A Look at Ireland's Economy After St. Patrick's Day

It's after St. Patrick's Day, but it is still worth taking a look at a brief analysis on the economy of Ireland. Consider the following SBE Council Cybercolumn from late last week:

On Saturday, March 17, everybody's Irish. After all, it's St. Patrick's Day.

As Americans celebrate all things Irish, it's worth taking a quick look at the state of the economy of Ireland.

Of course, it must be understood that all of Europe has been suffering, and the near-term outlook is negative.

According to a report in the March 15 Irish Times, "Bloxham Stockbrokers has revised downwards its economic forecast for the year, blaming uncertainty in the global economy for a weakening of the country's prospects. Its report projects growth of just 0.5 per cent in real gross domestic product, compared with previous estimates of 1.1 per cent. Next year, GDP is expected to grow by 2 per cent, according to Bloxham's estimates." It was pointed out that slowing exports were a main reason for the growth outlook downgrade.

At the same, it was noted, "However, the country is in a much better position than other euro zone peripheral debt countries to grow once the world economy picks up, Bloxham said."

Consider three critical points.

First, Ireland in fact is in a far better position than most of its neighbors. Keep in mind that, while Ireland's GDP performance was worse than the EU in general over the last four years, for more than a decade prior, Ireland's economic growth far outdistanced the EU (not to mention the U.S. as well).

Second, part of Ireland's growth story was that government spending as a share of GDP was far below the rest of Europe. For example, before the recent economic mess hit, Ireland's government expenditures came in at 34.3 percent of GDP in 2006, compared to 46.3 percent among the 27 EU nations, according to the European Commission's Eurostat data.

However, Ireland's government spending exploded recently, reaching 66.8 percent of GDP in 2010. That level will have to come down to where it was previously - and do so rapidly - in order for Ireland to get back on a solid growth track.

Third, given that economic freedom is the necessary foundation for entrepreneurship to flourish, and therefore, for the economy to grow, it is critical to point out that on the Heritage Foundation's "Index of Economic Freedom 2012," Ireland ranks an excellent number 9 out of the 179 nations ranked.

But it also was noted that Ireland's score dropped, due in part to that increase in government spending. It was noted in the index: "Its score has decreased by 1.8 points from last year, reflecting poorer management of government spending and reduced monetary freedom. The Irish economy fell to 2nd place in the Europe region behind Switzerland. Ireland recorded one of the 20 largest score declines in the 2012 Index."

Looking ahead, Ireland's strengths - for example, strong property rights; a low corporate income tax rate (12.5%); a "streamlined regulatory process is very conducive to dynamic investment and supportive of business decisions that enhance productivity" (as noted in the index); and openness in terms of global trade and commerce - put the nation in a far better position to get back on a strong growth track compared to much of Europe.

Getting government spending rolled back, though, will be critical. If that happens, we can get back to celebrating all things Irish, including the Irish economy.

_______

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.

Public Alarmed Over Spending and Big Government

People are worried about the federal government's big spending, big borrowing and big taxing ways. Indeed, while President Obama and congressional leaders push spending ever higher, claiming this will somehow help the economy, the American people are not buying this snake oil...

Read the rest of this SBE Council Cybercolumn by chief economist Ray Keating here.

Government Spending and the Economy

Government spending grew rapidly during the Bush administration, and now is exploding under President Obama.

Some people actually assert that this is good for the economy. It’s not, of course, and the Center for Freedom and Prosperity Foundation takes a look at the economic impact of government spending, and highlights eight problems with bigger government.

Check out “Eight Reasons Why Big Government Hurts the Economy.” It’s well worth the six-and-a-half minutes.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Obamamobiles

In the May 20 Wall Street Journal, columnist Holman W. Jenkins, Jr., referred to “Obamamobiles.” What’s up with that?

It’s straightforward and scary.

Automakers hit tough times, and two of those companies took government bailouts. Of course, with government handouts comes government meddling. And President Barack Obama is proving to be an all-pro government meddler.

On May 19, for example, the President declared that automakers would have to meet far tougher fuel efficiency mandates. By 2016, CAFE standards would 35.5 miles per gallon – 39 mpg for cars and about 30 mpg for light trucks.

So, the President’s idea is to force U.S. companies that are having a tough time with massive losses to make less profitable vehicles. Huh?

In effect, the President has decided that politicians know better than consumers. The political class will dictate what kinds of vehicles are made, rather than companies competing to serve consumers. For good measure, these government CAFE dictates translate into more costly and more dangerous (physics dictates that smaller and lighter vehicles mean more dangerous vehicles for passengers) autos.

