Friday, November 16, 2018

Welcome to the Socialist Republic of Calirado


The very foundation of the welfare state is the idea that people's standard of living is unrelated to their effort to provide for themselves. When the left demands that the rich "pay their fair share" of taxes - a somewhat less blunt version of "tax the rich" - the real message is that our tax code is as important a part of economic redistribution as entitlement programs are.

In short: tax and spend until there are no economic differences between people.


This is, literally, what the welfare state is all about. Its egalitarian ideological foundation means no more, no less than the complete elimination of any differences in terms of income, wealth and consumption. The American welfare state is founded on this very ideology; its most ardent proponents have not yet gotten what they wanted, and set out to get with the War on Poverty, but they have not given up. Not by any stretch of imagination. At the national level, the left is still pushing hard to put the DMV in charge of your health care and to have taxpayers pay parents to be home with their kids. Both these ideas are recipes for a budget disaster to which the left will respond with calls for increasingly burdensome, unequally distributed taxes.

The taxes the left needs will suppress consumer spending and domestic demand - that has already happened in Europe - thereby grinding the economy to a halt. The only way the left can pay for its welfare state is by pinning their hopes on other countries.

Bluntly: under leftist rule, America's future is one of economic stagnation, lost opportunities and crushed optimism. It is a future of industrial poverty.

It is worth keeping this in mind as the left rolls up its sleeves at the state level. While they cannot go all-out socialist at the national level, they are now ready to go to work on its welfare-state pipe dream in Colorado. Since they have been so successful at slowly suffocating the Californian economy, they now want to turn the Centennial State into Calirado.

Yes, their welfare state is actually socialism. Venezuela is a good example of what this means, but we don't even have to go there. The left's own chief economist, the late John Kenneth Galbraith, has spelled it out himself. In his book Economics and the Public Purpose from 1973 he correctly labeled the welfare state a socialist project. It represented what he called "New Socialism" and made no qualms about the long-term goals: complete egalitarianism, government supremacy over the economy, and indicative, central economic planning.

The new Democrat rule in Colorado will not be able to take their state that far, but they will certainly try to take their economic destruction of that state as far as they possibly can. The Colorado Sun reports:
The paramount challenge Democrats face as they take full control of Colorado state government next year: the gap between the ambitious agenda they promised voters and the limited money they have to spend. In interviews with The Colorado Sun, top Democratic lawmakers say they’re already brainstorming ideas big and small to close that gap — including passing legislation to increase the state revenue cap by $200 million, an idea that would go a long way toward funding Gov.-elect Jared Polis’ promise of all-day kindergarten for every child.
A $200-million so-called increase in the revenue cap - tax hikes in plain English - may seem like nothing in a state where state and local governments already take in more than $25 billion in taxes each year. However, every tax hike counts, especially since the recent economic success for Colorado, with up to 3.7 percent annual growth, correlates strongly with the Trump economy. Once the growth effect of Trump's tax cuts and deregulations wear off - which they will start doing in 2019 - higher taxes will weigh particularly heavy on the economy of the Centennial State.

Back to the Colorado Sun, which notes that the Taxpayer's Bill of Rights, TABOR, is presenting the new Democrat majority with some real hurdles. To get around it, the paper explains, the Democrats
could use their newfound political power to rewrite the state’s constitution and tax code to fund a major expansion of public services, if voters allow.
The fact of the matter is that the Colorado TABOR is rather weak already as it is. It only applies to the General Fund, which in the 1990s led to a transition of state expenditures from the General Fund to Other Funds. The net effect on spending was unimpressive.

The Colorado Sun adds to this picture, noting that a recent bipartisan compromise in the state legislature "exempted a state hospital fee from the TABOR revenue cap". In fact, there is an inordinate amount of legislative energy being spent on hollowing out, circumventing and undermining TABOR. Explains the Sun:
But now the state is back at the spending cap sooner than many expected, and Democrats are considering amending their 2017 deal with Republicans and raise the cap. The move could eliminate upwards of $300 million in expected taxpayer refunds over the next two years, and instead, allow lawmakers to spend the money.
So why are they doing all this? First and foremost, of course, to keep their big government spending - the state of Colorado spent an estimated $33.9 billion in 2017 - but also to expand the welfare state. The aforementioned universal child-care program is the first budget boondoggle to hit taxpayers, but there are far worse things lurking behind the scenes. From the Denver Business Journal, March 1 2017:
Democrats in the Colorado Legislature will take another stab this year at passing a pair of measures establishing a statewide system of paid family leave from work for employees and creating a state-chartered retirement-savings system targeted at low-income workers. The initiatives were unveiled Wednesday in a news conference to discuss legislation for working families. The proposals have been opposed by business interests in the past and are likely to be again this year. Both efforts have failed several times in past years, even including years when labor-friendly Democrats held the majority in both the House and the Senate.
And that, again, was last year. Back in 2016, I cautioned about a plan for single-payer health care, a program that would easily double the state's budget:
According to the Kaiser Family Foundation state data, health care in Colorado cost a total of $30 billion - and that was in 2009. A reasonable estimate for 2014 points to $36 billion.
In fact, after I published this article, the KFF put total health care spending in Colorado at $36.4 billion. Of that, approximately $7 billion was Medicare money; if we deduct this amount and assume that the state of Colorado would roll in Medicaid into its single-payer program, the bill would still have been $29.4 billion in 2014.

For 2019, that amount is likely going to land at $37.5 billion. This is if the annual growth rate has been five percent since 2014, a conservative assumption. We deduct an estimated $4.3 billion in in-state Medicaid spending, which would just be transferred to the new system, but assume that the state now covers the federal portion of Medicaid.

With a similar adjustment for Medicaid funds in the state budget, this means that if Colorado began a single-payer system in 2019, its health care spending would increase state government spending by 107 percent.

What taxes are they going to raise to pay for that new spending?

Colorado Democrats are going all-out to turn their state into a new California. It is not only a warning sign for anyone thinking of investing in that state, but also a harbinger for the nation as a whole. This is what Democrats will do to the entire United States of America, once they have their hands on the entire federal government. 

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