Conventional wisdom has long held that
voters punish politicians who cut government spending. Politicians
fear that they will be labeled uncaring, lose friends, and maybe
even lose their jobs if they try to scale back the size of
government, even for the sake of balancing a budget.
If
this was ever the case, it is no longer. In the face of increasing
government obligations to fund priority programs, reductions in
nonessential spending are not only necessary, feasible, and
responsible, but also popular . A survey of state executives makes
the point clear: Regardless of party, current governors who have
cut state spending to balance their budgets enjoy strong
popularity. Further, their counterparts who chose to raise taxes
find support waning.
During the 1990s, state spending increased
dramatically, sustained by artificially high tax revenues. However,
by late 2001, the tech bubble had burst, the economy had been in
recession, tax revenues had declined, and nearly every state was
facing a fiscal crisis. The states' responses have varied widely:
Some cut spending, some raised taxes, and others used a combination
of taxes and spending cuts.
From
their choices, a pattern has emerged: Governors who held the line
on spending have gained in popularity, while those who increased
taxes have received a much chillier reception. Congress should
consider this lesson while marking up the fiscal year (FY) 2005
budget.
For
example, four governors--two Republicans and two Democrats--have
made deep cuts in usually sacrosanct programs and have seen their
popularity skyrocket.
Governor Arnold Schwarzenegger (R-CA)
In
recent years, California has been the most outlandish case of
fiscal mismanagement. The electorate recalled Governor Gray Davis
(D) and sent Arnold Schwarzenegger to Sacramento with a mandate to
restore fiscal sanity. The "Governator" immediately declared a
state of financial crisis and attempted to cut $1 billion from the
current fiscal year budget. Although the California Assembly has
tried to frustrate his efforts, Schwarzenegger proposed a 2005
state budget that cuts $4 billion. Most of the proposed cuts are in
welfare programs, including California's health care program for
the poor and disabled.
Conventional wisdom holds that cutting
these kinds of programs will damage a politician's popularity, but
Schwarzenegger's cuts have had the opposite effect. His job
approval-disapproval rating has improved to 56-26 in the most
recent Field Poll
and an amazing 65-19 in the Los Angeles Times poll. The new governor is so
popular that many analysts believe Democratic-leaning California
may be in play for the 2004 presidential election.
Schwarzenegger's connection with the
electorate was again demonstrated on Super Tuesday, when California
voters supported his positions by passing the $15 billion bond
together with a balanced budget amendment and by rejecting an
initiative that would have made it easier to increase taxes.
Some
have suggested that Schwarzenegger's popularity is a function of
his celebrity rather than his policy, but this analysis is flawed.
Just when the honeymoon should be ending, Californians are backing
Schwarzenegger's policies.
Governor Tim Pawlenty (R-MN)
When
campaigning for governor, Tim Pawlenty signed the Taxpayer
Protection Pledge, promising to veto any tax increases. At the
time, Minnesota faced a projected $1.6 billion deficit. By the time
he took office, that figure had been revised upward to more than
$4.2 billion. Under intense pressure from all sides--including
three former Republican governors of Minnesota--to raise taxes,
Pawlenty refused to abandon his pledge. In his 2003 State of the
State address, he argued:
This isn't brain surgery, folks. The state
is simply spending more than it's taking in. And now we need to do
what any Minnesota family who faces a financial challenge would do:
sit down at the kitchen table and figure it out. Families can't
raise taxes to get out of a jam, and we won't either.
By
the end of the legislative session, Pawlenty had signed a $4.23
billion deficit reduction package that did not raise taxes, in
spite of a state Senate controlled by the Democrat-Farmer-Labor
Party. In fact,
after a sustained struggle during which the Senate passed a $1
billion tax hike, Majority Leader John Hottinger finally resigned
himself to reality: "This governor will never sign a tax increase
this year." Pawlenty's principled stand has won him the respect of
Minnesotans, who gave him approval ratings of 58 percent and 56 percent in two recent
polls.
Governor Phil Bredesen (D-TN)
Tennessee's fiscal situation has been
rather contentious over the past few years. Don Sundquist (R)
reneged on a campaign promise and attempted to institute the
state's first income tax. His move led to raucous protests in the
state capital. Sundquist relented and raised the state sales tax
instead. Yet, despite $1 billion in new revenues, Tennessee's
fiscal health remained poor.
When
Governor Bredesen took office, the state still faced a $320 million
deficit for FY 2002-2003 and a projected $500 million deficit
for FY 2003-2004. In response, the Democrat championed and secured
across-the-board cuts of 9 percent for most departments in 2004 and
has asked for 5 percent reductions in most programs for 2005. Even
more important, Bredesen has ruled out any additional tax
increases.
As
with Schwarzenegger and Pawlenty, Bredensen's cost-cutting ways
have boosted his popularity. A Mason-Dixon poll released in
February showed that his job approval-disapproval rating was
72-22. When voters
were asked in December 2003 how the budget should be balanced, 67
percent said by reducing spending, 15 percent said by raising
taxes, and 13 percent said by doing both. Governor Bredesen seems to be following
the voters' wishes.
Governor Jennifer Granholm (D-MI)
Governor Granholm has also cut spending
instead of raising taxes. In her first year in office, Granholm
slashed $1.5 billion to balance Michigan's budget. Even sacred cows
like state-employee compensation and education funding were not
spared. A dult education was cut by 74 percent, arts project
funding by 50 percent, and even public school funding by 1 percent.
A January 2004 poll found her approval rating at a stratospheric 77
percent, suggesting
that spending cuts have resonated with the people of Michigan.
Yet,
for some reason, Granholm has changed tack in 2004, proposing
almost $400 million in new taxes. It would be telling if her popularity
were to decline as a result.
Other Examples and Counter-Examples
Although this paper is not an exhaustive
study, these four examples suggest a recurring phenomenon. Other
examples include:
- Craig Benson (R-NH), who
vetoed a budget that would have increased spending because it would
have pushed the state further into the red: "I am vetoing a future
income tax." His approval-disapproval rating is 52-29.
- Bill Owens (R-CO), who
responded to growing revenues by cutting taxes and holding down
spending. A constitutional provision that mandates increased
education spending is forcing a budget crisis, but Owens's track
record indicates that he will make cuts instead of raising taxes.
His approval rating stands at 62 percent.
- Bob Ehrlich (R-MD), who
held the line against tax increases and cut spending, although his
new budget does propose a car tag fee increase. For now, he enjoys
a 62 percent approval rating.
However, raising taxes to balance a
deficit has proven unpopular. Governor Davis's attempt to cut the
state deficit by tripling the car tax contributed to his recall.
Other governors who have hurt their reputations by trying to tax
their way out of a deficit include:
- Bob Riley (R-AL), who,
after campaigning as a fiscal conservative who would not raise
taxes, then advocated a massive tax increase. Although the
legislature passed it, the people of Alabama rejected the measure
by a 2-1 margin, and Riley's approval-disapproval rating continues
to lag at 25-68.
- Sonny Perdue (R-GA), the
first Republican governor of Georgia since Reconstruction, who
announced tax increases during his first week in office. His
popularity still hovers just below 50 percent.
Conclusion
As
Members of Congress craft budget resolutions and spending bills,
they should take to heart this simple and clear message from the
states: Voters understand how budgets work, and they respect
lawmakers who keep a tight grip on the public purse. Out-of-control
spending is not just irresponsible; it is a guaranteed way to lose
constituents' trust.
Keith Miller is a Research Assistant
in, and Alison Acosta
Fraser is Director of, the Thomas A. Roe Institute for Economic
Policy Studies at The Heritage Foundation.