Gavin Newsom And Jay Pritzker Offering Red States The Deal Of Lifetime

Forbes

4 hours ago

Government spending saps economic growth, which is no insight. It's stated routinely in my upcoming book The Deficit Delusion that the centralized and politicized allocation of goods, services and labor in sub-optimal fashion by politicians lays a wet blanket on economic growth.
What makes the economically enervating nature of government spending worth mentioning is the ongoing debate about state and local taxes, also known as SALT. Governors in high-tax blue states would like to return to the old state of tax play whereby state and local taxes paid could be 100 percent deducted against federal tax bills. Red state citizens should take this gift from people with names like Newsom and Pritzker and run with it.
Except that red state politicians are largely balking. So are their citizens. They see unlimited deductibility of state and local taxes as a subsidy of blue state taxpayers, and an incentive for blue states to tax and spend with abandon at a cost to federal tax collections. Their critiques speak to the undeniable good of an unlimited SALT deduction, for red states.
To suggest otherwise is to imply that blue states benefit economically from excessive spending, all at the expense of the federal government's ability to spend. Actually, that's a feature of SALT, not a bug.
Once again, government spending is economically harmful. The goal for red state politicians should be to localize the certain damage of government spending to the extent they can. Let California, New York, Illinois and New Jersey pursue a lot in the way of economy and freedom-sapping government so that the federal government has fewer dollars to harm the U.S. economy with.
It's certainly odd, but not surprising, that blue state governors would clamor for an enhanced ability to further damage their economies with excessive spending born of high taxes. Much odder is that red states aren't taking the blue states up on an arrangement that to some degree erects a fence around economic foolishness.
Red state politicians and their citizens yet again claim the SALT deduction subsidizes high-tax and high-spend blue states. More realistically, it subsidizes the red states that want neither.
No doubt blue states see excessive taxing and spending in state as advantageous, and it should be obvious to red staters why: the discredited economic vision of John Maynard Keynes lives on most harmfully in blue states. Their politicians almost to a man and woman buy into the Keynesian notion that government spending grows an economy. Quite the opposite.
With full deduction of state and local taxes, what an opportunity for red states to show why Keynes was wrong. Within them there's an underlying understanding that a government that does least does best. Which is yet again why red state politicians and voters should eagerly take the deal being offered from their taxing and spending opposites.
The deal implies that blue states will foist more Keynes on their people, the red states quite a bit less. What a deal! Unknown is why red state politicians won't accept such a gift unless, of course, they're more wedded to discredited notions of government waste than their limited government rhetoric suggests.