None of this is good for automakers, for the many small businesses involved in the auto industry, and for vehicle consumers (again, including small businesses).

Jenkins has been doing fine work picking apart much of the Obama industrial policy agenda. In the May 20 column, he observed:

With his latest installment of ever-higher fuel mileage requirements for the auto industry, Barack Obama embraces a momentary, crisis-spawned expansion of the art of the possible, unleavened by any art of the rationally desirable. Detroit is dependent on Washington loans for survival. The industry's lobbyists and its congressional allies have collapsed in a heap, offering no resistance. So why not go for broke? If you're alone in front of the shrimp buffet, why not eat all the shrimp -- even if it makes you barf later? …

So far, the Obama administration has yet to lay out its magical thinking on how the homegrown auto makers are to become "viable" when required to subordinate every auto attribute that consumers find desirable in favor of achieving a passenger-car average of 39 miles per gallon by 2016. Nonetheless the answer has quietly seeped out: Taxpayers will write $5,000 or $7,000 rebate checks to other taxpayers to bribe them to buy hybrids and plug-ins at a price that lets Detroit claim it's earning a "profit" on its Obamamobiles.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Obama Jobs?

President Barack Obama’s economic agenda mainly consists of historic increases in government spending. More government supposedly leads to recovery, more robust economic growth, and increased job creation.

These are the strange economic ideas being peddled by politicians these days. Unfortunately, they often get backing by a good number of misguided economists who apparently accepted the silly notions of Keynesian economics in school.

Of course, these politicians and economists like to provide fictional numbers to back up their fictional economics. One of the big numbers served up by the Obama administration is that government-led stimulus will create or save 3.5 million jobs.

A May 11 USA Today article noted: “Rep. Paul Brown, R-Ga., said at a hearing last week that it may not be possible to accurately determine whether the stimulus hits its job creation target. ‘Very probably, these numbers are just picked out of the clear blue sky and are not authenticated or authenticatable,’ he said.”

The White House Council of Economic Advisers responded, with USA Today reporting: “The new report by the White House Council of Economic Advisers offers more details about the projected impact of the $787 billion stimulus package, which Obama signed into law in February. The figure of 3.5 million jobs saved or created, the report says, is the difference between the projected number of jobs during the last three months of 2010 with the stimulus and the projected number of jobs without if there had been no stimulus plan.”

If this sounds fishy, it is.

The USA Today story closed out: “The administration's practice of discussing jobs saved as well as created is ‘a very clever device for providing future political cover,’ said University of Chicago economics professor Steven Davis. ‘The “jobs saved” part was a way for them to say, ‘The economy is still shrinking, but it would have shrunk faster but for the good things that we did.’”

Rep. Brown and Chicago economist Steven Davis are both absolutely correct.

This is shady economics, allowing the Administration to say its agenda worked even if it did not.

What’s the main problem? The underlying assumption that more government spending creates jobs ignores the fact that resources are being diverted away from the private sector to the government. Government creates nothing. Government can destroy businesses and jobs. And at its best, it can protect life, limb and property, enforce the law and contracts, and dispense justice. But when it comes to more government spending, resources are taken from the private sector – whether through taxes or borrowing – where prices, profits, losses, competition and consumers call the shots, and then doled out by politicians and their appointees according to politics.

Once you grasp how the economy works, it becomes clear that all of this government spending will not make the economy better than it otherwise would have been, but instead worse.

The Obama stimulus plan is not about net job creation. Instead, it’s about shifting from market-driven jobs to government-driven jobs, with the overall number of jobs being less than what would have been accomplished if government spending were not cranked up in the first place.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Big Corruption, Big Government

Why is there so much corruption in and around government? Good question.

A new Center for Freedom and Prosperity video with Dan Mitchell asks: “Want less corruption?”

The answer provided in the video – which is right on the mark – is: “Shrink the size of government.”

The point is undeniable: When government is so big – spending other people’s money, doling out massive subsidies, and imposing myriad regulations and taxes – special interests want to secure their “piece of the action.” No matter how many ethics measures are passed, the only surefire way to reduce the corruption that comes with big government is to shrink government.

Check out the video.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Public Sector Pay vs. Private Sector Pay

While the private sector is the driving force of U.S. economic growth and productivity, government serves as a clear drag on the economy. Yet, due to government decisions being driven by politics and special interest pressures, we see stories like the one that appeared on the front page of the April 10 issue of USA Today.

