I'm in Baltimore today, looking through some of my great-grandfather's papers and books and becoming their caretaker. As many readers probably know, I have an ongoing research interest in him. He was the president of Maryland's Constitutional Convention of 1968. The Constitution ultimately failed amidst the turmoil of the King assassination and the expansive changes to the state government that were proposed.I came across this statement by him at the beginning of the convention that I liked a lot. A strong federalist and reformist impulse motivated his work throughout the convention:
"And so, we, the citizens of what we proudly call the great free State of Maryland, have, along with our fellow citizens of other states, become cringing, favor-seeking vassals, fawning at the feet of Uncle Sam, grateful for the few crumbs of our own money tossed to us. But that great big, sprawling, bureaucratic colossus sitting astride the Potomac is too big, too far removed from the people, too impersonal to make more than uncertain, feeble, ineffective, and ofttimes inept attempts to solve these problems which ought to be solved by state and local governments.
The challenge is clear for us to see; it is written in large bold letters on the walls of this historic State House. We have almost complete freedom in drafting a constitution to submit to our people. So long as it provides for a republican form of government, so long as it does not transgress the rights and liberties of the individual citizens guaranteed and protected by the Constitution of the United States, we, the people of the State of Maryland, can have almost any kind of constitution we choose."
What would be your opinion on countercyclical policies handled by state and local governments, if the idea is feasible?
ReplyDeleteI am guessing there is the possibility of stimulus from one state only leading to recovery in another state that never had a stimulus, but not in the home state.
That is an interesting idea Prateek. considering the possibility of a countercyclical fiscal state policy raises a number of questions.
ReplyDelete1.Under the current system, could it even be possible with a balanced budget (as is almost universal)? for the state to spend, it must tax its citizens and commerce, thus probably reducing private spending and investment still further.
2. Oftentimes fiscal stimulus is derided as make-work, without serving a legitimate and urgent public purpose. Perhaps state authorities would be more skillful in directing infrastructure spending than disconnected federal bureaucrats.
3. As you say, there is the issue of bleeding money into other jurisdictions. For example, you might think this would be the worst in states like Rhode Island with compact borders. For example, building contractors compete for projects in a relatively large area. All of the stimulus contracts might be snapped up by contractors from Conneticut and Massechusetts. That is just identifying the issues though, the likelihood of such events is another story. And of course, neither Alaska nor Hawaii would face any such question. Maine might be similarly immune, population centers being well removed from US cities.
You know, Maryland has counties (population wise) that are the size of countries or regions of countries (say a Swiss canton). Those countries or regions have far more elected officials "running them" than I am sure that a Maryland county has (most counties have less than a dozen elected officials) - a Swiss canton has, for example, a hundred or member parliament body. That sort of reform - expanding the number of elected representatives - would go a long way toward making counties more relevant to voters - particularly since populous counties spend billions in taxpayer money every year.
ReplyDeleteHmmm...combining points one and three, In a situation like Maryland, if Massachusetts and Connecticut run balanced budgets sans stimuli and recieve spillover benefits (contracts, employment, etc.) from the Rhode Island non-deficit stimulus, then we might expect to see net benefits for Massachusetts and Connecticut. And not necessarily for RI.
ReplyDeleteIs this right?
Argosy Jones, I sat on the idea a while, and realized that various state governments could easily cooperate on stimulus.
ReplyDeleteIf negotiations between the two legislative councils succeed, they might implement it without too many spillover worries.
Of course, a stimulus need not necessarilly mean increased spending for the same tax rates, but may also mean reduced tax rates for the same level of spending.
So we may see other kinds of stimulus spillovers - many of one region's taxpayers may actually come from consumers and businesses from another region. Or the economic incidence of one county's taxes fall more on people in another county. So only outsiders might benefit from tax rate reductions. But if that is so, it is only fair that outsiders get benefit of spending stimulus, since they are the ones who pay taxes.
I think the good idea of localized stimulus programs is that even if such programs start out using tax money, they could more easily phase out towards raising capital privately and then running on cash flow of the operations instead of taxes. So there could be stimulus programs that only involve redistribution of resources at the beginning, but move more towards a market-based process, where the need or use for any program can be determined by prices and how costly it is to provide them, and then scrapping programs that are not useful.