Tuesday, September 23, 2014

Minnesota: Then and Now

As promised in G2A MN Elections, here are the calcs and sources.

1964 Cost per capita in 1964 dollars
$2 Bil/3,413,864 =
$586/person

2014 Cost per capita in 2014 dollars
$57.5 Bil/5,379,139 =
$10,689/person

1964 Cost per capita in 2014 dollars
($586/18)110=
$3,580/person

Change is cost
$10,689/$3580 = 2.99 times

State and Local Spend
FRED GDP DEF
MN Population History

And here are some responses and questions.

"Therefore "local / state government" costs 3X what it did in 1964. Since much of the additional cost goes to education, special education and health/human services, are we getting 3X the value?" G2A

"So, what do you think the State could do for its people with the same level of spending as 50 years ago? Annual expenditures of $19.257B. Ready. Set. Go." Joel

"All of the things that government did 50 years ago, when everything was just great. I think it's just like our school district. We still produce the same number of national merit scholars as we did back when we spent half as much. Anyone want to bet that MN has done not quite as well?" J
Thoughts?

47 comments:

John said...

Since I was born in 1966, some of you will need to help me learn what life was like back then.

As always facts with sources are preferred.

Anonymous said...

The Dow Jones Industrial Average is 22 times higher today than it was in 1964. Turns out America has been a good investment.

--Hiram

John said...

Boiler plate response...

"Here is some more qualitative rationale that one of the Pauls reminded me of.

The USA is overall the best and most unique country in the world. We are wealthy and powerful and willing to use that to help others all around the world. We have destroyed aggressive nations and then helped to rebuild them. Millions of citizens from around the world would love to come live here and die trying, even though many of our own citizens take it for granted or complain that it still is not good enough for them.

And we did that with a governmental system that cost 33% or less of our GDP.

With that in mind why do you think we should screw with the most successful country in the world? Rationale and cost anaysis expected." G2A

John said...

Can we go too far and spend too much via government?

Diminishing Returns?

jerrye92002 said...

The question is sometimes phrased as "how much [government spending or taxation] is enough?" My answer has always been that "there is no end to the amount of good that can be done with somebody else's money" and therefore, [liberal] government's natural inclination is to grow and spend with total disregard for what things cost and what the value produced (or destroyed) is. For example, a school district can spend twice as much without raising student achievement by even 1%. And some have.

John said...

That is why I am concerned when Liberals say they can not give a hard target for government spending as a percent of GDP, and their rationale is that we need to spend what is required to fulfill the role.

It indicates that they don't understand that the role and inefficiencies will grow to spend whatever money is provided.

It would be like my giving the engineers an unlimited budget to create an undefined product. The engineers could spend billions making the best coolest product. They are not bad for doing this, it is in their nature to experiment, improve, perfect, etc. The only problem is that it could bankrupt the company.

Why documented requirements and budgets matter...

jerrye92002 said...

I had a manager once who said that "there comes a time in the life of every project where you have to shoot the engineers and start production." In government, that is the equivalent of electing "extremist" Republicans to government power. There are two two-year periods in MN (post-1960) history when spending did not increase radically. In both cases, Republicans were in charge.

Anonymous said...

how much [government spending or taxation] is enough?

Depends on what you want to buy, I suppose.

--Hiram

Anonymous said...

Can we go too far and spend too much via government?

Sure. I just finished watching "The Roosevelts", which is available on Roku until September 28th, which among other things, made the point tangentially at least, that huge amounts of deficit government spending can work out just fine.

--Hiram

Anonymous said...

That is why I am concerned when Liberals say they can not give a hard target for government spending as a percent of GDP, and their rationale is that we need to spend what is required to fulfill the role.

That's because hard targets aren't realistic or meaningful. To a parent of a child with a life threatening illness, how much medical care is enough? What hard target should the parent, or society impose?

--Hiram

Anonymous said...

Something to keep in mind. If we measure the size of government by how much government spends, money spent on care for that child with the life threatening illness makes government bigger. Care, by they way, which might not have been available back in 1964 when government was much cheaper. So what do we do? Hire a death panel with authority to decide the child has received "enough" care, thereby reducing the size of government?

--Hiram

jerrye92002 said...

... "The Roosevelts", which is available on Roku until September 28th, which among other things, made the point tangentially at least, that huge amounts of deficit government spending can work out just fine.

Only propaganda can make a 10-year-long depression sustained by government incompetence seem "just fine," and that's what this mini-series is.

John said...

Hiram,
I hate to break it to you, but even the socialized medicine programs have limits on what they will spend to save a life. From what I can tell, it is based on the patients age, prognosis and other factors.

