McClaughry: The peril of the federal billions

By John McClaughry

On Jan. 5, Gov. Phil Scott delivered an upbeat State of the State message. He declared that though Vermont has many unmet needs — his leading example was a “desperate need for more people and workers” — anything is possible.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute.

Why is anything possible? His reason: “Thanks to the work of our Congressional Delegation — especially Senator Leahy — we’ve received billions in federal aid. And with that aid, we came together to fund significant needs. … We have passed historic investments in housing, broadband, climate change, water and sewer, and economic recovery — dedicating over $600 million to transform communities, large and small, across the state.”

Even after all that, Vermont state government is still awash in almost uncountable millions of federal money. The big questions in the State House should be how much money do we have to spend, can we apply those billions of federal dollars to our priorities or only to Washington’s, and what will we do when the flood of funds from Washington ends?

For years Vermont budgeteers of both parties have recognized that a sudden influx of one-time money can be perilous: using the money to launch or expand programs that Vermonters will soon have to pay for out of their own pockets.

In his address, Gov. Scott recited a long list of things we need to spend more money on. In addition to more workforce training and (yet again) paying desirable people to move to Vermont, he listed the chronic problems of unaffordable housing, homelessness, inadequate child care, substance addiction, mental health, overworked health care providers and public safety.

All of these will causes have advocates who will clamor for more funding year after year. Governors and legislatures hardly ever have the courage to end programs. Even level funding is rare.

This year a huge new claimant is loose in the spending competition. The December report of the legislatively created Vermont Climate Council calls for dozens of new uses for billions of budget dollars, called “investments,” to step up the battle against climate change. The short term goal is to reduce CO2 emissions by three million metric tons of CO2 equivalent in just eight years.

Some of this hoped-for emissions reduction will come from regulatory actions that legislators, happily for them, don’t have to vote on. But most of it will have to come from spending — subsidizing 165,000 new electric vehicles especially for lower income people who can’t afford them; driving up heating oil, propane and natural gas prices to entice homeowners to switch to 110,000 subsidized electric heat pumps; and weatherizing 90,000 more homes (at little or no cost to the homeowners).

When the council released its Climate Action Plan, the Scott administration issued a statement that its lack of detail makes it impossible to calculate its costs: “We cannot support proposals which impose a fiscal commitment beyond the means of most Vermonters.”

The climate advocates who control the Legislature won’t settle for this. They already suffered a huge setback when their preferred source of continuing revenues — the Transportation and Climate Initiative’s motor fuel taxes — sank out of sight in the other 11 states supposedly ready to enter it.

They’ll press for the Council’s “Clean Heat Standard” to make fossil fuel heating customers pay for home and business electrification, and a revived “feebate” plan like that proposed by VPIRG in 2009. The “feebate,” now rechristened “vehicle efficiency price adjustment,” would tax low-mpg internal combustion vehicles to subsidize pricey electric and other fuel-efficient vehicles.

Significantly, in his address listing so many pressing needs for more money, Gov. Scott pointedly did not endorse any new spending for the Climate Action Plan. In fact, he only used the word “climate” in four places, all in connection with past accomplishments, workforce training needs, future business opportunities and “climate resilience.”

The hard fact is that the federal government, whose debt is now equal to the entire U.S. GDP, cannot go on much longer running up hundreds of billions of dollars of debt each year to shower money upon the states. If a state spends its federal windfall money on ongoing programs including supposed remedies for climate change, sooner or later it will have to cut back those programs it unwisely expanded, or start paying the increased costs from its own resources — most likely by jacking up taxes on its own voters.

That will defeat the governor’s hope for attracting more and better business opportunities, that will likely appear in states with less — not more — taxes and regulations.

John McClaughry is vice president of the Ethan Allen Institute.

Images courtesy of Public domain and John McClaughry
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10 thoughts on “McClaughry: The peril of the federal billions

  1. Governor Scott has made clear that he wants this one time money to go to needed investments, primarily in infrastruture like waste water systems and internet expansion, not additonal programing. With a net gain of 5 more seats in the House, he would have the veto proof majority he needs to have substaintial leverage over spending choices. A skilled negotiator, Governor Scott will play with what the hand, not a good one, and the cards he has at the moment.

    In the meantime, it would be wise to focus attention on the doable in 2022. Specifically, pick the issues where there has been the most impractical overreach by the opposition and greatest resonance for change with the public, find good candidates and work for their election this November.

    What is less helpful, is the backbiting and caustic comments towards those with whom we should be finding common cause.

    • John tells us: “With a net gain of 5 more seats in the House, he (Scott) would have the veto proof majority……..” There you go.

      That’s the assignment for the Vermont Republican Party as its first step to bring rationality and common sense back to Montpelier. Get the candidates on the ballot and the Republicans and moderates will vote for them.

      Just take a look at the bills in the legislature and you’ll see the need for this State to come back to the middle of the political spectrum.

    • “…backbiting and caustic comments… “?? And where might those be? Or is this supposed observation, yet again, another strawman, another false dichotomy?

