Memo To The Establishment: It’s Not 1958 Anymore

In the 1980’s, I often heard the expression “it’s not 1958 anymore” to describe the changing economic and political climate in the US.  These were the days when Reagan’s was ascendant and Keynesian ideas had been thoroughly discredited (or so we thought). The economy was being de-regulated, capital moved more freely, employment became for flexible for individuals, and innovation of all kinds soared in the private sector.  The days of the UAW and GM agreeing to wage scale increases in large increments and bond markets nodding were tossed into the ash heap just like Jim Crow.  The old Post World War II system was untenable in the emerging global economy and the US, led by Ronald Reagan, showed the world the way to 25 years of largely sustained economic growth. 

Louisiana did not share in this prosperity for the bulk of the past few decades – in large part due to the “old school” model of cronyism championed by the now-incarcerated former Governor Edwin Edwards.  Louisiana became uncompetitive compared to surrounding states like Texas, Florida, Tennessee, Georgia and even Alabama.  Our corporate and individual tax burdens rose, along with public sector spending that outstripped the regional average, and population grew the least in the Southeast.

Then along come the twin events of term limits and Bobby Jindal’s election as Governor in 2007.  Although the jury is still out on how the Governor and the legislature will go down in history, it is clear they have moved away from the tax and spend and spend model that annually forced thousands of our best and brightest to Houston, Dallas and Atlanta for meaningful employment.  The days of raising taxes to maintain the state’s bloated budget are over, as spirited objections to Governor Jindal’s comparatively modest $15 driver’s license fee increase can attest.

Fear not, ye legions of the establishment, along comes John Maginnis with a simple solution, bring back the Stelly tax.  Yes, the state simply cannot afford to make any cuts in a budget that spends more in real dollars than Tennessee with 20% less population.  We cannot consolidate a system of higher education that has twice as many four-year institutions as the state of Florida, a state with about 3 times the college age population and a destination for students from around the country and world. If not for “giving” the middle and upper middle-income voters a break on their state income taxes the state would have enough to keep every aspect of state government humming.  We are competing with states like Texas, Florida and Tennessee, which manage to sustain viable social services WITHOUT ANY INCOME TAX AT ALL, to keep and attract business.  Maginnis speculates that eliminating the Stelly Tax is why the state has not had enough cash to pay out annual refunds; this is the worst economy since at least the 1930’s.  It would be nice to have some firm data on this before fingering Stelly repeal but maybe that would be asking too much. 

Perhaps Washington, DC could be part of the problem, no? The “health care reform bill” signed into law by President Obama this week will add, on top of all the other mandates to states, a massive Medicaid expansion that will cost hundreds of millions MORE annually in a budget environment that is already horrific.  Louisiana is actually
in the top 10
states right now in the soundness of our fiscal condition, so I can only imagine the massive budget cutting going on in 40+ other states.

 What Governor Jindal and the reform-oriented members of the legislature should do is look at this budget situation as an opportunity make bold changes to the higher education budget. There is duplication, everyone who studies this closely knows it, so taking action now can prevent Louisiana from going the way of California, New York and others who are leading their states into an abyss of debt that only a Chinese bond holder could love.  It is not 1958 anymore and we need to make policy changes that reflect the realities of the 21st century, not the same old song and dance of raising taxes every time revenues go down.  Louisiana needs more taxpayers, not more taxes!



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