The article was titled “Benefits widen public, private workers’ pay gap.” It noted the following:

• “The pay gap between government workers and lower-compensated private employees is growing as public employees enjoy sizable benefit growth even in a distressed economy, federal figures show. Public employees earned benefits worth an average of $13.38 an hour in December 2008, the latest available data, the Bureau of Labor Statistics (BLS) says. Private-sector workers got $7.98 an hour.”

• “Overall, total compensation for state and local workers was $39.25 an hour — $11.90 more than in private business. In 2007, the gap in wages and benefits was $11.31.”

• “A full-time government worker receives benefits worth an average of $27,830 per year. A private worker's benefits are worth $16,598.”

It also was reported: “Illinois state Sen. Chris Lauzen, a Republican, says government benefits are unsustainable and unfair to taxpayers who earn less than civil servants. ‘People will become angrier and angrier when they learn the difference between their pay and benefits and what we give to public employees,’ he says.”

And people should be angry. Politicians should not be coming to the taxpayers – either individuals or businesses – for more revenues. Instead, it’s time for givebacks from grossly overpaid government workers.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Still More Taxes?

The Obama budget plan includes various tax hikes that will hurt entrepreneurs, investors, business and the economy. Those include higher personal income, capital gains and dividend tax rates on upper income individuals; keeping the death tax around; and imposing a cap-and-trade regulatory/tax scheme.

But that apparently is not enough. The March 25 Wall Street Journal reported the following:

The White House said it would launch a search for new tax revenues, as Congressional leaders moved to scale back proposed spending increases and tax cuts in President Barack Obama's ambitious budget. The Obama administration plans to create a task force to consider elimination of corporate loopholes and subsidies, tougher enforcement against tax avoidance, and tax simplification, White House Budget Director Peter Orszag said late Tuesday.

A task force to, in effect, raise more taxes – is this really what the economy needs right now?

Congress is absolutely right to be concerned about the current explosion in government spending. But are they serious? Initial congressional budget numbers indicate more posturing than serious action on reining in spending.

Obviously, government looking to suck even more resources out of the private sector is not the answer to our budget or economic woes. If too much spending is the problem – which it is – then we obviously need sharp reductions in that spending, not higher taxes.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Less Spending in Kansas

Kansas was in a political standoff due the state’s budget.

Tax refunds and pay for state workers were in jeopardy this week. But Governor Kathleen Sebelius, a Democrat, and Republican state lawmakers came to an agreement.

Sebelius signed a bill that will reduce spending in the current fiscal year, though she vetoed some spending cuts.

The February 17 Kansas City Star noted:

The bill Sebelius signed erases the state’s $200 million current-year budget deficit and gives lawmakers a head start toward eliminating $1 billion worth of red ink in next year’s budget.

Because of a cash-flow problem, the state had only $10 million in its checking account Monday morning — not enough to cover payroll, tax refunds and other state bills.

Sebelius had proposed borrowing the money from other state funds, but Republican leaders balked. They called on her to sign their budget reduction bill to ensure the state would have money available to repay the internal loans…

The budget reduction bill trims most state agencies by 4.25 percent. For public universities and colleges, the cuts amount to $34 million. Social services for the poor and vulnerable saw relatively few reductions.

What a novel idea? That is, fiscal responsibility. Reducing government spending in response to budget shortfalls, and apparently, no tax hikes.

Other states – and for that matter, the federal government – should take note of what just happened in Kansas.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Bad Economists

Just in case you were wondering how our elected officials come up with really bad policy ideas – like believing that massive government spending projects are good for the economy – just read the January 7 New York Times business story written by Louis Uchitelle titled “Economists Warm to Government Spending but Debate Its Form.”

These misguided policy ideas are either conjured up by or affirmed by many of my fellow economists.

Based on a meeting of the American Economic Association, Uchitelle wrote the following:

• Frightened by the recession and the credit crisis that produced it, the nation’s mainstream economists are embracing public spending to repair the damage — even those who have long resisted a significant government role in a market system.

• At their last annual meeting, ideas about using public spending as a way to get out of a recession or about government taking a role to enhance a market system were relegated to progressives. The mainstream was skeptical or downright hostile to such suggestions. This time, virtually everyone voiced their support, returning to a way of thinking that had gone out of fashion in the 1970s.

• The few sessions that dealt with fiscal policy were packed with economists, mostly from academia. Nearly all argued that public spending can be more effective than tax cuts in getting out of a bad recession.

