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Best investment in MN: Disinvest in government

In a MinnPost Community Voices commentary last week (“Regarding MN shortfalls: We can’t go on like this”), authors Marcia Avner, Brian Rusche, Dane Smith and Ray Waldron managed to butcher both economics and the art of metaphor.
The philosopher Immanuel Kant observed that “our metaphors comprise the conceptual spectacles through which we view the world.” The authors — who collectively formed the Invest in Minnesota Campaign — painted Minnesota as a state “suffering from a vitamin deficiency.” We grow weaker and unhealthy; still, we resist a balanced diet. If only we would “think of taxes as spinach, broccoli and peas.”
“Not exactly everybody’s first choice on the buffet table,” they wrote. “But the stuff we need to reinvigorate our state.” It seems their appetite for tax dollars is insatiable.

I do agree with them on this point: We can’t go on like this. We do need to invest in Minnesota, but contrary to their solution, the best way to invest in Minnesota is to disinvest in government.
“Minnesota’s distinctive place as a high-quality place to live was achieved through innovation and private enterprise, to be sure,” they acknowledge, but quickly add, “It also came through investment in human capital, education at the forefront, but also in essentials ranging from public-works infrastructure to caring for the elderly and poor, and amenities such as parks and libraries.”
Private sector produces wealth
Were I individually as clever in use of metaphor as the four collectively, I might say, “They are putting the cart before the horse.” Government does not produce wealth. It cannot do anything for anybody until it first takes something from someone else. Until someone in the private sector produces wealth, there is no money for public education, no money to build infrastructure. Before government expanded its domain, families took care of their elderly, churches and charities ministered to the poor, and private philanthropy built parks and libraries.
The authors lamented that a diminished Minnesota has “caused real pain to all but the most affluent of our citizens” and made the point that high-income earners “have benefited the most from deep income-tax cuts,” and that “the same top-enders have a greater share of wealth and income than at any time in recent history.”
That is not an economic argument. It is a moral argument — a flawed moral argument, but a moral argument nonetheless; the economic argument is more on point.
“The scrimping and corner-cutting … is most assuredly NOT producing the general prosperity that was promised when tax cuts were enacted.”

Importance of money flow, spending
An economist, unlike the moral polemist, will tell you that tax cuts alone do not produce prosperity, any more than tax increases do. Where and how money flows in the economy and where and how government spends tax dollars determines how much wealth is created and how it is distributed.

In the private sector, tax cuts have contributed to the production of wealth, which the authors acknowledge. They just don’t like how it is distributed. It is that growth in wealth to which the four now lay moral claim in the name of “fairness” and the “common good.”

Wealthy people do not bury their money in coffee cans in the backyard. They save and invest, providing the capital that fuels the economy. Other factors, not the least of which is government meddling, also affect prosperity. Investment capital alone is not sufficient to produce prosperity, but it is absolutely necessary.

And what has government done with its golden talents? It would have been better had it buried them beneath the Capitol lawn, but instead, government has to a large degree misspent them. Government has spent education dollars tinkering with a failing one-size-fits-all system. It has extended its reach well beyond its constitutional obligations. It has spent state dollars on pet projects rather than infrastructure maintenance.

So, by all means let’s invest in Minnesota, but let’s do it the right way by disinvesting in government. Let’s invest in Minnesotans by letting them keep more of their own money and take more responsibility for their spending decisions on things like education and health care. Let’s disinvest in government by limiting spending to its constitutional obligations. Spinach, broccoli and peas are side dishes, never meant to be the main course.

Craig Westover is a senior policy fellow with the Minnesota Free Market Institute. He contributes to and to the Opinion page of the Pioneer Press. 

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Comments (11)

  1. Submitted by John Olson on 05/01/2008 - 01:37 pm.

    About 30 percent of state employees are already at or near retirement. As they are leaving, they are generally not being replaced.

    State government is already shrinking and will continue to do so.

  2. Submitted by Jeff Rosenberg on 05/01/2008 - 01:57 pm.

    This analysis gets all of the economic theory right. Unfortunately, the theory doesn’t seem to accurately represent reality.

    I have to wonder, if government intervention is such a problem, why so many people over the past few decades have moved to our high-tax, high-service state. They certainly didn’t come here for the climate. No–they came here because our investments in infrastructure and human capital have paved the way for our state’s success.

  3. Submitted by Craig Westover on 05/01/2008 - 02:33 pm.

    That’s not necessarily a good thing. Government has certain obligations that are enumerated as constitutional duties. It’s not a good thing that we underfund the judicial system, for example, or the Public Defenders office. It is not good when these areas experience attrition. “Smaller” government doesn’t necessarily mean “smaller in size”; it means “smaller in scope.” Government shouldn’t underfund its legitimate constitutional obligations; it shouldn’t spend anything expanding services never enumerated to be provided by government in the first place

  4. Submitted by John Olson on 05/01/2008 - 05:50 pm.

    Many people–even learned ones–cannot distinguish or agree on the difference between “smaller in size” versus “smaller in scope.” The garden-variety Republican wants the former, the Conservative wants the latter and the fringe wants both (especially in the Judicial Branch).

    The others are watching CNBC. 🙂

    Who defines the phrase “smaller in scope?”

  5. Submitted by Craig Westover on 05/01/2008 - 07:04 pm.

    Jeff –

    I might question your analysis. First, while Minnesota is growing, we are doing so at a far slower rate than other states, which is why we may well lose a congressional representative after the 2010 census. Second, while the left is correct and there is no mass migration of the wealthy out of Minnesota, many retirees are leaving the state. Do the math – in a state with a progressive income tax how many middle-income earners have to move into the state to compensate for a single high-tax individual moving out? 3M recently moved 300 executive types to Asia; how many middle-income tax-payers are required to make up for the lost revenue to the state (and that doesn’t include higher spending from discretionary income or community giving and involvement).

