The 66th anniversary of D-Day got me to ruminating on the tremendous sacrifice and the high tax rates that we imposed on ourselves during arguably our finest hours as a nation. It also got me to thinking about the funny numbers flying around these days about our governmental costs and obligations.
The way Gov. Tim Pawlenty and other government-bashing politicos would do the math, our nation now has spent between two and three times more on our war in the Middle East than we did on World War II. And using this same childlike finger-counting, the average American family today is 20 times richer than the average family was in 1950.
This is the falsehood you get if you only count actual nominal greenbacks to make your case. In physical dollar bills, we spent some $300 billion on the largest war in our history, between 1941 and 1945. On the much smaller conflict since 9/11 in Iraq and Afghanistan, we have spent $809 billion in actual dollar bills. Similarly, average family income in 1950 was less than $4,000 and now is about $80,000.
Even amateur students of history and economics knows that this method of counting is ridiculous, and that you have to account for inflation and the size of the economy to get a true perspective of costs and benefits. During the peak year of World War II, total military spending consumed a staggering 37.5 percent of our total GDP. And during the peak year of our Middle East War, the total military spending as a percent of GDP was 4.2 percent, according to a recent report by the Congressional Research Service. And we all know very well that a family making $12,000 a year these days is living in poverty, and is not three times richer than the average family in 1950.
And yet Pawlenty and other anti-government operatives have been going around the nation and the state using nominal dollars to claim that state government was growing on average 21 percent between 1960 and 2002, when he became governor, and that since then he's heroically got the growth rate down to 2 percent a year. The increasingly strident and unreliable Wall Street Journal editorial page has reprinted these claims.
Pawlenty typically cheats, by double, with artful phrasing on this 21-to-2 claim, and by using biennial growth to describe the previous growth rate. MinnPost's Eric Black has written a superb and detailed piece explaining how badly Pawlenty is distorting the numbers, including the wry observation that by this way of reckoning, Minnesota National Guard spending alone on Middle East deployments probably would exceed the amount we spent on the entire Revolutionary War (what a bargain, $100 million, according to CRS). Black notes that because of a dreadful decade of economic decline, low inflation and revenue shortages, almost every governor in America these days could claim to be the most fiscally conservative in their history. (Black also refers to our own excellent op-ed on the subject, several months ago, which makes the case that much of the ACTUAL growth in government through the 1990s was good for Minnesota people and good for business too.)
The ultimate irony is that even without the gross distortions, Pawlenty does deserve to be known forever as Tightwad Tim, the most ideologically pure penny-pinching governor in our recent history. If you look at the most comprehensive measure of government cost, the Price of Government figure from Minnesota Management and Budget, state and local government revenues are down from roughly 17.5 percent through the 1990s (a level we think is about right for sound investments in people and infrastructure) to about 16 percent in the aughts. That's about $3 billion less per year — for hospitals, schools and highways — than if we had NOT cut income tax rates permanently in 1999 and 2000 and if Pawlenty had NOT adhered to a rigid no-new-taxes ideology since becoming governor.
But here’s the other shoe dropping, a question that begs asking.
Are we better off than we were in the 1990s? By almost any measure that is applied for quality of life and business conditions, and for most of the population in the middle and lower-income realms, the answer is "no". The exception, until very recently, might be those at the very top of the income scale. They have a larger share of income and wealth than when the decade started and their state-local effective tax rate is lower, according to the Minnesota Tax Incidence study.
The Bush-Pawlenty tax-cut decade overall was the worst in memory for most people, with two major recessions, no gains in actual wages for the vast number of families in the middle incomes, and real losses for those in the bottom two or three deciles. As the Bible says, a tree should be judged by its fruit, adjusted for inflation and economic growth, of course.