By Ron Knecht – 19March2019
Recently, I enjoyed a very thoughtful talk by the eminent scholar and public servant, Jerry O’Driscoll.  He spoke to Reno’s Hayek Club, a group that promotes limited government and individual freedom and has endowed area high schools with a fine curriculum and materials on managing personal finances.
His talk and the discussion following it addressed, among other things, similarities and differences among socialism, communism, Nazism, fascism and progressivism.
He noted that Nazism was officially the National Socialist German Workers Party.  Also, Benito Mussolini, a long-time socialist activist, was expelled from that party when he began to advocate and practice violence; but his policies as Italy’s dictator were quite socialist.  Communism, as practiced by the Soviets and others, was distinguished from Axis German and Italian systems mainly by its greater viciousness: It killed over 100 million of its own people even outside of wars with other nations.
Many young people who advocate socialism today claim Sweden, Denmark and Finland are socialist.  In fact, they are mixed economies with significant social welfare sectors and business freedom like the United States.  The U.S. ranks 12th among 180 countries in the Heritage Foundation’s 2019 Index of Economic Freedom, with Denmark 14th, Sweden 19th and Finland 20th.  All four nations are considered “mostly free,”
So, what about differences among socialism, communism, fascism, statism, progressivism, crony capitalism and mixed economies?  These days, some people try to escape the consequences of their actual politics and of derogatory labels by highlighting minor and technical differences among left-wing sects.
Earlier that day, I heard citizens accuse a former local public official of being a socialist – to which he took exception, saying he’s a Republican conservative.  If you want a spirited argument among Republicans, ask a group of them: What and who is a RINO (Republican in Name Only)?
As reflected in the four controller’s annual reports (CARs) I wrote, all this stuff misses the mark.  The point is collectivist coercion, and the extent to which it dominates an economy, permeates a society and burdens people and businesses’ daily lives.
We need government to deter criminality, provide for the common defense, protect personal and economic rights, etc.  But we need to recall that all the benefits government delivers, especially when it extends beyond those fundamentals, are contingent (they may materialize or not) and subject to the law of diminishing returns.
Government action, being collectivist coercion, always involves destruction of human wellbeing that is certain before any putative benefits are actually delivered.  Thus, to confer payments to some group requires taxes, but every dollar taken in taxes is an absolute act of destruction of human wellbeing on those taxed.  And every law or regulation that benefits some group is also an act of certain destruction of human wellbeing by limiting the freedom of others in order to confer benefits on its intended targets.
The real question facing any policy or government action is whether the uncertain benefits are very likely to exceed the certain destruction of human welfare.
Jerry pointed out, as I did in my CARs, that regulation of all kinds is often as damaging to the public interest in economic growth, net social benefits and fairness as is public spending and the taxation it requires.  I noted there’s good data that allows us to determine the optimum level of public spending relative to the size of the economy and the level of damage from excess spending.  However, we have no metrics for determining the optimal level of aggregate regulation and the social damage from excess levels.
So, the real issue is not whether socialist or communist governments own the means of production or, instead, fascists allow crony capitalists to own them as long as they supply what government wants in the manner and quantity it wants and at prices it dictates.  The issue is the overall level of collectivist coercion any configuration of government produces and thus the level of net social damage and burden on individual freedom and economic growth it inflicts.
The ultimate problem is collectivist coercion, which is the essence of government, not merely an unfortunate byproduct.  Via economic freedom, we must minimize the net damage from excessive government, not argue rhetorical or technical matters.
Ron Knecht has served Nevada as state controller, a higher education regent, legislator and economist.  Contact him at RonKnecht@aol.com.
 
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I'm tired of politics this week, so something cheerful and moving to brighten everyone's day.

