The ongoing economic crisis has been a test of leadership not only for the president and Congress, but also for the stewards of America's statehouses. Polls show the public holds the Obama administration in low regard for the tax and stimulus policies at the national level. According to a Cato Institute report released Thursday, however, a handful of governors has demonstrated a better way of managing budgets in tough times.
Because states cannot print their own money, general fund spending has dropped a total of $75 billion, or 11 percent, since 2008. Not surprisingly, some governors don't know how to reduce spending so have used tax increases to make ends meet. This year alone, there will be $31.4 billion in new taxes and fees imposed, according to the National Association of State Budget Officers.
Cato gave "A" grades to the four most frugal chief executives who were able to resist the temptation to increase the tax bite on already hard-hit consumers. Republican Gov. Bobby Jindal of Louisiana repealed $350 million in income-tax increases in 2008, while proposing to spend 17 percent less money in 2011 than 2008. Republican Gov. Tim Pawlenty of Minnesota vetoed tax increases and held the line on spending. Republican Gov. Mark Sanford of South Carolina took the highest honors for holding 2010 spending to 2003 levels while slicing taxes. Gov. Joe Manchin III of West Virginia stood out from his fellow Democrats by lowering tax rates and running frugal budgets.
By contrast, Democratic Gov. David A. Paterson of New York oversaw $1.7 billion in new sales, cigarette and business taxes in 2008, along with a $1.5 billion "mobility tax" on workers in the Big Apple. In 2009, the tax hit was $5 billion on income, utility bills, health insurance and wine. Cato gave "B" marks to rising GOP stars like Indiana Gov. Mitch Daniels, who, though a fiscal conservative, "seems to focus more on balancing the state budget than shrinking the size of government." Texas Gov. Rick Perry received the same score because "he has not reduced the size of state government."
The Cato report only looked at governors who were in office in 2008 or 2009, leaving out Republican newcomers such as New Jersey's Chris Christie and Virginia's Robert F. McDonnell. A look at these governors' proposed 2011 budgets shows that Mr. Christie is going to be hard to beat in next year's ratings. The Garden State chief is proposing $987 million in tax relief at the personal and corporate level. Mr. McDonnell's liquor-store privatization plan will help scale back the size of state government, but more tax relief will be needed to offset the proposed $10 million increase in fees proposed for the Old Dominion in 2011.
Governorships frequently serve as a proving ground for presidential hopefuls. The good news is that any of these possible contenders for the 2012 Republican nod will be able to point to a record on taxes and spending far more impressive than that of President Obama.
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