Remember the story from my friend who lived in Italy, his land lady was diagnosed with some form of cancer and they sent her a check for ~$50,000 and told her to enjoy her last months of life...

Anonymous said...

even the socialized medicine programs have limits on what they will spend to save a life.

So at some point, they kick sick children out of hospitals? And parents are satisfied with that knowing their kids got "enough" life saving care?

--Hiram

John said...

A reader noted in a different way that things were not very good for minorities in 1964. Though I am unsure if improving civil rights drove any financial costs?

I would have thought that should have been an excellent improvement with little or no on going governmental costs. Thoughts?

The biggest expensive changes I can think of that have happened since 1964 are:

- public education is legally required to spend big bucks on children with special needs.

- massive growth in medicaid, medicare, food programs, and other entitlements. Government took the place of family and charities in paying for the care of low income citizens.

- more children went further in public K-12 and more went to public institutions of higher learning.

- significant increase in regulations, monitoring and enforcement. (ie land, water, air, emissions, spills, safety, etc)

Other than "inefficiencies of government" and the above. Can you think of anything else that has changed significantly to account for the tripling in costs?

I assume the MN budget split over time looks something like this link.

John said...

"They kick sick children out of hospitals?"

I am not sure what happens in Europe, but in America some charity helps the children. We do love kids.

John said...

Food for Thought

John said...

So did I miss something, or this a pretty complete list of what additional value we have gotten for three times the cost?

- public education is legally required to spend big bucks on children with special needs.

- massive growth in medicaid, medicare, food programs, and other entitlements. Government took the place of family and charities in paying for the care of low income citizens.

- more children went further in public K-12 and more went to public institutions of higher learning.

- significant increase in regulations, monitoring and enforcement. (ie land, water, air, emissions, spills, safety, etc)

It may be enough to justify the additional cost. I just want to make sure I am not missing any other new services or roles. 50 years is a long time.

Thoughts?

Anonymous said...


I am not sure what happens in Europe, but in America some charity helps the children.

I actually don't think it happens here either. We simply stick the bill to someone else. Nobody believes in "enough" when it's their interests on the line.


--Hiram

John said...

"Nobody believes in "enough" when it's their interests on the line."

Now there is a sentence we can both agree on.

jerrye92002 said...

I always wonder what would happen-- how many people would not need the help government hands out-- if government didn't just hand out these goodies, no strings attached?

Anonymous said...

jerry-

are you talking about Big Business?

John said...

Anon,
Please be more specific.

We all get tax breaks of one sort or another. The tax code has been morphed to encourage certain behaviors and discourage others.

Which money or services are given to businesses for free?

Is this something new since 1964 that is driving up the cost of government?

John said...

Now I know the government cuts checks to citizens for Medicaid, Medicare, Food Stamps, Heating Assistance, ACA subsidies, Housing Assistance, Social Security Retirement, SS Disability, Job Training, etc and absolutely nothing is expected in return.

Where does government cut checks to businesses without expecting something in return?

John said...

We keep getting side tracked...

So did I miss something, or this a pretty complete list of what additional value we have gotten for three times the cost?

- public education is legally required to spend big bucks on children with special needs.

- massive growth in medicaid, medicare, food programs, and other entitlements. Government took the place of family and charities in paying for the care of low income citizens.

- more children went further in public K-12 and more went to public institutions of higher learning.

- significant increase in regulations, monitoring and enforcement. (ie land, water, air, emissions, spills, safety, etc)

It may be enough to justify the additional cost. I just want to make sure I am not missing any other new services or roles. 50 years is a long time.

Thoughts?

I thought about adding "Light Rail", but they had big transportation expenses back then.

jerrye92002 said...

I just need to note here that "tax breaks" are NOT a form of government spending! Reduced taxation simply allows you to keep more of your money, and spend it on what you want and need, rather than having it forcefully extracted from your wallet and spent on what some politician or bureaucrat thinks is needed.

I also believe that any money spent on individual entitlements should NOT be counted as being "for the common good," because the war on poverty is over and poverty won. After some $26 trillion, we have the same percentage of people in poverty as we did before.

I don't think you can count the additional spending on public education, either, unless that you can show that the total amount of education delivered, as measured by academic knowledge acquired, has increased proportionally. The fact that the current generation is less able in history, spelling and grammar, and in many cases math and science, would tend to argue against that proposition. Inflation-adjusted spending has at least doubled on a per pupil basis. Has student achievement doubled?

John said...