Gordon Lightfoot’s Canadian Railroad Trilogy
By Ron Knecht – 29January2019
There was a time in this fair land when the railroad did not run
when the wild majestic mountains stood alone against the sun
Long before the white man and long before the wheel
when the green dark forest was too silent to be real
But time has no beginnings and hist’ry has no bounds
as to this verdant country they came from all around
They sailed upon her waterways and they walked the forests tall
built the mines, the mills and the factories for the good of us all
The lyrics above begin Lightfoot’s “Canadian Railroad Trilogy,” which Johnny Cash called “an extremely fine piece of songwriting.”
Bob Dylan named Gordon Lightfoot his favorite singer/songwriter.  I think I agree.  “Everytime I hear a song of his, it’s like I wish it would last forever,” he said.  “Lightfoot became a mentor for a long time.  I think he probably still is to this day.”
The Canadian Broadcasting company commissioned the song by the country’s special son for a special broadcast on January 1, 1967 to start Canada’s centennial year.  It took him three days to write, and it has a slow tempo middle section between faster paced beginning and end sections.
Lightfoot was an inspired and inspiring choice.  The song describes the building of the trans-Canada Canadian Pacific Railway in the early 1880s, a dozen years after Leland Stanford drove the golden spike to celebrate our first trans-continental railroad.  Its awesome lyrics and sound herald the optimism of the railroad age in the opening stanzas.
For they looked in the future and what did they see
They saw an iron road runnin’ from the sea to the sea
Bringin’ the goods to young growin’ land
all up through the seaports and into their hands
Look away said they across this mighty land
from the eastern shore to the western strand
Bring in the workers and bring up the rails
we gotta lay down tracks and tear up the trails
Open ‘er heart let the life blood flow
gotta get on our way ‘cause we’re movin’ too slow
His lyrics also tell the cost in blood, sweat and sorrow in the poignant slow middle section:
Behind the blue Rockies the sun is declinin’
The stars, they come stealin’ at the close of the day
Across the wide prairie our loved ones lie sleeping
beyond the dark oceans in a place far away
We are the navies who work upon the railway
Swingin’ our hammers in the bright blazin’ sun
Livin’ on stew and drinkin’ bad whiskey
bendin’ our backs ‘til the long day is done
A navvy, mainly a British term, was a laborer employed in the excavation and construction of a road, railroad or canal.  We can learn a few things from our northern neighbors.
In the final again upbeat section, he returns to the optimistic vision:
So over the mountains and over the plains
Into the muskeg and into the rain
up the St. Lawrence all the way to Gaspe
swingin’ our hammers and drawin’ our pay
Layin’ ‘em in and tyin’ ‘em down
away to the bunkhouse and into the town
a dollar a day and a place for my head
a drink to the livin’ a toast to the dead
Oh the song of the future has been sung
all the battles have been won
On the mountain tops we stand
all the world at our command
We have opened up the soil
with our teardrops and our toil
Again learning from the folks to the north: the muskeg is a North American swamp or bog consisting of a mixture of water and partly dead vegetation, frequently covered by a layer of sphagnum or other mosses.
The final verse unites both themes:
For there was a time in this fair land when the railroad did not run
…
When the green dark forest was too silent to be real
And many are the dead men too silent … to be real
Pierre Berton, who wrote “The National Dream” and “The Last Spike,” two bestselling books about the railway, said, “You know, Gord, you said as much in that song as I said in my book.”
I'm tired of politics this week, so something cheerful and moving to brighten everyone's day.

Gordon Lightfoot’s Canadian Railroad Trilogy
By Ron Knecht – 29January2019
There was a time in this fair land when the railroad did not run
when the wild majestic mountains stood alone against the sun
Long before the white man and long before the wheel
when the green dark forest was too silent to be real
But time has no beginnings and hist’ry has no bounds
as to this verdant country they came from all around
They sailed upon her waterways and they walked the forests tall
built the mines, the mills and the factories for the good of us all
The lyrics above begin Lightfoot’s “Canadian Railroad Trilogy,” which Johnny Cash called “an extremely fine piece of songwriting.”
Bob Dylan named Gordon Lightfoot his favorite singer/songwriter.  I think I agree.  “Everytime I hear a song of his, it’s like I wish it would last forever,” he said.  “Lightfoot became a mentor for a long time.  I think he probably still is to this day.”
The Canadian Broadcasting company commissioned the song by the country’s special son for a special broadcast on January 1, 1967 to start Canada’s centennial year.  It took him three days to write, and it has a slow tempo middle section between faster paced beginning and end sections.
Lightfoot was an inspired and inspiring choice.  The song describes the building of the trans-Canada Canadian Pacific Railway in the early 1880s, a dozen years after Leland Stanford drove the golden spike to celebrate our first trans-continental railroad.  Its awesome lyrics and sound herald the optimism of the railroad age in the opening stanzas.
For they looked in the future and what did they see
They saw an iron road runnin’ from the sea to the sea
Bringin’ the goods to young growin’ land
all up through the seaports and into their hands
Look away said they across this mighty land
from the eastern shore to the western strand
Bring in the workers and bring up the rails
we gotta lay down tracks and tear up the trails
Open ‘er heart let the life blood flow
gotta get on our way ‘cause we’re movin’ too slow
His lyrics also tell the cost in blood, sweat and sorrow in the poignant slow middle section:
Behind the blue Rockies the sun is declinin’
The stars, they come stealin’ at the close of the day
Across the wide prairie our loved ones lie sleeping
beyond the dark oceans in a place far away
We are the navies who work upon the railway
Swingin’ our hammers in the bright blazin’ sun
Livin’ on stew and drinkin’ bad whiskey
bendin’ our backs ‘til the long day is done
A navvy, mainly a British term, was a laborer employed in the excavation and construction of a road, railroad or canal.  We can learn a few things from our northern neighbors.
In the final again upbeat section, he returns to the optimistic vision:
So over the mountains and over the plains
Into the muskeg and into the rain
up the St. Lawrence all the way to Gaspe
swingin’ our hammers and drawin’ our pay
Layin’ ‘em in and tyin’ ‘em down
away to the bunkhouse and into the town
a dollar a day and a place for my head
a drink to the livin’ a toast to the dead
Oh the song of the future has been sung
all the battles have been won
On the mountain tops we stand
all the world at our command
We have opened up the soil
with our teardrops and our toil
Again learning from the folks to the north: the muskeg is a North American swamp or bog consisting of a mixture of water and partly dead vegetation, frequently covered by a layer of sphagnum or other mosses.
The final verse unites both themes:
For there was a time in this fair land when the railroad did not run
…
When the green dark forest was too silent to be real
And many are the dead men too silent … to be real
Pierre Berton, who wrote “The National Dream” and “The Last Spike,” two bestselling books about the railway, said, “You know, Gord, you said as much in that song as I said in my book.”

