Bad Solution to the Wrong Problem

On July 1st a provision of Referendum C, the five-year Taxpayer Bill of Rights (TABOR) refund suspension, came to an end in Colorado. As we cast off this bipartisan travesty, it is important to look back and see why it happened, so it never, ever, happens again. Ref. C was a bad solution for a problem that didn’t exist.

Colorado’s economy was doing quite well throughout the ’90s. However, from 2001 to 2002 the economy took a dive and general fund tax revenue decreased from $8.8 billion to $7.7 billion, a 12 percent decrease. Those who see TABOR as a threat to their power decided to do as Rahm Emanuel advocates, “Never let a serious crisis go to waste. What I mean by that is it’s an opportunity to do things you couldn’t do before.”

This was their chance to cripple TABOR.

Supporters of Referendum C blamed the need for budget adjustments on the TABOR limit and so-called “ratchet effect.” They told Colorado voters that a five year exemption from the TABOR revenue limit was needed to prevent the state from collapsing into Mad Max style chaos. In 2005, Ref. C was predicted to raise $3.7 billion over five years, making it the largest tax increase in Colorado history. All of this, however, was based on the premise that the budget shortfall was caused by TABOR in the first place.

Reality disagreed.

The economy in most states suffered during the 2001 recession. Aggregate general fund revenues declined an average of 6 percent for all states. The 9/11 terrorist attacks compounded this problem and not only damaged the nationwide economy, but hit the Colorado tourist industry particularly hard. At the time, tourism accounted for 8 percent of all jobs in Colorado. As a result of 9/11, visits to ski resorts declined by 14 percent for the first part of the season and 4.4 percent for the entire season. National Parks visits fell by 8 percent, and the rafting industry saw its first commercial decrease since 1988.

On top of the recession and terrorist attacks, Colorado also faced the worst drought in 25 years in 2002. The entire state was declared a disaster area for the first time since 1977. It was the driest year since 1703 along the South Platte basin, and since 1579 along the Colorado River. As you can imagine, this was not a good year to be a farmer or rancher. Dry-land wheat production was at 45 percent of its 10-year average. Cattle breeding stock was down 40-50 percent and Southern Colorado ranchers lost 80 percent of their herd and $460 million.

The third major problem with the budget was a result of an earlier “solution,” Amendment 23. Amendment 23 mandates yearly increases in K-12 education regardless of revenue collections. If revenues are high, the increases come out of the TABOR refund, but if revenues are low, the increases come out of the general fund. In tough economic times, education spending continues to increase, but other services decrease even more than they would have otherwise. When the budget decreased from 2001-2002 by over $1 billion (12 percent), education spending actually increased by $846 million (16 percent). From 2001-2006, state school finance spending increased by 39 percent in Colorado.

Crisis (or perceived crisis) can cause people to act irrationally and to listen to opportunists looking to expand their power. TABOR was unnecessarily handcuffed and the taxpayers suffered. The silver lining will come if we can learn from this mistake and work towards solutions to problems that actually exist, such as so much of our current state budget being tied to federal programs that require automatic state spending increases every year.

Originally appeared in the Denver Daily News, Colorado Springs Gazette, and The Independence Institute on July 16, 2010

More information on Referendum C is available in my Independence Institute paper "Referendum C: The Wrong Solution for the Wrong Problem." 

LTE: Private trash option would help problem

This letter to the editor appeared in the Denver Post on June 18, 2010

Re: “Gripes, garbage pile up as city reduces service,” June 15 news story.
Residents in north Denver are learning the lessons of government failure the messy way. Trash piles up as the city-run trash monopoly is strapped for cash and reduces services.

Bill Vidal, Denver’s manager of public works, explains that “Budgetary constraints are budgetary constraints. I can’t print money.” He is right — this isn’t the federal government, after all. However, when the government creates a monopoly on a service, there is no competition and there are no options for customers. When the government fails, everyone suffers.

