How will Idaho Fund Public Education?

I have been very concerned about declining tax revenues in Idaho. They have fallen from near $3 billion to $2.3 billion in two short years with the potential of another $200 million shortfall next year. How will the legislature be able to fund public education and the Department of Health and Welfare at current levels?

Some have suggested raising taxes. However, most taxes come from the private sector of the economy which is already struggling. Raising taxes on a sick host may further weaken the economy and even produce less tax revenue not more. It would be similar to taking a pint of blood from a patient that has already lost 2 pints of blood.

Another solution is to increase the size of the private sector of the economy. A $60 billion Idaho economy could raise $2.5 billion with only a 4.1 percent tax rate while a $35 billion economy would require a 7.14 percent tax rate to raise the same $2.5 billion.

The burning question on everyone’s mind is - How does one jump start the economy? I don’t think this question has been answered because the experts have been focusing on consumer spending. Stimulus packages and deficit spending are based upon Keynesian economics theory that says increased government spending will stimulate the economy. I think this a flawed approach and will no longer work. The focus needs to be on basic production rather than consumer spending.

Basic production is the real key to any economy. Basic production creates wealth, jobs, and raises the standard of living. Basic production produces tax revenue while government spending does not create wealth; it consumes wealth and produces little tax revenue.

Think about the Mormon pioneers. When they moved into the Salt Lake Valley, they were experiencing a profound depression. What did they do? Did they spend more money? No. They started working – planting gardens, crops, building houses, etc. No amount of money will stimulate the economy if there is no basic production taking place.

Basic production is mining, logging, agriculture, manufacturing, and energy production. The policy of the United States federal government through high taxes and extreme environmental policies has caused jobs to go oversees and restricted development on public lands. If my theory on the importance of basic production is correct, our current economic downturn will not change until we decrease the tax load on private businesses and reform our environmental laws. The key to public school funding and the funding of social programs depends upon a paradigm shift away from Keynesian economics to basic production.

When the tax base is increased through increasing the size of the private sector of the economy, then and only then, will tax revenues stabilize.