Of course, many of these economists might not be as “mainstream” as Uchitelle insists.

In the end, though, economists should know better. But apparently many do not. Government spending merely drains resources from the private sector – whether through taxing or borrowing – to be used for political purposes and projects. That’s not good for the economy. The private sector is not spurred by this, but instead, is crowded out by government. The economy is bound to suffer in the short run from an extended recession and under-performing recovery, and over the long haul from restrained or sluggish growth under this kind of fiscal policy regime.

It must be kept in mind that government’s massive intrusion into the private sector – through bailouts, bad housing and monetary policies, and assorted misguided regulatory initiatives – got us into this mess.

The right kind of tax and regulatory changes – reducing tax rates and regulatory burdens to boost incentives for private investing and entrepreneurship – along with a rollback in the size of government are the policies our economy desperately needs.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Lessons from Coolidge

I am a longtime “Coolidgean.” That is, Calvin Coolidge is one of my favorite U.S. presidents.

It turns out that January 5 was the 76th anniversary of Calvin Coolidge’s death. Marking this date and looking ahead to the inauguration of our next president, Ryan L. Cole wrote an excellent piece for the American Spectator titled “Keeping Cool with Coolidge.”

The article provides an interesting contrast between Coolidge’s politics and the politics of the early 21st century, and most importantly, differences in the philosophy of governing.

Cole summed up Coolidge’s policy agenda this way: “…when asked for his thoughts on assuming the presidency, Coolidge simply replied, ‘I think I can swing it.’ And despite the opinions of New Deal historians, swing it he did. A year after Harding's death Coolidge was elected president in his own right by a landslide. He spent the next four years fulfilling his duty as he believed the founders had envisioned -- cutting taxes, resisting and vetoing new spending, and generally minding his own business while presiding over a time of great prosperity.”

That is why I am a Coolidgean.

And we desperately need some Coolidge-like common sense today.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

More Government Spending Not the Answer

The economy is a mess. Various politicians – including President-elect Barack Obama – and some economists argue that the way to get the economy moving again – or to “stimulate” the economy – is through more government spending.

Does this make any sense? Of course not. Yet, we hear it day after day.

The idea was brought to us during the Great Depression by economist John Maynard Keynes. Keynesianism didn’t work during the Great Depression, nor at any other time.

Check out the latest video from the Center for Freedom and Prosperity titled “Keynesian Economics Is Wrong: Bigger Government Is Not Stimulus.” In the video, economist Dan Mitchell sets the record straight on misguided Keynesian economics.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Check Up on Your Governor

They always seem to talk a good game, but just how fiscally responsible is your governor?

Well, you can find out by checking out the Cato Institute’s just-released “Fiscal Policy Report Card on America’s Governors: 2008” written by Chris Edwards.

As described by Edwards: “This ninth biennial fiscal report card examines the tax and spending decisions made by the governors since 2003. It uses statistical data to grade the governors on their taxing and spending records – governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.”

Best and worst? Edwards notes: “Three governors were awarded an 'A' in this report card – Charlie Crist of Florida, Mark Sanford of South Carolina, and Joe Manchin of West Virginia. Eight governors were awarded an 'F' – Martin O'Malley of Maryland, Ted Kulongoski of Oregon, Rod Blagojevich of Illinois, Chet Culver of Iowa, Jon Corzine of New Jersey, Bob Riley of Alabama, Jodi Rell of Connecticut, and C. L. 'Butch' Otter of Idaho.”

Check out the fiscal report card, and then start asking questions of your elected officials.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Approval for California Legislators Barely Detectable

During rocky economic times, it’s expected that people will not look kindly on their federal elected officials.

And right now, President Bush earns very low approval ratings in the polls, with the Democratic-led Congress doing even worse.

But there’s a place where state lawmakers manage to garner even more atrocious assessments from the voters. That place is California.

The Golden State is in the midst of a fiscal mess, with a standoff over the state’s budget now reaching 74 days, according to a story from the Sacramento Bee.

The Bee’s report highlighted just how low legislators’ approval ratings have sunk:

California lawmakers keep breaking records. Earlier this month, the Legislature surpassed the mark for state budget futility. Now Californians have given their legislators the worst rating in recorded state history. A Field Poll released Thursday showed only 15 percent of registered voters give the 120 lawmakers passing marks, while 73 percent disapprove of their job performance. "This is the lowest job (approval) rating recorded for anybody from any institution," said Mark DiCamillo, director of the 62-year-old Field Poll. "No one has ever gotten this low. Even Richard Nixon."

