yet, there is potential that government spending might have positive impacts to the extent that it: (1) is not “pure” but rather directed to spurring the latter three and (2) provides incentives to private sector investment spending.

Several guidelines, advisories or suggestions emerge from this line of thinking, as follows.

ü      Think long term. Try to put aside the inevitable temptations of Members of Congress  to look for stimuli in the form of “quickies”. This advisory implies major job-creating public infrastructure projects in the areas of transportation, science and technology, water, renewable energies and the environment.

ü      Raise productivity: With the help of people from business, labor and the inter-disciplinary research community, formulate and implement a strategy to foster productivity improvements.

ü      Spur entrepreneurship and innovation: For example, see my “Strategy to Increase Entrepreneurship and Innovation…” Note that 64% of net new jobs arise from science or technology-based enterprises no more than five years old.

ü      Consider a carbon “tax” [actually, a fee on emissions of carbon pollutants]: This is a market-perfecting device that provides real incentives for accelerated development of renewable energy sources. “Real” means prices that account for the external costs of our over-dependence on carbon fuels. Remember what happened in the ’70’s when the price of oil declined? -- Conservation efforts were canned and renewable energy projects went by the boards. Our dependence on foreign oil has been increasing ever since. Regional Greenhouse Gas Initiatives like that in New England have demonstrated that a few cents’ increase in electric power bills provide millions of dollars’ worth of investment in renewable energy. Part of the fee’s yield could also help to reduce governments deficits.

ü      Remove regulatory impediments to entrepreneurship and innovation at all levels. 

These sorts of initiatives call for significant communication, cooperation and collaboration [3Cs] between the executive and legislative branches of our government, giving new life to bipartisanship. Without such new life, those of us who look forward to a new Congress to “get things done” will be sorely disappointed. The most significant threat, however, would be to the economy. As a commentator in “Moneynews” remarked online on election day in an article entitled “Gridlock in Congress Will Threaten Economy“:

              “A standoff between the Obama administration and emboldened Republicans will probably block any new help for an economy squeezed by slow growth and high unemployment.”

If the old political power and ego games reign in the new Congress, we all lose. There is a lot more at stake than Congressional egos. Let us hope that the 3Cs approach can prevail.

The new Republican-dominated Congress, for example, should be open to supporting President Obama’s new $50 billion dollar “Stimulus II” package -- to the extent that its transportation and any other infrastructure projects help to improve productivity as well as provide jobs.

The 3Cs, therefore, amount to a basic guideline for the new Congress. The great American majority of “We the People” expects their elected and unelected officials to work together for the good our country. That is the main challenge. That is primarily “What’s to be done.”

            PETER BEARSE, Ph.D., International Consulting Economist, 11/3/10. Send questions or feedback to pjbearse@gmail.com or by way of a call to 382-8079.



Rep McCotter - Obama's Great Redistribution

Remaking our economy through government is a road to ruin

By Rep. Thaddeus G. McCotter - The Washington Times – 10 September 2010

In the wake of their wave of elections in 2006 and 2008, the Democrats' tsunami recedes from shore and sweeps us into the economic abyss of the 1970s. Americans clinging to their prosperity amid the devastation wonder what happened.

Exploiting the pain of this Great Recession to impose its great redistribution of your money, the left simultaneously perpetrates a "temporary" government spending spree and a permanent expansion of the welfare state. This disastrous course prolongs and deepens Americans' tribulations and threatens limited government and the very foundation of American exceptionalism.

As known by every American who has courageously restructured a family budget or a business plan to meet the economic challenges of globalization, our nation not only suffers a recession. We confront a great restructuring.

In this age of globalization, we interact across the globe in seconds. The communications revolution's expansion of individual freedom and self-government spurs the decentralization and democratization of once highly centralized and bureaucratized organizations. And it dooms big government. Thus, our task during this restructuring is to match the consumer-driven economy with a citizen-driven government.

