Spending Limits & the Budget

Budget Secretary Michael Masch had some interesting comments about government spending and the proposed Taxpayer Protection Act during yesterday's Appropriation Committee hearing, courtesy of PLS Committee Summary (subscription):

Senator Regola said it seems every year there is a problem with communication when it comes to the budget process. He asked if any consideration was given while the budget was being crafted to the Taxpayer Protection Act, which would cap spending at the rate of inflation. Secretary Masch responded that the Taxpayer Protection Act would impose an arbitrary cap on spending that doesn't take into account the way government functions.
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He said he is all for reducing spending when possible, but many services are growing much higher than the rate of inflation, including health care and corrections, and the state must meet those obligations.

Mr. Masch is absolutely right, the TPA doesn't take into account how government functions - it expects government to be fiscally responsible and show some spending restraint. Mr. Masch is also right in saying that the cost of many things state government spends money on grow faster than the rate of inflation - but that is not a coincidence. Services paid for entirely, or heavily subsidized, by taxpayers are growing faster than inflation because government subsidizes them while lacking the fiscal restraint of the private sector.

Consider it another way, instead of looking at government as a buyer, look at it as a seller. The price of government services (to taxpayers) go up faster than the price of all other goods and services (inflation). It can't be blamed on the price of labor, or health care, because private companies also pay these bills, while keeping prices from growing as much as taxes do. This should not be.

He added that business special interest groups tend to be hyperbolic about this issue but the nonpartisan Tax Foundation says Pennsylvania has a pretty good business tax climate.

This is not at all what the Tax Foundation says. It is true, when ranked against the other 50 states, PA ranks near the middle in "Business Tax Climate", while ranking 18th in total tax burden, according to the Tax Foundation. Which is to say, Pennsylvania state and local taxes are close to the national average - which is far too high.