I agree that most business tax incentives are not money for nothing. However sometime Liberals seem to think companies get traditional welfare payments. I am not sure why. I think most of those, if they exist, went to the Green Energy companies in the form of loans. (some of which we did not get back)

I was puzzled where the ACA healthcare subsidy, earned income tax credit, child tax credit, etc fit into this discussion. Money for nothing, or incentive to encourage certain behaviors?

John said...

I am indifferent right now as to whether the additional activities and expenditures were good or bad for the common good. I am just interested in what the gov't does / spends now vs what they did / spent then.

As always what is your source regarding this OPINION???

"the current generation is less able in history, spelling and grammar, and in many cases math and science,"

John said...

Finally, since probably 35% of the education budget goes to special needs kids today. Who paid for their care and nurturing in 1964?

Sean said...

"Who paid for their care and nurturing in 1964?"

Their parents, if they could afford it. But the reality is that before the reforms of the 1960s and 1970s, most kids with special needs didn't go to school at all.

Laurie said...

I haven't had anything to say on this topic because I am skeptical that spending is 3X higher than it was 50 years ago. Does this imply that our tax rates are 3X higher?

I would be curious to see how spending has increased using price of government as the measuring tool. The only price of govt comparisons that I have seen only go back to 1991. If we compare spending from 2014 to 1991 our current POG is lower.

About special ed- The largest numbers of kids receiving special education qualify with learning disabilities and behavior disorders. I think these kids were in school 50 years, but were not receiving support. Some of the EBD kids are very costly to educate, especially if they attend a separate EBD facility.

jerrye92002 said...

A simple internet search yields:
http://www.heritage.org/research/reports/2008/09/does-spending-more-on-education-improve-academic-achievement.

Lots of other sources saying similar. I like the anecdotal evidence that says you best not publish grammar and spelling errors to senior citizens educated in the 40s and 50s; they'll nail you every time.

John said...

Heritage Does Spending More Help

John said...

NCES Report Card

John said...

NAEP Long Term Analysis

John said...

NCES Long Term Analysis

John said...

EPI Education Cost Analysis

John said...

I think your nostalgia tendency is kicking in.
College Board Trends

John said...

NCES 120 Years of Education

John said...

After browsing these, I think the Heritage folks are playing games again.

John said...

Laurie,
From what I understand, the POG is kind of a funny measure.

It would be like saying that you got a 5% raise, therefore your mortgage payment should increase by 5%.

Since the benefits and features of government really are somewhat fixed. (ie no new features, performances, etc) The POG cost should be dropping as technology improves efficiency, just like most other services.

The 3X measure I calculated adjusted for population and inflation.

It is not relative to what people in the state earn or are worth. Do you think government cost should go up just because we earn more?

And yes we are funding it some way. I would assume higher property taxes, sales taxes, gas taxes, cigarette taxes, income tax rates, fees, etc.

John said...

MN Tax History in Detail
MN Tax History Short Version

Apparently we didn't even have a sales tax until 1967...

jerrye92002 said...

"I think your nostalgia tendency is kicking in." How many of today's college graduates spell and write as well as HS graduates of 1950? And have the standards changed? Few of us could pass a math test from 1920.

Thank you for all of the links, but please, could you offer an assessment of them? If they support my contention, I don't need to delve into the details.

jerrye92002 said...

Laurie is partly right. As a percentage of income, MN taxes have not increased nearly as outrageously as has state spending, because incomes generally go up over time (unless Obama is in the WH).

However, when was the last time you saw tax rates go DOWN as a percent of total income? Sure, total tax collections suffer in times of recession, but politicians never seem to think that the government can "tighten the belt." For example, at the federal level, the "autopilot spending" is so high that a 1% actual reduction in spending (rather than the automatic increase built in) every year for 5 years would balance the budget. In Minnesota, the "Zero based budget" plan never got past the DFL majority. Or, as Reagan said, "Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!"

jerrye92002 said...

"After browsing these, I think the Heritage folks are playing games again."

You forgot the "IMHO." I happen to think that facts are facts. And though you can draw your own conclusions however you like, they ought to be supported by the facts. Here it seems pretty conclusive.

John said...

You have got to be kidding...

They didn't account for any changes in:
- student body demographics
- a higher percentage of children in the system
- special education mandates
- other

And according the NCES documents outcomes are improving, especially in the area of minorities and other groups that were historical doing worse.

The Heritage folks tried to compare apples and water melons...

Maybe you should review the EPI and NCES Long Term trends link. The college board link also explains clearly the huge changes that have occurred.

jerrye92002 said...

And your justification doesn't account for possible changes in the metrics used-- the "dumbing down" of the tests. With or without that, the recent gains in minority achievement don't even begin to justify the doubling of cost.