Many New Mexicans may remember that, at this time last year, our neighbors to the north in Colorado were having a heated debate over government spending and taxes.
Voters in Colorado narrowly approved the measure known as Referendum C, which allowed the state government to spend all the revenue it takes in for the next five years – but the state’s taxpayer protections, known as the Taxpayers’ Bill of Rights, lives on. More importantly, Colorado’s experience with strictly limiting taxes and spending provides New Mexicans a clear example of how we could change our state’s economic fortunes for the better.
Government plays a major role in New Mexico’s economy. In fact, $2 is spent by the federal government within our borders for every $1 our citizens send to Washington. As if the large federal presence were not enough, according to data from the Census Bureau, New Mexico employs more state and local workers per capita than all but two other states.
This reliance on government is not the economic boon that some would like to believe.
While like New Mexico in many ways, Colorado is not as reliant on government spending. In fact, in 1992, Colorado adopted strict limits on taxes and spending in a conscious effort to shift resources from government and into the private sector.
Unlike New Mexico, where politicians can raise taxes and spend as much as they like with few limits, Colorado’s politicians must ask voters to approve any spending above the “natural” rate of government growth – the combined effects of inflation and population – and any tax hikes. Between 1997 and 2002, Colorado issued annual tax rebates totaling more than $3.2 billion.
So what does giving voters greater control over the taxing and spending habits of their politicians do for the economy?
Well, in terms of personal income levels, which are probably the most effective mechanism for measuring living standards, Colorado outstrips New Mexico by wide margins.
In 1992, Colorado ranked a respectable 17th in personal income levels. Thanks in large part to its Taxpayers’ Bill of Rights, it now ranks 8th in the nation. This was the greatest jump during the time period. New Mexico, on the other hand, ranked 46th in the nation in 1992 and ranks 46th today.
Even more impressive, especially given the opposition to fiscal restraint by most on the left, is the fact that spending restraint has resulted in significant poverty reductions in Colorado. That state’s poverty rate is lower than all but 11 other states. New Mexico, on the other hand, has one of the worst poverty rates in the nation, beating only two states – Mississippi and Louisiana.
The problem is that politicians, if left to their own devices, will spend taxpayer money far in excess of the real needs of government. Much of this money is either wasted or used in ways that are not as beneficial to the citizens of that particular state as if the money was left in the private sector. Over time, this means that government consumes more of the economy, while the private economy, from which economic growth and innovation result, is less robust.
Some will assume that if we only elected the “right” politicians, the problem would be solved, but history shows this to be wishful thinking.
The Rio Grande Foundation analyzed the spending records of each of the last four governors of New Mexico and found that while Gary Johnson was the most fiscally-conservative and Bill Richardson the most spendthrift, Garrey Carruthers, a Republican, was a bigger spender than Bruce King, a Democrat.
Spending in New Mexico – not to mention around the country and at the federal level – is a bipartisan problem.
There is no reason for New Mexicans or our political leaders to accept our current status of economic lagging. It is not culture, our reliance on resource extraction or even our poor educational system that hinder our state economy. In reality, it is our willingness to let government take more of our hard-earned money than is absolutely necessary that keeps us down.
Only by placing strict limits on our political leaders will New Mexico’s economic future brighten.
Gessing is president of the Rio Grande Foundation, which describes itself as “a nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.”