Of regents, Steve Sebelius, tax hikes and stadiums
August 14, 2014
Three of my fellow regents recently called for a Clark County sales-tax hike to partially fund a 50,000-seat stadium at the University of Nevada, Las Vegas. One Regent also proposed yet another significant fee increase for UNLV students to fund that and other projects, even though fees have doubled in real terms in recent years and are set to rise 17 percent more in the next four years. And he proposed an increased hotel-room tax.
Liberal Las Vegas columnist Steve Sibelius said it was good they "found the courage" to push a tax increase. But, he argued, there are other higher priorities for tax dollars. So, he won't support tax increases unless public spending is first increased by unspecified amounts for his pet causes.
I've never seen any of these folks even recognize the fundamental issues raised by tax-hike proposals, let alone address them. Namely, how much public spending is enough? And do they understand that the continued growth of the public sector relative to everything else is not only destructive of human well-being but also unsustainable? Do they even know that, despite false liberal narratives to the contrary, public spending has grown much faster than Nevadans' incomes and is excessive?
The central fact is that government all over America has long been too big relative to our economy, as shown by substantial empirical (not theoretical) research. That research finds that when public spending devours too much of our incomes, economic growth slows significantly — thus diminishing overall human well-being for at least as long as government excess continues.
Growth and overall human well-being are maximized when public spending is 20 to 25 percent of the economy, a level last seen in America over 55 years ago. Because public spending, regulation, litigation fostered by public policy, and the taxes to support all of it have steadily increased over that time, Ronald Reagan was spot on when he said decades ago that government is too big. But despite his best efforts and those of many limited-government advocates, the destructive growth of the coercive sector relative to the economy — its dominance of our lives – has continued, reaching record levels after 2007.
Nevada, contrary to tired liberal dogma, is not a low-tax state, with its tax burden having risen to 25th or 26th among the states, depending on whether it is measured per person or relative to the incomes of residents. The tax burden has increased in part because real, per-person state general-fund spending has risen 30 percent in the last two decades, while the incomes of Nevada families and businesses have increased only ten percent. With local taxes and spending also rising in real, per-person terms, the burden on Nevadans for state and local government is already too high, but still growing.
Maybe Sebelius and other reflexive tax-hikers could muster the "courage" — and the integrity and diligence — to say exactly what fraction of the economy they ultimately want for government. All they've ever said so far is, "More!" If they do, they should bear in mind that the non-recovery from the Great Recession we've experienced the last five years (and will continue to bear) is due to the accumulated half-century of government excess capped by the taxing, spending, borrowing, regulation and litigation blow-out since 2008. New increases will further diminish growth and human well-being.
Sebelius flogs spending on K-12 education and mental health services foremost among his pet causes. Is he aware that K-12 and Health and Human Services spending have grown faster over the last 20 years — nearly 40 percent in real, per-person terms – than all other areas of state spending, and much more than Nevadans' incomes? Most of the increase has come since the recession, as Nevadans' incomes have declined 10 percent.
It feels good to posture as the advocate of the children and the sick. And that is what modern liberalism is much about: posturing and manipulating symbols and images to claim virtue by recklessly spending other people's money and rights on one's favorite causes. But Nevada's experience of having poor K-12 and mental-health-care results despite massive state spending increases in these areas confirms the common sense and empirical research that concludes that money isn't the issue. The issue is the systematic failure of government to reap efficiencies, manage costs reasonably and adopt sound policies that would actually deliver high quality services.
Sebelius is right that we need to prioritize government spending — after we complete the task of deciding how much government should get overall. That is, government, like families and businesses, should manage its spending within budget constraints, because that's the only way it will become reasonably efficient and not continue to grow unsustainably. He's also right to suggest the market for entertainment (what happens at stadiums) in Vegas is not so dysfunctional that the public sector must intervene via its higher education institutions to provide such services — especially when they're already challenged to perform well their educational functions.
Ron Knecht is an economist, law school graduate and Nevada higher education regent.
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