Being in the party of big government, Democrats cannot hope to embrace this change. Typified by last year's record 16 percent increase in federal spending to $3.2 trillion, at your expense the left labors under the delusion that its redistribution can prevent the restructuring's inevitable implosion of big government.

To wit, President Obama's erroneous, radical and professed intent to have government lay the foundations of a new American economy. Previously, the federal government sought to regulate our economy. Today, this leftist government wants to re-create our economy. Such hubris ignores the reality that the most prosperous and equitable economy in human history was created by the American people, not the federal government, and it rejects America's revolutionary experiment in freedom and limited government. If, as under Obamacare, the federal government can arbitrarily and radically re-create our economy, it is no longer limited and subservient to the sovereign American people.

Ideologically enthralled, the left has replaced the housing bubble with a government bubble designed to prop up the decrepit welfare state. This economic quackery pumps monetary morphine into the terminal carcass of the left's Great Society model of governance, wherein your power, property and decisions are concentrated increasingly in a highly centralized, corporatist and bureaucratic state. In consequence, the left's big-government orgy of spending, taxes, deficits, debt and depressed economic growth does not facilitate a brighter future; it perpetuates the benighted present.

It cannot do so indefinitely. To date, government has escaped restructuring because, while families and businesses can spend only what they make, government spends what it takes - and more. Still, government will not prove immune to necessary change. Best we immediately reject and prudently rectify the left's redistribution, for the longer the restructuring's economic day of reckoning is denied, the greater the number of Americans - present and future - who will be crushed beneath the wheels of the left's fiscal train wreck.

Admittedly, the times require more from Republicans than bland mantras of reduced spending and balanced budgets, because this fails to put such proposals in the proper context of ultimately transcending the restructuring. This omission enables the left's redistribution to pose as a palliative to our present distress, paint Republicans as draconian accountants and thereby diminish a prospective GOP majority's ability to attain even a modicum of fiscal integrity in federal spending.

During the restructuring, Republicans must hasten government's reformation so Americans are free to forge our path to enduring economic growth in this nascent age of globalization. In so doing, Republicans' core principle must be that true progress is the expansion of liberty and self-government, not the increase of bureaucracy and big government. Only the entrepreneurial and industrious American people will keep our economy the world's inspiring light of prosperity.

Again, the good news is that by dooming big government, the great restructuring will ensure our economic destiny stays in our hands. The only question is how much of it will be left in our pockets when the great redistribution's bill comes due.

Rep. Thaddeus G. McCotter of Michigan is chairman of the Republican House Policy Committee.

Learn from History

Depression of 1920-1921

When President Harding assumed office on March 4, 1921 the United States was in the midst of a post war economic depression. By 1920, unemployment had jumped up to 12 percent and the GNP had dropped by 17 percent. Harding ignored Secretary of Commerce Herbert Hoover's recommendation for proactive federal intervention; rather Harding cut tax rates for all groups, including the reduction of the top rate from 75% to 25%. His efforts to reduce the national debt also involved cutting Government spending by 50% over the next 2 years. The resultant climate of low Government spending and low taxes allowed the private sector the room it needed to add jobs at a rate not seen in modern times. Recovery began to take place in summer of 1921; by 1922 unemployment receded to 6.4 percent; by 1923 the unemployment rate was 2.4 percent. The continuation of his policies by his Vice President, after his death (only 2 years into his Presidency) laid the foundation for the era known as the "Roaring Twenty's", and by 1926 unemployment had reached a record low of 1.8%, the lowest ever recorded in peacetime. Economist Benjamin Anderson writes, "In 1920–21 we [the U.S.] took our losses, we readjusted our financial structure, we endured our depression, and in August 1921 we started up again. . . . The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production, and on the free play of private enterprise. It was not based on governmental policy designed to make business good.

History provides the best lessons of all, if we let it.

