Governors’ policies set stage for states’ economic success (or failure)

Published November 4, 2016

Although many people are focused on the presidential race, candidates running for other important offices, such as for governor, often have a larger impact on the day-to-day lives of most people.

For example, governors are responsible for proposing state government budgets and recommending changes to tax structures. Governors can choose to sign new taxes and new spending programs into law, or they can choose to reject lawmakers’ tax-and-spend proposals. When times are good, governors can expand government spending and intrude further into people’s lives, return tax revenue to taxpayers, or store up revenue as emergency funds for leaner times. And when those leaner times hit a state, governors have the power to push through new tax hikes to fill holes in a state government’s budget, or they can work with lawmakers to help spending and revenue levels balance.

Governors, and the state lawmakers who vote on their economic plans, should be looking for ideas that will help jumpstart economic growth by enacting the policies proven to work in other states.

In a new report published by the Cato Institute, researchers offer a great playbook for lawmakers to use who are looking to learn how to enact fiscally responsible policies. The report, titled “Fiscal Policy Report Card on America’s Governors,” instructs lawmakers using examples of successful policies implemented in various states across the country and shows which governors are leading their states toward economic prosperity and which are leading voters toward higher taxes and additional unsustainable obligations.

One negative trend highlighted in the report is increased government spending associated with governors in both major political parties. Using statistical data gleaned from government sources to grade all 50 governors on their taxing and spending track records, the report finds state government spending increased by 33 percent from 2010 to earlier in 2016.

By comparison, the country’s overall economic output, as measured by gross domestic product—the total value of goods produced and services provided in the country—has grown by about 12.8 percent over the same period. In other words, the value of government spending is growing faster than the value of U.S. commerce.

According to the report, a primary driver behind increased government spending is growing Medicaid costs, a problem predicted by governors and policy experts for decades. In 1998, for example, Ohio Gov. George Voinovich (R) famously referred to the entitlement program as “Pac-Man,” noting how the state government’s spending on health care benefits consumes “ever larger portions of Ohio’s budget and eat[s] away at the state’s ability to direct vital dollars to education and other priorities.”

Almost 20 years later, Voinovich’s Medicaid Pac-Man is still voraciously consuming increasing proportions of state spending, a trend accelerated by President Barack Obama‘s Affordable Care Act, which put policies into place that forced or incentivized states to pay for additional entitlements for a larger number of people.

However, not all governors are dragging states toward economic ruin. Grades formulated using seven variables (four variables measuring governors’ state tax policies, two variables measuring spending policies, and one measure of government revenue figures) show five governors stand out from the pack, earning high grades on their fiscal responsibility: Govs. Doug Ducey (R-AZ), Paul LePage (R-ME), Pat McCrory (R-NC), Mike Pence (R-IN), and Rick Scott (R-FL).

On the flip side, Govs. Robert Bentley, (R-Ala.), Kate Brown (D-Ore.), Jerry Brown (D-Calif.), David Ige (D-Hawaii), Jay Inslee (D-Wash.), Dan Malloy (D-Conn.), Brian Sandoval (R-Nev.), Peter Shumlin (D-Vt.), and Tom Wolf (D-Pa.) earned failing grades because of their big-government policies.

Other studies, such as the American Legislative Exchange Council’s annual “Rich States, Poor States” report, consistently show results suggesting small-government policies such as those enacted by those five “star pupils” and other governors receiving high marks encourage people to move from states with burdensome taxes and out-of-control spending, effectively “voting with their feet.”

Likewise, study after study has shown businesses “vote” in the same manner, with many each year moving from high-tax states to lower-tax states.

Governors across the United States, as well as the lawmakers who send bills to their governor for approval, should redouble their efforts to get government out of people’s way. By spending less taxpayer money and relieving tax burdens, lawmakers can lay the groundwork for the success of their states and the people who live and work there.

[Originally Published at Townhall]