Tax, spending caps would hurt N.H. economy

Though recent news has been positive, New Hampshire continues to face serious economic challenges 2 1/2 years into its recovery from the Great Recession. Employment has been rising over the past few months, but New Hampshire still needs to add more than 28,000 jobs to replace those lost during the recession and to keep pace with the growth of the labor force.Similarly, long-term unemployment remains a serious problem. In 2011, nearly one out of every three unemployed workers in New Hampshire was without a job for 26 weeks or longer, a much larger proportion at this stage of the recovery than in any other recent recession.Not surprisingly, according to the latest WMUR/Granite State Poll, 37 percent of respondents indicated that they felt the economy was the single most important problem currently facing New Hampshire, far and away their leading concern.Policymakers in Concord, to their credit, have professed a desire to address such concerns. But the House and Senate have passed conflicting proposals to rewrite the state constitution in a way that not only fails to address working families’ anxieties, but also would impair future economic growth. The arbitrary limits they propose would harm the state’s ability to recover from this and any future recessions.More specifically, about a year ago, the House passed CACR 6, a proposal to require a three-fifths vote of the Legislature to approve any tax or fee increase. The Senate has just adopted a new version of the proposal that would instead impose a rigid cap, tied strictly to inflation, on state spending levels.Inflexible tax and spending limits of this kind reduce the options available to elected officials for responding to immediate crises, changing economic circumstances or shifting public preferences.Moreover, they would prevent the state from making the sorts of investments needed to get people back to work and to promote sustained and shared prosperity over the long run.New Hampshire’s stalled efforts to expand Interstate 93 illustrate well the shortcomings of tax and spending caps. In the absence of federal funds, New Hampshire will have to come up with millions of dollars to complete the expansion, an outcome that is critical to residents and businesses alike in the southern part of the state.If a tax or spending cap were in place, New Hampshire would find it far more difficult to allocate resources towards the project and may have to shortchange other important initiatives in the process.Other states have experienced firsthand the very real consequences of relying on gimmicks like supermajority requirements or predetermined spending formulas. Both Arizona and Nevada, due in part to the presence of supermajority requirements, saw their bond ratings downgraded in recent years, thus making it more expensive for them to borrow money via the bond market. Colorado, the only state in the nation with a hard-and-fast tax and spending limit in its constitution, witnessed, in the words of the editor of the Denver Business Journal, “withering tax support for college and universities, under-funded public schools, and a future of crumbling roads and bridges.”In response, business leaders in Colorado helped to spearhead successful campaigns to suspend that limit from 2005 through 2010 and to stop an attempt to strengthen it.Voters expect their senators and representatives to explore and, if warranted, to enact innovative approaches to easing the state’s economic difficulties. Without a doubt, efforts to amend the New Hampshire Constitution to impose new fiscal constraints would certainly represent a dramatic departure for the state. Still, they would do little to help working families find or keep a job, to raise their take-home pay, or to encourage businesses to expand or to invest here. Instead, they would fundamentally alter the deliberative process the Legislature has used for decades to set the state’s budget priorities and, in so doing, make policymakers less responsive and accountable to the very people who elected them into office.Jeff McLynch is executive director of the New Hampshire Fiscal Policy Institute in Concord.