The WSJ looks at the contrasting approaches of Virginia and Maryland to tax and spending. The...


The WSJ looks at the contrasting approaches of Virginia and Maryland to tax and spending. The latter's governor, Martin O'Malley, touts his "investment" for its results in education, except that Maryland is losing jobs and rich residents, and often runs out of money. Virginia's unemployment is lower and Governor Bob McDonnell has turned a $6B deficit into a $1B surplus.

Comments (47)
  • Drew Robertson
    , contributor
    Comments (373) | Send Message
     
    Silly me. I saw "The WSJ looks at" and thought it might be a solid news story. Nope it's more Club for Growth blather from Steve Moore, veteran lickspittle to billionaires. I live in NY (Cuomo - D) right next to NJ (Christie - R). I'm not a big fan of either of these guys. I do know that there is very little they could have done in the past few years to change the relative performance of their states. ((NY doing better.) Same for VA and MD which are very different places. It's like saying that just because the stock market has performed better under Obama than under GWBush (or his pop) we should reelect the Democrats.
    26 Aug 2012, 07:36 AM Reply Like
  • CautiousInvestor
    , contributor
    Comments (3090) | Send Message
     
    Whatever the defects in the comparison, the conclusion drawn is consistent with research conducted by Christina Romer who found tax reductions to be more potent fiscal multipliers than spending increases. Now the flip side of that "axiom" is proven to be true as well.

     

    New research by Alberto Alesina, Carlo Favero, and Francesco Giavazzi suggests an answer:

     

    This paper studies whether fiscal corrections cause large output losses. We find that it matters crucially how the fiscal correction occurs. Adjustments based upon spending cuts are much less costly in terms of output losses than tax-based ones. Spending-based adjustments have been associated with mild and short-lived recessions, in many cases with no recession at all. Tax-based adjustments have been associated with prolonged and deep recessions.
    26 Aug 2012, 10:04 AM Reply Like
  • Ray Lopez
    , contributor
    Comments (1818) | Send Message
     
    "New research" over what period? Anything done during the post-WWII US period is suspect--the US thrived then due to the fact, among other things, the other countries were re-cooperating from WWII. But I agree: given a choice between cutting spending and raising taxes, I choose the latter. Unfortunately both Republicans and Democrats have practiced Keynesian economics over the past two generations: the Democrats raise spending and spend money (tax and spend) while the Republicans cut taxes and spend money (borrow and spend).
    26 Aug 2012, 03:18 PM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message
     
    Maryland (my native state) is quickly becoming the "California of the East." Its legislature and state house are completely dominated by liberal democrats, who have never seen a tax or spending program they didn't like. Citizens, particularly those with wealth, are beginning to vote with their feet, since making changes at the voting booth seems ineffectual.
    26 Aug 2012, 07:49 AM Reply Like
  • 7footMoose
    , contributor
    Comments (2229) | Send Message
     
    Maryland, the home of tax and spend liberal politicians who only know how to source government jobs and tax the state's citizens. Long gone are the days of fiscal stability and sanity led by Louis Goldstein. The era of uncontrolled spending was initiated by Parris Glendenning also known locally as Parris "Glenspending". Who never met a liberal or union cause that he could deny funds to. Those who can are voting with their feet and moving to more fiscally responsible states.
    26 Aug 2012, 08:38 AM Reply Like
  • haunted
    , contributor
    Comments (120) | Send Message
     
    If you know of a fiscally responsible state, please share it with us.
    26 Aug 2012, 01:20 PM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message
     
    h:

     

    http://fxn.ws/U3VOLI
    26 Aug 2012, 01:32 PM Reply Like
  • 7footMoose
    , contributor
    Comments (2229) | Send Message
     
    Close by to Maryland you can try Delaware and Virginia.
    26 Aug 2012, 06:26 PM Reply Like
  • Energysystems
    , contributor
    Comments (2071) | Send Message
     