This is the second in a series of columns summarizing my Controller’s Annual Report (CAR) for fiscal year 2018 (FY18).  Based on the state’s official books and records, the CAR provides Nevada citizens, officials and others summaries of key facts, data, analysis and issues addressing Nevada’s fiscal condition and policy challenges.

Last week’s column reviewed state spending, concluding: Since FY06, state spending has grown faster than Nevada’s economy, thus imposing an ever-larger real burden on Nevada families and businesses, whose real incomes are lower than in FY06.  Health and Social Services (HSS) and K-12 spending have grown rapidly while total other spending, except that for transportation, declined.

So, how did our state fund its spending?

Non-tax revenues – grants and contributions to the state, charges for services and contract revenues – have grown very rapidly (59 percent faster than Nevada’s economy) to comprise 56 percent of total FY18 revenues of $13.63 billion.  General fund revenues, comprised mainly of tax proceeds, grew at the same rate as the state economy, and they provide the other 44 percent.

Government operating and capital grants and contributions of $5.296 billion accounted for 39 percent of total revenues and for 59 percent of the total revenue growth since FY06.  These revenues consist mainly of federal government spending for Medicaid, Supplemental Nutritional Assistance Program (SNAP, or food stamps) and Temporary Assistance for Needy Families (TANF).  They are the revenue support for much of the huge increase in HSS spending required mainly by federal government regulations.

A notable risk in this area is that federal funding is sometimes reduced, but federal spending mandates rarely are.  Now and in coming years, Nevada faces just such a problem with Medicaid revenues and spending.

In Nevada higher education, charges for services plus grants and contracts comprise $1.236 billion or nine percent of total state revenues, and they grew slightly slower than Nevadans’ incomes.  Other program revenues of $1.164 billion or 8.5 percent of total revenues grew much slower than incomes.

So, in FY06 most state revenues, 52 percent, came from taxes and the rest from program revenues.  But over the last dozen years program revenues grew 105 percent to $7.696 billion while general revenues rose only 46 percent to $5.934 billion.  It is doubtful that federal funding will allow Nevada program revenues to grow as rapidly in the future as in the past.  So, without restraint on state spending growth, Nevada families and businesses likely will face increasing taxes in coming years.

What are the facts and issues concerning taxes?

In sum, revenues from gaming, state property and state sales and use taxes fell sharply in real terms while tax revenues from non-gaming businesses, including unemployment assessments, rose greatly.  The burden carried by consumers and residents, not including the pass-through effects of business taxes, grew slower than their incomes.

The incidence of the declining tax revenues lies greatly with consumption, not with savings, investment and employment; and with persons, not businesses.

To compensate, Nevada added new levies mainly on savings, investment and employment, and on businesses.  It did so mainly the modified business tax (MBT), which taxes employment and federally mandated unemployment assessments; and also via the new Commerce Tax (CT) and levies on auto leasing, lodging and insurance premiums.

Some people claim repealing the CT would significantly harm K-12 education.  This is false and misleading.  There’s no direct connection between CT revenues, which flow into the general fund (not education accounts), and state K-12 spending.  Further, because CT revenues decrease MBT revenues, the net effect of deleting the CT would be to reduce the overall revenue growth rate less than the growth rate of the Nevada economy.  So, eliminating the Commerce Tax would still allow net total revenues to grow.

The shift in tax burden from consumption to investment and employment and from persons to businesses diminishes tax neutrality and transparency.  Businesses don’t much absorb the economic burden of their increased taxes; instead, they increase prices to consumers and lower total employee hours and compensation rates.
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The good news is that, with ten taxes accounting for two percent to 24 percent of general revenues, and considering their incidence mainly on persons and consumption, Nevada’s tax base is reasonably well diversified.
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Ron Knecht has served as Nevada Controller, a higher education regent, a legislator and economist.  He can be reached at RonKnecht@aol.com.  
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