Wow.

Imagine what lawmakers’ approval ratings would look like if they reined in bloated government spending, and kept taxes low. Just a thought.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

An Ugly Reminder on Federal Spending

The current fiscal year comes to a close at the end of this month. The Congressional Budget Office’s latest “Monthly Budget Review” was published on September 5. It provides the budget basics through the first 11 months of FY2008.

What does it tell us about federal government expenditures? Basically, the spending juggernaut relentlessly marches on.

Specifically, when adjusted for weekdays and holidays, federal outlays were up by 8 percent compared to the same period last year. And spending was up in all major categories: Defense/military by 10.9 percent; Social Security benefits by 5.5 percent; Medicare by 4.7 percent; Medicaid by 4.8 percent; net interest on debt by 3.4 percent; and other programs and activities by 11.4 percent.

When will someone slay the federal spending monster that sucks so many resources away from the private sector?

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

State on a Spending Binge

The cries of state politicians are growing louder. They wail that current economic troubles are doing or soon will do severe damage to their budgets. The end, of course, is near.

U.S. Senator Barack Obama, the presumptive Democratic Party presidential nominee, and various Democrats in Congress are even talking about handing over more federal taxpayer dollars to state politicians as a means for stimulating the economy. That would be really funny except for the fact that these people seem serious.

A few points from a cover story titled “States pay price for binge in spending” in the August 1-3 USA Today are worth noting:

• “State and local government spending has been rising three times as fast as revenue amid warnings from governors that their finances are nearing crisis stage. As many Americans face stagnant wages, high gas prices and job uncertainty, new government figures show that state and local governments boosted spending 7.8% in the second quarter compared with 2007 while revenue rose 2.5%. Government is on a hiring binge, too, even as private-sector jobs disappear.”

• “State and local governments are on track to spend more than $2 trillion for the first time in 2008 — about 13% of the nation's gross domestic product. A key factor driving higher spending: new employees and higher compensation.”

• “Even California, despite years of budget woes, has continued to add employees. "It's the strangest thing. Government keeps hiring even when times are tough," says Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., a private business group.”

• “Chris Edwards, budget director of the libertarian Cato Institute, says elected officials don't manage money well. ‘Why can't government adjust a percentage or two here and there without having a crisis?’ he asks. ‘Businesses do it routinely.’”

Excellent point, Chris.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Budget Deficit Rising: What Does It Mean?

On Monday (July 28), the White House Office of Management and Budget released its “Mid-Session Review” of the federal budget.

The headline news focused on the current FY2008 budget deficit being projected at $389 billion, with next year’s deficit rising to a projected $482 billion. This has drawn the usual gasps and cries of horror from various camps, such as the media and deficit hawks. For good measure, accusations fly between Democrats and Republicans over who is more fiscally irresponsible.

But a few things should be kept in mind.

First, budget deficits by themselves do not necessarily have a major impact on the economy. No economic magic is unlocked if at the end of the fiscal year, federal outlays and receipts come out equal, or close to it.

The usual assertion is that U.S. federal deficits raise interest rates, and thereby serve as a drag on economic growth. But the idea that deficits ranging in size between 2.4% and 3.3% of U.S. GDP could have a substantive impact on interest rates with trillions of dollars in capital sloshing around the global economy is rather preposterous. And when you look at the historical data, we have had periods with budget deficits when interest rates have risen and, at other times, have fallen.

Second, the causes of widening deficits should be noted. The budget deficits projected for this year and next are mainly the result of poor revenue growth due to a slow-growth or no-growth economy, and rising federal spending.

Consider, for example, that while total federal revenues are projected to actually decline in FY2008, and then rise by 3.8% in FY2009, the government’s spending juggernaut just keeps rolling along, with outlays expected to increase by 7.8% in FY2008 and by 6.5% in FY2009.

So, the current deficits serve as spotlights on the negatives of rapid increases in the size of government.

Third, and finally, the ultimate threat that these deficits present to the economy is that they increase the chances of major tax increases. The 2001 and 2003 tax relief measures, of course, are temporary, with most of the tax relief measures set to expire at the end of 2010. That means the economy is staring at a huge, costly tax increase. These deficits make those tax hikes even more likely to occur.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Cost of Government Day

Want some depressing news from Americans for Tax Reform?

Last week, the group released its “Cost of Government Day 2008” report. The analysis serves up a date each year by which the average American worker “has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by government on the federal, state and local levels.”

The date for 2008? July 16. That’s four days later than last year, and 17 days later than 2000.