    I also live in MD. O'Malley is a complete joke. Tax, spend, nickel and dime the public to death. Can't wait til I'm out of here permanently.
    26 Aug 2012, 08:48 AM Reply Like
  • 7footMoose
    , contributor
    Comments (2229) | Send Message
     
    O'Malley is an Obama buffoon at best and a poor band member at least.
    26 Aug 2012, 06:28 PM Reply Like
  • wyostocks
    , contributor
    Comments (9113) | Send Message
     
    When did tax and spend ever have long term benefits?
    The rich move, the poor get additional handouts and the middle class working stiff gets screwed paying the bill.
    Just don't try explaining it a liberal.
    26 Aug 2012, 08:50 AM Reply Like
  • Good Captain
    , contributor
    Comments (463) | Send Message
     
    Wyo,
    Clearly you've never asked friends of or contributors to "tax and spend" politicians. They can regale you w/ such stories I'm sure.
    26 Aug 2012, 03:56 PM Reply Like
  • apberusdisvet
    , contributor
    Comments (3098) | Send Message
     
    When Maryland installed it's millionaire's tax, the flight was enormous; instead of tax revenues increasing, they actually decreased. A lesson to be learned here, but certainly not by the "share-the-wealth" marxists.
    26 Aug 2012, 09:27 AM Reply Like
  • anonymous#12
    , contributor
    Comments (545) | Send Message
     
    Ah....Virginia.....

     

    From the State Budget for FY 13:

     

    "The Virginia Department of Transportation's (VDOT) annual budget for Fiscal Year 2013 is $4.19 billion, representing a 12 percent decrease (emphasis added) from the previous year. The decrease is largely driven by the GARVEE bonds programmed in Fiscal Year 2012.  - VDOT

     

    They cut spending for transportation and issue bonds to replenish this cuts, Virginia total government debt is still increasing. Putting an end to the unicorns and fairy surplus meme.....

     

    GARVEE bonds are backed by the promise of a future FEDERAL FUNDING stream.....

     

    Hmmm....FEDERAL FUNDING, but I thought republicans were against bigger government, why do they cut state funds so they can fund this cuts with Federal subsidies?? 

     

    Sort like hypocrisy.....
    26 Aug 2012, 09:45 AM Reply Like
  • JB1982
    , contributor
    Comments (100) | Send Message
     
    Virginia's use of GARVEE bonds is irrelevant as Maryland uses them too.
    26 Aug 2012, 11:21 AM Reply Like
  • minecanary
    , contributor
    Comments (1234) | Send Message
     
    Not so fast Tack. CT has the CA of the east monicker already patented. Our Democratic bozos just locked us into a dedicated highway to run gov't buses back and forth every 3 minutes between our welfare cities...at a million $ a foot or so. All with the highest bonding rate in the U.S. already.
    26 Aug 2012, 10:18 AM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    Dang we were considering moving to CT for wor but that sounds awful...
    26 Aug 2012, 11:37 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
     
    Minecanary, that doesn't seem to have affected all the hedge fund managers or Wall St execs who live in the state.
    26 Aug 2012, 11:47 AM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (528) | Send Message
     
    CT, number 1 in per capita state debt.

     

    #1 in cost of living in continental US

     

    #1 in overall tax burden

     

    Ranks about #45 in most business friendly states.
    26 Aug 2012, 09:30 PM Reply Like
  • AJBaker
    , contributor
    Comments (126) | Send Message
     
    Any info on ranking on per capita debt as a percentage of per capita income?
    26 Aug 2012, 11:59 PM Reply Like
  • minecanary
    , contributor
    Comments (1234) | Send Message
     
    In another stroke of fiscal genius, Gov. Malloy just decided to hand the world's biggest hedge fund, already based in Ct., many millions of our hard earned tax dollars so they would build another site in the state. Their CIO already took home 3-4 bbbillllion in the last 2 years. Bet he paid no taxes though.
    27 Aug 2012, 12:09 PM Reply Like
  • chopchop0
    , contributor
    Comments (5155) | Send Message
     
