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A Wyoming Economy or a Government Economy

During Louisiana governor Bobby Jindal’s visit to Wyoming in November 2015, he discussed his strategy to put Louisiana’s fiscal house in order. His basic philosophy of government is that we can grow the American economy or we can grow the government economy, we can’t do both. If we want to grow the American economy we must shrink the government economy. This economic growth strategy worked in Louisiana and it will work in the Wyoming too, if given the chance.

Government spending in Wyoming doubled in the 2000s on the back of a mineral tax revenue windfall. That windfall is over. Now the big question is, what to do?

Consider your own family’s economy. Your spouse has lost his job. Your family income has halved, the state’s economy is on a downswing and it looks like your spouse won’t find another source of income anytime soon – 5, 10 years maybe. In fact, the last time this happened the downturn lasted 17 years!

What do you do? Do you try to maintain the level of spending you’ve become accustomed to by draining your savings account or diverting money from your retirement fund, or do you bring your spending down to match your new fiscal reality?

The state of Wyoming finds itself in a similar situation. Should we reduce government spending to a level we can afford or should we increase government revenue to support the current and future level of spending? The choice will impact Wyoming’s economy.

What are we hearing from the governor and legislators? Governor Mead once again called for Rainy Day Fund raid but this time with a twist. Instead of a straight raid like last time, which failed, Governor Mead wants to divert money from going into the legacy savings accounts, accounts that were set up to protect future generations when the mineral bonanza was over forever.

Other legislators are talking about an even more destructive strategy. Government has an option no family has. It can use the tax system to take money from your pocket to put into its own so it can keep spending on government priorities. Already, legislators are talking about new revenue sources—a thinly veiled call for tax hikes. This would slow economic growth further as resources are taken out of the private sector to spend on political priorities.

Let’s face it. Government has a spending problem, not a revenue problem. Should government take money out of the private economy, the Wyoming economy will shrink as the government economy grows. As politicians and bureaucrats make political decisions instead of economic decisions like entrepreneurs do, it means yet more money directed at political priorities, ones that benefit politicians and bureaucrats, instead of economic priorities, ones that result in wealth creation and real economic growth.

But it’s not all doom and gloom. We aren’t in panic mode now, but could be should politicians decide to maintain government spending at the cost of private sector investment. We have is the opportunity to weed waste out of the Wyoming budget and set the stage for real private sector growth in the future should government instead decide to bring government spending down to a level taxpayers are currently willing and able to fund.

One way the government could get out of the way to grow the real economy is to stop doing what could be done in the private sector. One strategy used by fiscally conservative politicians is called the Yellow Pages test. If an activity is in the Yellow Pages, the private sector is taking care of it and therefore the government shouldn’t be doing it. Governors Mitch Daniels from Indiana and Jeb Bush from Florida have both used this system to save millions of tax dollars and reduce competition from government in private sector activity.

This would stop government crowding out of private sector activity and leave resources available for what government should be doing, such as public safety and the judicial system.

We are looking at a huge revenue shortfall and we don’t know how long it will last. This shortfall must be made up from spending cuts, not tax hikes and certainly not from stealing from future generations. We have a great opportunity to put our own fiscal house in order, limit government and set the stage for real economic growth in the future. Let’s take it.

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Tuesday, 25 July 2017
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