Tom Pelham is mad as hell. And just as wrong

Now that Bruce Lisman has cut ties with his vanity platform, Campaign for Vermont, the organization is foundering financially and, worse, is stuck with budget scold Tom Pelham as its chief public voice.

Pelham has spent the last five years writing opinion piece after opinion piece slamming the Shumlin administration over taxation and budgets. Now, his temperature appears to be rising — to the point that he might want to check his blood pressure. Reading his latest commentary, I can practically see steam shooting out his ears.

His point, as ever, is that the Shumlin administration is bankrupting the state, wrecking the economy, and imperiling our futures by overtaxing and overspending. And in the process, he repeats a fundamental misperception about money that’s commonly held by budget hawks everywhere.

See if you can spot it:

Excluding federal funds, the state budget passed by the Legislature and signed by the governor in 2011 required $2.954 billion in revenues extracted from the Vermont economy through taxes, fees, fines, assessments, settlements, etc., and deposited into various state funds.

The key word there is “extracted,” which he repeats three times. Pelham appears to believe that all government revenue is collected, thrown onto the burn pile, and set ablaze. Which is so completely wrong it’d be funny if so many serious, influential people didn’t share that belief.

The vast majority of public funds are, in fact, immediately turned around and invested. Which benefits the economy. Which is why, in times of recession, stimulus spending is the most effective tool.

Where does that money go? It fixes roads and bridges. It pays public sector salaries, and the predominantly middle class recipients promptly spend the money on goods and services. It pays for public sector benefit plans that provide financial security for recipients, freeing them to spend more of their incomes and assume more debt. It underwrites health care costs for the poor and working poor, which keeps people healthier and helps pay the freight for doctors and hospitals. It enforces a system of laws necessary for economic stability.

As for human services and unemployment programs, they are singularly effective ways to help the economy. Better than tax cuts, better than business incentives. Don’t believe little ol’ liberal me? How about Moody’s Economy.com, that hotbed of mainstream thinking:

In findings echoed by other economists and studies, [economist Mark Zandi] said the study shows the fastest way to infuse money into the economy is through expanding the food-stamp program. For every dollar spent on that program $1.73 is generated throughout the economy, he said.

“If someone who is literally living paycheck to paycheck gets an extra dollar, it’s very likely that they will spend that dollar immediately on whatever they need – groceries, to pay the telephone bill, to pay the electric bill,” he said.

By contrast to that $1.73 figure, business incentives only generate $1.33.

Now, I’m not saying that government doesn’t waste some of that money. Although even if it’s spent wastefully, it still goes into the economy one way or another. It doesn’t simply disappear.

Not to say that I condone government waste. Far from it; as I’ve said plenty of times before, I want government to be as efficient as possible. But when Tom Pelham asserts that every dollar in government revenue is “extracted” from the economy, never to return, then he’s absolutely and dangerously wrong.

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2 thoughts on “Tom Pelham is mad as hell. And just as wrong

  1. Walter Carpenter

    “The key word there is “extracted,” which he repeats three times.” Thanks much for this. I saw it too, but you expressed it better:) What was that saying from ancient times, “taxes are what you pay for civilization,” or something like that:) I wonder how Mr. Pelham benefits state government?

    Reply

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