Edwards’s 2-to-1 Budget Law

From Chris Edwards, the Director of Tax Policy Studies at the Cato Institute:

How should government officials decide on whether to fund big projects such as fighter aircraft, highways, bridges, and other types of infrastructure? First, they should check the Constitution to see whether they are legally allowed to spend on the object in consideration. Second, they should assume that the item will cost at least twice as much as initial estimates indicate.

There should be a 2-to-1 hurdle when the price tag of a project is being considered.
Government purchases of military hardware, highways, energy projects, space equipment, and other items often cost 50% or 100%, or more (see here and here), above what politicians originally promise.

Let’s be conservative and say that a 50% cost overrun is typical, such that we can expect a new $1 billion project to actually cost taxpayers $1.5 billion. But as economists often point out, paying for $1.5 billion in government spending will cost taxpayers much more than $1.5 billion because of the “deadweight losses” or inefficiency costs created by extracting taxes from the private sector with a complex and high-rate system.

How much more? Harvard’s Martin Feldstein thinks deadweight losses might be $1 for each added dollar of taxes. But let’s be conservative and say it’s only 50 cents on the dollar. So government projects impose deadweight losses of 50% on costs that are likely to balloon at least 50%.

The bottom line is that when America’s taxpayers hear that politicians want to spend, say, $10 billion on a new scheme, they should assume that they will face an ultimate financial hit of $22.5 billion. And that’s conservative!"

Cato-at-liberty » Give the People What They Want

Author Chris Edwards states, "Part of the trick is that members (Congressional members)always claim that they support budget restraint in general, while arguing at the same time that each particular program, when it is up for a vote, desperately needs to be expanded."

I find that this is true at the state level also, even among my Republican colleagues. Everyone wants to cut programs...with the exception of their own pet project.

To address this problem, Edwards suggests putting a cap on the amount of annual growth of the Federal (or State) budget. I have actually sponsored legislation to address this issue at the state level and it has been met with much resistance from the usual special interest groups. As the old saying goes, "Maybe next year."

Cato Comments on High School Dropout Rates

Cato Scholar Comments on High School Dropout Rates
Tuesday, April 1, 2008
Andrew Coulson, director, Center for Educational Freedom:

The idea that we can reduce the public school dropout rate simply by measuring it better is misguided. It's like believing that the North Koreans could improve their economy by more accurately measuring the number of people who are starving. As with the North Korean economy, the problem with U.S. public schooling is that it is a monopoly that takes choice away from families, takes professional autonomy away from educators, and takes normal economic incentives away from everyone. Until the monopoly is broken up, expect to see business as usual. And that means millions of kids starving for a real education.

Fiscal Report Card: Governor Gets an F

I stumbled across this article as I am catching up on my reading today and it adds insight to why today the state faces a $1.2 Million dollar deficit for the current fiscal year and a $2+Million Dollar deficit for FY09. You won't see the blame put upon Napolitano though, no, as she continues to grow government programs, stubbornly insisting that we borrow more money, digging ourselves, our future generations, further into debit.

BTW, check out the grades awarded to then governors Huckabee and Romney.