Only four times since 1977 has the date fallen later than July 16 – 1982, 1983, 1992, and 1993. Why so late? The author, Peter Ferrara, wrote: “The driving factor for this development is the fact that all components of the cost of government – federal spending, state and local spending, and regulation – are now increasing faster than national income.”

How do the components breakdown in terms of days?

• 21 days worked for state and local regulation

• 42 days worked for federal regulation

• 50 days worked for state and local government spending

• 84 days worked for federal government spending

A Wasteful Detour on the Economic Highway

As the economy struggles, there are people who actually believe that more government infrastructure spending is the best way to spur economic growth.

In reality, of course, this makes no economic sense whatsoever. Sucking resources out of the private sector – whether through taxing or borrowing – so that government can spend those dollars on politically-driven projects is not a plus for the economy.

If you need a real world example, just check out the latest bad news reported on July 17 by the Boston Globe regarding Boston’s “Big Dig” project, which many appropriately renamed the “Big Pig.” Several points worth noting from the report:

• Massachusetts residents got a shock when state officials, at the peak of construction on the Big Dig project, disclosed that the price tag had ballooned to nearly $15 billion... Now, three years after the official dedication of the Central Artery/Third Harbor Tunnel, the state is reeling under a legacy of debt left by the massive project. In all, the project will cost an additional $7 billion in interest, bringing the total to a staggering $22 billion, according to a Globe review of hundreds of pages of state documents. It will not be paid off until 2038.

• Big Dig payments have already sucked maintenance and repair money away from deteriorating roads and bridges across the state, forcing the state to float more highway bonds and to go even deeper into the hole. Among other signs of financial trouble: The state is paying almost 80 percent of its highway workers with borrowed money; the crushing costs of debt have pushed the Massachusetts Turnpike Authority, which manages the Big Dig, to the brink of insolvency; and Massachusetts spends a higher percentage of its highway budget on debt than any other state.

• The scope of the debt has not previously been calculated, much less publicly disclosed, by the state's political leaders, including Governor Deval Patrick and his senior transportation officials.

• The debt is a big part of why Massachusetts had the highest tax-supported debt per capita in the United States last year. Most of the Big Dig borrowing occurred when cost overruns on the tunnel network skyrocketed in the late 1990s and state officials scrambled to keep the partially completed project afloat… During the last three years, Massachusetts spent the most of any state, by far, 38 percent of its highway budget, on debt payments, according to Globe analysis of federal data. The median is less than 6 percent nationally.

• When the project was unveiled in the early 1980s, Massachusetts residents were told by transportation officials that the federal government would pick up 90 percent of the cost. Based on cost and borrowing estimates made at that time, state residents were expected to spend around $345 million, interest payments on debt included. But the federal government ruled that the project was not eligible for that level of federal support. As costs mounted over the next two decades, it was the state's responsibility to make up the difference. Ultimately, the federal government paid just 27 percent of the construction costs, or about $4 billion. As a result, the Globe analysis of state and federal data shows, state taxpayers and toll-payers are responsible for a staggering $18 billion of the total $22 billion in construction and debt costs.

• There are two sources of state highway funds: state borrowing and reimbursement to the state on federal gasoline taxes collected in Massachusetts. The Big Dig, which makes up 7.5 miles of an 11,000-mile system, gobbled up about 40 percent of those funds during the last 17 years, data show.

The “Big Pig” is a glaring example of government waste and incompetence, and it thereby illustrates that more government spending – on infrastructure or other escapades – is not the path to an improved economy.

A Tempting Idea from Maine

Frustrated by unaccountable politicians socking your small business and/or family budgets with high taxes?

Well, I came across a July 6 story in the Portland Press Herald about how voters in a small town in Maine reacted. Consider the following:

Route 4 rises due north from Farmington, then west into the foothills of Maine’s western mountains to the Franklin County town of Phillips, population 992. The stores are open, but town government is closed. No town manager, no municipal budget.

Voters at a town meeting June 28 rejected an article to raise just over $256,000 to cover spending that exceeded last year’s budget under the state’s three-year-old tax cap law.

With that vote, the rest of the town meeting warrant was moot, Town Manager Lynn White said, and the meeting was adjourned.

Salaries, fuel costs, highway department, fire and transfer-station services ended June 30, as did White’s paid position. The new fiscal year was to have begun July 1.

Taxpayers are angry and worried as the price of everything continues to rise and local roads continue to fall apart. They want accountability...

I love these people. They have spunk … not to mention a very tempting idea.