    I’m not making an argument against spending on either education or infrastructure. I’m making an argument that individuals and government operated on free market principles is more effective at providing those things than are government-run programs.

    John –

    You ask — Who defines the phrase “smaller in scope?”

    It is defined in the state constitution and in the principles laid out in the U.S. Constitution, but then, I agree, you don’t hear about those on CNBC 🙂

    Seriously, we’re not even close to the gray areas at the margins of legitimate government power. When we have a board that requires more class time to get a license to braid hair than to become a lawyer, we probably have too much government regulation. When we propose that the Department of Education track and hold schools accountable for children’s body fat, we’ve probably pushed education past its legitimate role. When we have a task force deciding how doctors ought to be paid and what services they can provide to patients, we’ve probably inserted government in a relationship where it doesn’t belong. Where in the state or federal constitution is clause giving government the power set a minimum wage or void contracts to bail out homeowners in default and lenders holding bad loans?

    The scope of government is pretty well-defined, if anybody cares.

  6. Submitted by John Olson on 05/02/2008 - 07:40 am.


    You ask “Where in the state or federal constitution is clause giving government the power set a minimum wage or void contracts to bail out homeowners in default and lenders holding bad loans?”

    Its in the same place that has given us such legislative gems as JOBZ, tax increment financing, and subsidies to a certain prominent Minnesota-based airline that just got swallowed.

  7. Submitted by Tony Wagner on 05/02/2008 - 01:51 pm.

    I don’t think the state is in as bad of shape as the Dane Smith piece stated recently, but I also don’t think it’s in dire need of the opposite reforms as Westover argues.

    The truth, as it so often does, lies somewhere in the middle. We actually seem to have chartered a pretty good course here in Minnesota, and we’ve been doing so for a while; whether this is because we’re balanced between these two extremes, or despite them, is arguable. However, squabbling between the two sides on the capitol floor certainly doesn’t improve government efficiency, and I wish more leaders and people of influence would acknowledge the importance of this moderate “middle ground” in the first place, rather than trying to further polarize the public. (Such moderate advocacy probably doesn’t generate much in the way of contributions, votes, and/or media attention, sadly.) I fear if the state ever fell predominantly into the hands of one extreme or the other, we would probably begin falling away from our long-established positive trends.

  8. Submitted by Craig Westover on 05/02/2008 - 04:00 pm.

    John –

    Caught the sarcasm, and I agree with you. And you can add Q-comp to that list. That’s the point.

    Tony –

    Here’s where I think the middle ground lies:

    Dane et al want government to both tax for and run (whether outright or through strict regulation) the plethora of programs they think Minnesota needs. Take Education, for example. The progressive view is that education is a public good (although they can’t define why in economic terms) and government should both tax and control it.

    A pure libertarian position would say people are responsible for their own kid’s education and should pay themselves or rely on private charity and scholarships and the like to make up the difference.

    The middle ground is government ensuring that the funding is available to meet economic public goods, like education, but returning that money in the form of tax credits (refundable for low-income individuals) to spend as they see fit. So in health care, instead of herding everyone into some government one-size-fits-all system, people have cash to pay for affordable and predictable medical expenses and can purchase insurance from any source to cover unaffordable and unpredictable expenses. In education, families have cash to select any school, public, private, charter, religious for their children. In transportation the state issues transportation vouchers for public transit to low income people and charges full operational cost fares to everyone else. Low-income people can, should they choose, sell their vouchers for a market price, like people sell Viking season tickets.

    The objection is not government involvement in legitimate areas of economic public good, but government control of decisions that rightly belong to individuals.

  9. Submitted by Tony Wagner on 05/05/2008 - 10:08 am.


    I appreciate the response, although I’m not sure your characterizations ring true, particularly your vision of a true “middle ground.” I think we’re currently closer to the middle ground that you think; I don’t think it is an accident that we’ve had leadership of various parties over the years yet still maintained the same basic frameworks in the areas you mention.

    Of course we should always try to improve these systems, and new ideas are certainly worthy of research and debate. It just seems like your characterization of the spectrum is, not surprisingly, slanted in your editorial direction.

  10. Submitted by Craig Westover on 05/05/2008 - 03:54 pm.

    Tony –

    I don’t think a “middle ground” is necessarily desirable in and of itself. Compromise is not necessarily a good thing. What is the compromise between food and poison or good and evil? Nor do I think that simply because both political parties persist in a direction that all is good. What we have is two political parties intent on expanding the scope of government, each for its own ends. I see some real problems with government that consistently moves in the direction of greater and greater expansion of its scope, regardless of whether I agree with the desired outcome.

  11. Submitted by Tony Wagner on 05/06/2008 - 01:35 pm.

    Of course I’m not advocating “compromise at all costs” but the very fabric of our nation is based on compromise, so it isn’t necessarily a bad thing either. And I don’t see a “good” and an “evil” on the sides of this debate; like you, I see two dominant and self-serving parties working to perpetuate and expand the system that gives them power.

    Hence why it would be nice to see some true moderates in power, who put the improvement of government and public services above the interests of their party. Unfortunately, it seems that kind of civic spirit dies just above the local government level in our current political environment, replaced by an us-versus-them mentality; on the other hand, we are fortunate in this country (and this state, specifically) that the government framework would not need to blown up to see real improvement, in my opinion anyway. Striving for efficiency might be the biggest improvement of all.

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