    All of you guys are right. CT MD and IL are all taking the path of CA. NJ and NY aren't far behind.
    26 Aug 2012, 10:30 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    All of a sudden the Dakota's are looking better. Or FL, WA or NV.
    26 Aug 2012, 06:58 PM Reply Like
  • bigbenorr
    , contributor
    Comments (1143) | Send Message
     
    Trust me, you don't want to live in North Dakota
    26 Aug 2012, 07:00 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    LOL. I know I have been to Fargo in January. Freaking cold beyond belief.
    26 Aug 2012, 07:27 PM Reply Like
  • chopchop0
    , contributor
    Comments (5155) | Send Message
     
    Or TX.... home to more F500 companies HQs than any other state
    26 Aug 2012, 10:01 PM Reply Like
  • 867046
    , contributor
    Comments (380) | Send Message
     
    While the most recent data is old, VA gets $1.51 from the federal government for every $1 it pays in federal taxes. MD gets $1.20 from the feds for every $1 that it pays.

     

    In defense of California:

     

    a) CA gets $0.78 from the federal government for every dollar it gets taxed. California has around $313 billion in gross federal tax.

     

    b) The GDP of CA ($2 trillion) places it somewhere around the eighth largest in the world ranked with Italy and India.

     

    c) The GDP of VA is around $435 billion. Which places it somewhere around Taiwan, Argentina and Austria. This GDP number of course is grossly inflated by the states largest industry, paper pushing, centered around Northern Virgina.

     

    d) From the list of the world top 400 universities as ranked by USNews UVA is #126. VPI is #326. (By the way Hopkins and College Park are ranked above UVA)

     

    e) From the same list as d) California has:

     

    #11 Stanfurd
    #12 CalTech
    #21 University of California - Berkeley
    #34 University of California - Los Angeles
    #77 University of California - SanDiego
    #101 University of California - Davis
    #106 University of Southern California
    #118 University of California - Santa Barbara
    #148 University of California - Irvine
    #287 University of California - Santa Cruz
    #325 University of California - Riverside

     

    Honorable mention: Harvey Mudd, one of the great engineering schools.

     

    Not to mention all the Nobel prize winners.

     

    Logical deductions based on the above data on CA vs VA:

     

    a) VA is a red state federal welfare client whose primary industry is paper shuffling.

     

    b) In the big world, VA would be a 2nd or 3rd tier country whose primary exports would be agricultural products. A place on the same level roughly as Argentina because even Taiwan and Austria have a larger technology and manufacturing base.

     

    Frankly both MD and CA have larger a larger technology base than VA.
    26 Aug 2012, 01:43 PM Reply Like
  • Energysystems
    , contributor
    Comments (2071) | Send Message
     
    And what's all that good stuff got to do with being a bottomless pit of debt? Nothing. Just fancy windowdressing on a sinking municipal ship. Largest municipal bankruptcy in American history? Didn't that happen in Cali too? Why no mention of that?

     

    Cali does have some great assets, but is doing much, much worse than it could be. Doing more of that stuff that drags you down, doesn't lift you up.
    26 Aug 2012, 01:51 PM Reply Like
  • anonymous#12
    , contributor
    Comments (545) | Send Message
     
    Blue states subsidize the red states. Also the red states are heavily subsidized by defense contractors, and the spending that goes to private contractors comes from....you guess it....the Federal government.
    26 Aug 2012, 02:10 PM Reply Like
  • 867046
    , contributor
    Comments (380) | Send Message
     
    Ener,

     

    Maybe numbers aren't your strong point, so lets spell it out with the data that we have:

     

    a) 22% of $313 billion is $68 billion. If California didn't have to subsidize all those red state slackers there wouldn't be any budget issues anywhere in CA.

     

    b) 50% of $62 billion (VA federal taxes) is $31 billion

     

    So when you are running a surplus in connection with federal tax dollars, how hard is it for a small state to run a budget surplus?

     

    Finally, yes CA is a high tax state, in return you have a world class technology power. Listing the universities is just a metric to show this.

     

    VA has low taxes by the benefit of all the federal tax dollars flowing into a low cost of living state.