Colorado Springs doesn’t have this problem. Trash service is private, competitive, and working great. In fact, the only area of trash service that is suffering is availability of trash cans in public parks. Again, this could be solved by private sponsorship of trash cans, which PETA recently offered and the city rejected.

Todd Hollenbeck, Woodland Park

Socialism: The Morning After

Filmmaker, Michael Moore, has recently squatted down and dropped another steamy pile of “documentary” into the can. His new film is an attack on Capitalism which I have not seen, and don’t plan to see. Because I have not seen it, this article will not be an attack on the content of the movie. I will give him the benefit of the doubt and assume that Moore has abandoned his previous techniques - sensational and sophomoric attacks - and has decided to finally become a true seeker of the truth.

I assume he went to the Mises Institute to interview Lew Rockwell, Jr. and discuss the economic theories of Ludwig von Mises, F.A. Hayek, and Murray Rothbard. I’m sure Moore provided an in depth argument explaining why prices should be determined by the Labor Theory of Value and not by supply and demand in a laissez faire system. Moore no doubt backed up his arguments with Rockwell with volumes of evidence to show how planned economies have out performed free economies.

While at the Mises Institute, Moore probably sat down with Thomas Woods, author of Meltdown, since Moore’s movie is supposed to be a look at Capitalism’s role in the financial collapse. They surely discussed the Austrian Theory of the Business Cycle and the role of interest rates in the market. They probably also discussed the role of the Federal Reserve in inflating the money supply and artificially setting interest rates and how that caused the housing bubble. Moore no doubt was able to show how it was capitalism that caused these problems and not the manipulation of the market by the Federal Reserve, government-owned enterprises like Freddie Mac and Fannie Mae, and government action such as the Community Reinvestment Act. Moore also probably pointed out how the Stimulus and all of the Bailouts have saved capitalism just like the New Deal “saved” it in the 1930’s.

After Moore’s intellectual economic debates with Rockwell and Woods, he probably hopped aboard the Amtrak and rode with the “common people” down to California to meet with Yaron Brook from the Ayn Rand Institute to discuss the moral and philosophical implications of capitalism as explained by Ayn Rand’s Objectivism vs. Marxist and Rousseauian Socialism. Moore obviously made reasoned and logical arguments for why the ideas that people should be “forced to be free” and goods should be distributed “to each according to his need, from each according to his ability” are morally and philosophically superior to ideas like voluntary cooperation and working in one’s self-interest.

I’m sure that he didn’t resort to his usual tactics and stand in front of AIG with a megaphone shouting that he “is making a citizens arrest of the board of directors…” Oh wait, he did that in the trailer?!? I’m sure that was just to attract an audience, but the rest of the movie will be full of facts, logic, and deeply thought-provoking arguments.

Anyway, what I really want to know is, how is he going to handle ticket sales and paying his employees? As we know from Michael Moore, profit is bad and he is the defender of the “common man” (i.e. the proletariat.) Therefore, is he going to be using Marx’s Labor Theory of Value when deciding how much the movie should cost and everyone should be paid? How will he determine the cost of the labor applied to making the movie by his cameraman, writers, producers (wait, is that like an evil CEO? Screw that guy then!) grips, editors, etc.? How much is he going to pay himself? Is he making the same amount as the cameraman?

Then next question is how will he decide what people should pay to watch the movie? Will people have to bring a pay stub and their recent tax return to determine their ability to pay? Will they also need to bring proof of their political and economic affiliations to show their “need”? Obviously libertarians and objectivists are the most in “need” of watching this movie since we are the ignorant masses that still believe that capitalism is the only way to ensure individual rights and liberty. Conservatives will have to pay slightly more, and progressives and socialists will pay the most (unless they are poor) since they don’t even “need” to watch this movie. How will we determine “need” vs. “ability”? How much would a rich conservative pay? Would a poor libertarian actually make money if they go? A rich progressive would have to sign over the lease on his Prius for a ticket.