Tom Peters
Ashland NH
(reprinted from Wikipedia Historical Facts)

ECONOMIC REVIVAL & JOB CREATION A STRATEGY

PETER BEARSE, Ph.D., International Consulting Economist

Independent-Conservative Reagan-Republican Candidate

to represent New Hampshire’s 1^st Congressional District

Economic development is dynamic. It does not arise from a “Plan.” Rather, it is a Strategy that builds upon and amplifies the bottom-up, innovative and entrepreneurial dynamics of a competitive, advanced industrial economy. A Member of Congress should advance program and policies to maintain the U.S.A. as the #1 incubator of enterprise and innovation worldwide. Any strategy falls into two parts, “Macro” and “Micro.”

MACRO means national fiscal, monetary and trade policies. Such approaches should create a national environment to encourage entrepreneurship and innovation. These in-clude:

þ     Restore fiscal discipline.

þ     Reform and simplify the tax code to replace the income tax.

þ     Increase investment in large, long-term infrastructure building and improvement projects.

þ     Free up and expand international trade -- on playing fields leveled through tough negotiations.

þ     Reduce the costs of health care [unlike Obamacare].

þ     Reform our immigration laws. Besides enabling enforcement by state and local authorities, permit more both low-skill and high-skill (especially scientific and technological talent) workers to arrive here legally as guest-workers with a path to citizenship.

MICRO means decentralized (sub-national) private, public and public/private policies, projects and programs to promote and assist entrepreneurship and innovation by state and local authorities, potential and actual entrepreneurs, businesses, schools, inventors and others. They would include:

v     Entrepreneurship education and training: Vastly expand these at all levels and via multiple venues: from elementary school through college, in businesses via “intra-preneurship training” and through business plan competitions, among other ways.

v     Promote business “incubators”, “accelerators” and “innovation centers”. These provide affordable space, facilities and support services for new, start-up enterprises. The term “incubator” has been borrowed from hospitals. Here, it means nurturing baby businesses until they are able to leave the incubator to grow and create significant numbers of jobs.

v     Speed the business start-up process. Here in the USA, it takes 6 days compared to 1 day in New Zealand.

v     Assist new technology-based manufacturing start-ups to help rebuild America’s diminished industrial base. During the start-up phase, they require more space than non-manufacturing start-ups, plus access to costly technologies, equipment and other resources.

v     Cut some slack to students with entrepreneurial tendencies who otherwise, burdened by high amounts of student loan debt, may opt for a “secure” position in a corporate job-slot rather than take the risk to be their own boss.

v     Provide tax credits to “angel” or other investors in new ventures who would be willing to keep their money in new or early-stage enterprises for at least five years. Such commitments facilitate business building during the typically early but also fruitful job-creating years of new enterprises. Studies show that 64% of net new job creation overall in the U.S. is due to businesses 5 years old and younger. 

v     Reward innovation via competitions that provide significant prizes.

v     Cut paperwork and red tape -- to shorten start-up times and minimize the negative impact of government regulations on business development -- the costs of which are typically much higher for small businesses than big businesses.

v     Pass an energy bill to cut our dependence on foreign energy and help build a world-competitive alternative energy sector. To avoid the failures of the ‘70s in this area, such a bill should put a price on carbon emissions.

v     Revamp the Small Business Innovation Research Program to favor innovators over proposal writers.

v     Create local investment institutions, ways and means to enable a truly “bottom-up” approach to economic development whereby local people can invest in the develop-ment of their own communities. These include Community Development Finance Institutions, Joint Municipal/Private Security Offerings, and royalty or micro-finance.

v     Use labor subsidies to assist new business formations. These include extensions or additions to basic unemployment insurance benefits,

By contrast, the Democratic approach of the Obama Administration is top-down statism relying on centralized planning and industrial policy.  Also by contrast, the others seeking the Republican nomination to Congress offer neither plan nor strategy, just the same-old/same-old mantra of lower taxes and a “free” market. But in a time of war, lowering taxes is irresponsible; and the free market, like freedom itself, is not free.