     

    So California is competing in the world economy and making/designing stuff while VA is a sleepy, rural, low cost of life place for retirees which receives basically a federal subsidy.
    26 Aug 2012, 02:12 PM Reply Like
  • Energysystems
    , contributor
    Comments (2071) | Send Message
     
    lol you're attempting to say the reason that high technology is somehow benefited by the bloated municipal mess. High taxes don't benefit the economy. They hinder it.
    26 Aug 2012, 02:32 PM Reply Like
  • Energysystems
    , contributor
    Comments (2071) | Send Message
     
    Spending nearly tripled from $51.4 billion in FY 1990-91 to $144.5 billion in FY 2008-09. In FY 1990-91 the state spent $1,350 per capita. Today, the government spends $2,644 per person.

     

    If you can't decipher that, I'll make it easier....spending is the problem. Just like in DC. Cali is on that same sinking boat. Instead of bailing out the taxpayers by cutting spending, they're bailing in more debt.
    26 Aug 2012, 02:41 PM Reply Like
  • chopchop0
    , contributor
    Comments (5155) | Send Message
     
    Tell that to TX or FL, both of which are even or net contributors to the budget depending on which year you look.
    26 Aug 2012, 03:49 PM Reply Like
  • 867046
    , contributor
    Comments (380) | Send Message
     
    Ene,

     

    a) In 2005 (the latest data) California received back $0.78 dollars for every $1 they paid in taxes.

     

    b) In 2005 California had a population of 35.83 million.

     

    c) In 2007 California paid $313 billion in federal taxes. So for the sake of the argument let's derate this number by 10% to get a 2005 data point of $282 billion.

     

    So in 2005 Californians donated to the red states 22% x $282 billion/(35.83 million) per person. Or $1731 per person.

     

    Looking at your same chart, CA in 2005-2006 spent $119.6 billion which turns out be $3338 per person.

     

    So in 2005, on average Californians spent $3338 per person but they also donated to the red states $1751 per person.

     

    So there it is in hard numbers. It is a highly ironical result given that conservatives while protesting against federal government largesse are a primary beneficiary of same.

     

    So for Californians it looks like the issue appears to be less their government but more centered on red state fiscal responsibility.

     

    To tie this back to VA. In 2005 VA received about $25 billion more from the federal government that it paid out in taxes. Well, part of that $25 billion came from the $62 billion donation that California made to the Federal Government.

     

    You'll pardon me if I don't find the thesis of this WSJ note credible in any regard.
    26 Aug 2012, 05:57 PM Reply Like
  • pmiller100
    , contributor
    Comments (358) | Send Message
     
    Virginia gets a lot of federal money, for more than just the beltway crowd that commutes across the river every morning. Virginia also has the largest concentration of military bases in proportion to state population. Myer, Belvoir, Quantico, AP Hill, Eustis, Lee, Norfolk, Little Creek, Langley, Picket, Dahlgren, Oceania... and I'm probably leaving a few out. These are mostly major installations. And military retirees are a disproportionate part of the state population as well, in order to live near a base from which they can shop tax free, etc. So that's another source of federal money - military pensions.

     

    Virginia is far from the poster child for less government spending - it just isn't state government spending.
    26 Aug 2012, 06:30 PM Reply Like
  • bigbenorr
    , contributor
    Comments (1143) | Send Message
     
    It's not my fault that the federal government takes taxes from California and gives the money to welfare losers in my state. And I really don't think that conservatives, especially those of us in the middle class, are the ones benefiting from that money.
    26 Aug 2012, 06:51 PM Reply Like
  • Heinz Doofenshmirtz
    , contributor
    Comments (308) | Send Message
     
    Then wouldn't you want a smaller Federal government, anonymous#12?

     

    Fewer of those subsidy dollars leaving your blue states.
    26 Aug 2012, 09:04 PM Reply Like
  • AJBaker
    , contributor
    Comments (126) | Send Message
     
    So the soldiers and the military retirees and the paper pushers get their money from where? And spend their money where?

