- The Washington Times - Sunday, October 20, 2002

Governors are powerful people. Next to the president, governors arguably have more sway over public policy (and thus our lives) than any other elected officials. Four of the past five presidents Jimmy Carter, Ronald Reagan, Bill Clinton and George W. Bush all were promoted by voters from the statehouse.
It is for this reason that every two years I prepare for the Cato Institute a fiscal policy report card on the nation's governors. It is a report card that measures the governors' performance in office based on criteria of promoting economic growth and controlling state government spending and taxes. The typical ranking of governors rate highly the governors who expand government the most. This takes the opposite approach: Those who keep government on a tight leash get the best grades.
So take a moment and scan the accompanying table to discover how your governor fared this year. (Govs. Bob Holden of Missouri, James McGreevey of New Jersey, Mike Easley of North Carolina, Mark Schweiker of Pennsylvania, Rick Perry of Texas, Mark Warner of Virginia, and Scott McCallum of Wisconsin all assumed office too recently to fully assess their records.)
The highest-rated governor this year was Bill Owens of Colorado. National Review recently touted Mr. Owens as America's "best governor" and our report confirms this accolade. The other A grade went to Jeb Bush, who is proving he's the biggest tax-cutter in the family. The highest-rated Democrat this year was Roy Barnes of Georgia, an old-fashioned fiscally conscientious Southerner in the vein of his predecessor, Zell Miller.
Oh, and as you can see, there were four F's awarded this year for fiscal incompetence. They went to Don Sundquist of Tennessee, Gray Davis of California, Bob Taft of Ohio and John Kitzhaber of Oregon. Messrs. Sundquist and Taft allegedly are Republicans.
There are several trends detected in this study worth commenting on. First, the state fiscal crisis that governors are now confronting has been a result of excessive spending, not insufficient tax receipts. In the decade of the 1990s state expenditures soared by $176 billion. Between 1996 and 2000, for example, state spending grew at roughly twice the rate of federal spending. The governors managed to make Bill Clinton seem like a penny pincher. Gov. Owens said it best: "The states don't have a revenue problem, they have a spending problem." Gary Johnson the combative governor of New Mexico has remarked that, "In the 1990s, many governors believed that government was the solution to every problem."
Second, many governors are foolishly trying to rebalance their budgets by raising taxes. The American Legislative Exchange Council (ALEC), finds that at least half the states raised taxes in 2001 and 2002 to the tune of $15 billion. As many as 30 states are expected to consider major tax increases in 2003. Leading the pack are California and New York, which have a combined $30 billion potential deficit next year.
If history is any guide, the states that raise taxes will be the states that remain mired in recession as the higher taxes continue to depress economic activity inside their borders.
A third observation: Republican governors have been a disappointment of late. Three of the biggest tax increases this past year were signed into law by Republican governors: Bob Taft of Ohio, Bill Graves of Kansas and Don Sundquist of Tennessee. The good news from 2002 was that attempts to implement first-ever income taxes in New Hampshire and Tennessee were foiled. An attempt to pass a multibillion-dollar expansion of the sales tax in Florida was also thwarted. Just because a politician has an R next to his name doesn't make him a tax-cutter.
Fourth, it appears that few governors have learned the fiscal lessons from the last recession of the early 1990s. During that recession, about half the states led by Arizona, California, Connecticut, New Jersey and New York tried to close yawning budget gaps by enacting major tax boosts. Most of those tax-increasing states had the most persistent budget woes and the slowest economic recoveries.
In fact, in the 1990s the states that cut income taxes had double the population growth, nearly 3 times the job growth, and about 25 percent faster income growth than the states that raised tax rates. For those governors who believe that tax increases can rescue a state from decline, I would love to introduce them to Jim Florio of New Jersey, whose soak-the-rich tax increases in the early 1990s sank the Jersey economy in to a swamp of financial malaise for years.
The fiscal policy experience of the 1990s proves that taxes don't just matter at the state level; they matter a lot. As governors now combat combined budget deficits of as much as $40 billion next year, they must learn that tax increases will be as successful at balancing the budget as bleeding sick patients was in the Middle Ages for returning people to good health.
States can't possibly tax their way back to prosperity.
It is to be hoped the governors will be smart enough not to try to do so.

Stephen Moore is a senior fellow at the Cato Institute.

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