Last month I gave a presentation to a meeting of the State Chamber of Commerce along with a representative from another state policy organization.  I was struck, and frankly dismayed, by the extent to which my co-presenter  spoke as if government and the private sector were opposing forces pitted against one another in a  zero-sum competition. In this view, taxes assessed on businesses and households extract dollars away from productive consumption and investment in the private sector in order to “grow government”.

It is certainly true that a vibrant private sector will always be the main engine of economic growth in a capitalist economy. Public spending can at times crowd out private investment, although, as economists like Brad DeLong argue, during times of sluggish economic growth like the present,  government spending can be vital for keeping the economy from grinding to a halt and for incentivizing private investment. But more fundamentally, this polarizing conception of “government versus the private sector” misses the important ways in which businesses, as well as families and communities, cannot thrive without a strong and effective public sector. You cannot have a vibrant, productive private sector without state and local government helping to: Read the rest of this entry »

The January-February issue of the Atlantic Monthly magazine features an excellent cover article by editor James Fallow weighing the question of whether America has entered a period of terminal decline. On the one hand, he suggests that the nation’s crucial comparative advantages, above all an unparalleled system of research universities and openness to talented immigrants from around the world, remain strong. He also believes that the U.S. can respond to challenges such as job losses, military threats, and globalization. Where he is far more pessimistic concerns the country’s rigid and unresponsive political system.  He writes:

What I have been calling “going to hell” really means a failure to adapt: increasing difficulty in focusing on issues beyond the immediate news cycle, and an increasing gap between the real challenges and opportunities of the time and our attention, resources, and best efforts.

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Plunging state tax collections are wreaking havoc on the state budget and having increasingly painful effects on public services in Oklahoma. Initial estimates were for tax collections for the current year, FY ‘10, to be more than $600 million below the prior year. Three months into FY ‘10, General Revenue  (GR) collections are already almost $400 million below estimate.  Even assuming the economy begins an immediate recovery, we are forecasting that this year’s GR collections will come in at least $1. 5 billion, or 25 percent, below levels in the year preceding the downturn (FY’08).

This acute drop in revenue collections has set off a debate among politicians, editorial boards, and others about whether tax cuts approved by the Oklahoma Legislature during the economic boom years of the mid-2000s are to blame. Read the rest of this entry »