Or does this movie belong to the people (read: State)? How can Michael Moore claim any ownership of this film? Film is art and art belongs to the people right? How very greedy of Mr. Moore to try to keep this movie to himself AND to make money on it! He should sign ownership of this movie over to people of the world, and give all the money he has made from this movie and any of his other films to the government. Once he has signed over all of his property, he should work in whatever job the collective decides would most help the collective (the show Dirty Jobs has some great ideas), send all of that money to the government and sign up for welfare and Medicaid, so the government can take care of him just like in his favorite country, Cuba.

This Article also appears on DC Write Up

Lesson on Inflation from Duck Tales

This is a great video to show the damaging effects of the Federal Reserve and Inflation.

Go to The Mises Institute to find free audio books, pdf books, articles and more about Austrian economics and free market capitalism.

Don't look to Washington, Look to Yourself

With all of the problems we are facing, it is understandable that people are looking for a leader to show us the way out. The worst place we can look, however, is Washington, DC. The Democrats look to Obama as their savior, while the Republicans search for this generation’s Reagan. Looking for a good politician, however, is like looking for a good hurricane. There are no good hurricanes; there are just less destructive ones. It is the nature of the political profession to be meddlesome and to use force to control people and destroy liberty.

Politicians are largely a reflection of the people. It is often said that people get the government they deserve. That is what has gotten us into the mess we are currently facing. We are looking for the government to fix the problems that we wanted them to create in the first place. We have allowed the government to swell to unbearable levels and now we are looking for other politicians to try to override the expansion. It is a noble undertaking for activist organizations to fight the growth of government and for grassroots organizations to try to elect freedom fighters, but at best they will only slow the growth but not reverse it. We must not look to Washington or to the parties to fix our problems. We must look to ourselves.

Washington cannot fix our problems because most people are not willing to accept what is necessary to fix them. The solution to 99 percent of our problems, especially the domestic ones, is more liberty and less government. Most people, even those who may support liberty in their own lives, favor governmental tyranny over the lives of others, and look to the government as a security blanket. A candidate that truly advocated liberty could never win an election today. Too few people understand what it means to be free. We have become a country of jealous spoiled children, always looking for someone to kiss our boo boos and constantly whining that life isn’t fair.

We no longer strive to achieve as individuals. Rather, we complain about those who have more than we do. The homeless man complains about the man who makes $40 thousand a year. The man who makes $40 thousand complains about the man who makes $100 thousand. The man who makes $100,000 complains about the millionaire. Instead of looking to those who have achieved as role models or as competition pushing us to work harder, we complain about how unfair their success is and hope for their downfall. We are no longer a country that admires success; instead we celebrate and reward failure. Is it any wonder that as spoiled children we now have government acting like an overbearing parent?

If we want to break free and become adults, we must grow up and accept responsibility for ourselves. We must use our minds and stop expecting someone else to take care of us. We must defend capitalism and work within our reality, using our rational minds, rather than escaping to a fantasy world. We live in a concrete reality, we can not change reality, we can only adapt to our surroundings by using our rational minds. This is what separates humans from animals, and adults from children. We must face the world free of contradictions and inconsistencies.
The government only functions to protect your life, liberty, and property. Government is only force-it can only act to physically stop something. It cannot give something to someone unless it first takes it away from someone else. We cannot demand that the government protect us from thieves and then expect it to steal on our behalf. We cannot complain when the government restricts our liberty and then demand it restricts the liberty of another.

Only when we are a people free of contradictions and inconsistencies in their beliefs and actions; only when we embrace reason and reality and use our rational minds to make decisions, rather than rely on our emotions in a fantasy world that cannot exist; only when we accept that voluntary trade in a capitalist system is the only moral and practical method for allocating scarce resources; only when we are worthy of liberty will we have a government that protects liberty.

We must stop looking to others for leadership and guidance. We must take it upon ourselves to learn about the economics and philosophy of liberty, and then spread that message to others. We cannot look to Washington or the government for leadership. We are individuals. We are rational, thinking beings. We are producers. We are free men and women, not spoiled children. It is time we started acting like it.

This article was also published at The D.C. Writeup