     

    These people earned their money and perform government services which the nation values. Without the money from these jobs the economy of Virginia would tank.

     

    On a WAG, bet there is more money spent that way than on welfare by a long shot.
    27 Aug 2012, 12:07 AM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3414) | Send Message
     
    Higher taxes may not be the only cause of the 'population drain' southward. Maryland is more urbanize, Virginia is more rural, idyllic and tranquil with that Old Dominion charm. Demographics may play as well. In general I do attest that Marylanders I know do express aspiration to move south for personal reasons.

     

    Welcome to Virginia!
    26 Aug 2012, 01:55 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
     
    What we should do is to tax government employees at a rate that is 100% higher than non-governmental employees! (and if you do contracting work for the the government then its 50% more).

     

    Maybe then we'll get less government!
    26 Aug 2012, 02:50 PM Reply Like
  • Buddy Canuspare
    , contributor
    Comments (406) | Send Message
     
    Davidbdc:
    Soldiers, sailors and airmen are government employees. Double their taxes as well? How 'bout taxing their pensions and removing their PX priveleges after they retire?
    26 Aug 2012, 07:15 PM Reply Like
  • spald_fr
    , contributor
    Comments (2814) | Send Message
     
    [What we should do is to tax government employees at a rate that is 100% higher than non-governmental employees!]

     

    Lets not start with the military as Buddy points out but with the Federal police force. Where in the h*ll have all these cops come from? You look at a shooting and there has to be a hundred Federal agents in their blue coats, etc.

     

    Lets cull back the so-called "Patriot Act", which allows the overwhelming number of police in this country. These guys are retiring on $100k to $200k per year!

     

    How about the TSA? I came through EWR last week and there must have been 50 blue shirted agents just standing around. Lets cut back these Federal employees.
    26 Aug 2012, 07:49 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    Interesting when I go through the airport at times the number of TSA people standing around running one security line is incredible.
    26 Aug 2012, 10:02 PM Reply Like
  • davidbdc
    , contributor
    Comments (3194) | Send Message
     
    Buddy,
    At first thought I agreed with you. But the more I think about it why not?

     

    When I was growing up (I realize it was a different world then), many people worked in government for a period of time and then worked in the private sector. Public servants were truly that. Most men entered the military for a period of time and then went about their lives (some stayed and served 20 or 25 years).

     

    Basically - public service WAS service.

     

    Why shouldn't it be that way again? When was the last time you met someone that worked for the federal government for 4 years and left to start a business?

     

    Government has become far too big - the bureaucracy overwhelming - and its consuming way to much of our country's resources.

     

    So maybe I vote that military men and women fall in the 50% more taxes group. (and you can bet your bottom dollar the TSA union will be crying foul claiming they are protecting the country too and they want to be moved from 100% to 50%.... exactly illustrating the entire problem).
    27 Aug 2012, 12:12 AM Reply Like
  • smarton
    , contributor
    Comments (56) | Send Message
     
    The moral of the article is clear. Don't spend on education, and your bottom line for the year will look so much better. Who cares about one, two, twenty years down the line.
    27 Aug 2012, 03:23 AM Reply Like
  • Tack
    , contributor
    Comments (16263) | Send Message
     
    We spend massive amounts on "education" at all levels of Government. The problem is that that spending is directed toward supporting a massive union bureaucracy and to spreading Government-sponsored social propaganda, not on anything to do with genuine education.
    27 Aug 2012, 09:25 AM Reply Like
  • Buddy Canuspare
    , contributor
    Comments (406) | Send Message
     
    Tack,
    China's doing better? As a Communist dictatorship, I would assume that a large percentage of their educational spending is devoted to spreading Government-sponsored social propaganda as well, so how come their kids are doing so well? India's not Communist, but Socialist to the core, so I presume they're doing the same thing to their kids as well - yet without China and India, corporate America wouldn't have anyone to give an H-1b visa to and would have to hire engineers locally! Heaven forfend! So merely the spreading of Government-sponsored social propaganda can't be the whole story.
    27 Aug 2012, 09:04 PM Reply Like
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