  2. Ask the Climate Cult how much anything they do will improve the Vermont climate. In detail. Not how much reduction in carbon dioxide but how much change in climate Vermont will experience. None? I’d bet on it. Stop spending that produces no beneficial results. The global average temperature hasn’t risen over the last nine years. How many electric cars will it take to compensate for the multiple private jets to the climate enclaves in exotic locations? How far will my Diesel truck go on what one plane burns? Yeah, they aggravate the hell out of me with their climate scam. – “Gov. Scott recited a long list of things…” among which I did not see tax reduction, which would improve taxpayer’s lifestyle and increase cash flow, increase their in-state economic activity to the benefit of Vermont commerce.

  3. John, the legislature has already begun the process of doling out the federal largess to favored constituents. The HWM committee introduced a bill to give thousands of dollars of tax free money to families earning over $400K. In the meantime, they are still taxing the SS income of seniors and denying them a deduction for medical expenses that is allowed at the federal level.

  4. Funny thing. VPR reported this morning that Vermont’s legislators are now looking to spend some of the windfall on an addition to the Capitol Building in Montpelier, as though legislators and bureaucrats won’t continue to work remotely into the foreseeable future. Surely, it will be an ‘energy-efficient’ structure. But just think of all the money we’d save, and the CO2 and Methane that would be sequestered, if we just eliminated half of the tax-subsidized crony work force hired by these people and let free markets determine where the money should be spent. We wouldn’t have to recruit workers either. We’d have these folks do real work for a change.

    I think it’s a virtual certainty at this point in time. There is no stopping this crony bureaucratic juggernaut except for bankruptcy. And it won’t be long now in coming. As with Hemmingway‘s character, Mike Campbell, in The Sun Also Rises, when asked how he went bankrupt…. ‘Two ways’, he said. ‘Gradually and then suddenly.’

    • Jay, the legislators will burn through the money faster than a lotto winner, with the same
      results……… they’ll both will be broke within a year !!

      Vermonter’s need to wake up ….

      • CHENRY,

        They need to go to the voting booth EN MASSE in NOVEMBER 2022, to overwhelm any shenanigans.

    • Jay,
      Career bureaucrats and allied politicians dug their way to the vault decades ago
      They are addicted to federal money, and do not want the vault moved, or curtailed in any way.

      They will fight tooth and nail to keep it that way.

      The BBB bill is just the latest “PROMISED-LAND/NIRVANA vault, which seems out of reach, because national hero Manchin said no, enough is enough.

      His poll numbers are near an all time high in West Virginia, his home state.

      “BUILD BACK BETTER” WOULD COST $4.490 TRILLION OVER THE NEXT DECADE, IF PROVISIONS WERE MADE TO LAST 10 YEARS
      https://www.windtaskforce.org/profiles/blogs/build-back-better-would-cost-3-95-trillion-overt-the-next-decade

      I am not surprised at the lack of public trust in Washington, DC, and elsewhere. The games of smoke and mirrors played in Washington are off-the-charts outrageous.

      Never, ever, has there been such a level of deceit, as Democrats have inflicted on the US People, since January 2021, using a controversial election in 2020 (see Appendix), to obtain government power, to relentlessly implement:

      – An increased size and intrusiveness of the federal government
      – A major change in US demographics by means of just-walk-in, anybody-is-welcome, open borders
      – Increased Democrat command/control over the federal government and the American people to “Remake America”

      However, Dem/Progs made a major mistake.

      – They intended to use top-down, command/control of the very-inefficient federal government to very-expensively “Remake America”.
      – Their strategy is a highly un-American approach, significantly different from the history of US economic development.
      – They never mentioned the words “private enterprise”.

      In contrast, Trump’s “Make America Great Again” specifically did not rely on government. MAGA relied on:

      – Eliminating business-stifling government rules and regulations
      – Freeing up the creative energies of the American people
      – Putting America and the American people first again, within secure borders

      BBB Intended and Unintended Consequences

      The BBB bill has a dual-purpose, 1) a society-transforming increase in social program spending, and 2) remaking the US energy sector. Democrats aim to use BBB to promote political patronage and transfers of wealth from lower- and middle-income taxpayers in red states, to upper middle-class and wealthy residents in blue states.

      This approach is anything but progressive and likely would be reversed after the next election. See URL

      BBB would:

      1) Increase US energy costs, because of increased, already-generous subsidies (tax credits, rebates, grants) for:

      – Unreliable, weather/wind/sun-dependent, variable/intermittent wind and solar energy, which would end up greatly increasing the costs of dealing with grid instabilities, as has happened in Germany, etc., which has the highest household electric rates in Europe. The increased subsidies largely would benefit wealthy, Democrat, coastal elites.

      – Expensive/unaffordable/less-useful electric vehicles, that are known to surprise by catching fire, 2) perform poorly and have low efficiency in colder climates.

      According to University of Chicago research, most of the $18 billion in federal income tax credits disbursed to date were used for, a) weatherization of U.S. households, b) residential net-metered solar that produces extremely expensive electricity, and c) electric vehicles, including wasteful government experiments with electric school and transit buses.

      2) Provide a tax cut for higher-income households, in mostly high-tax, blue states, by increasing the state and local tax deduction (SALT) from $10,000 to $80,000

      • Since before Eisenhower warned of the Military-Industrial Complex, Alexis De Tocqueville was correct when he (or someone) said, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money”.

        This is, and has been, all about political control of Federal, State and Municipal tax revenues – to say nothing of the borrowing power of their respective credit lines. We are victims of cronyism, period. And, in most cases, we are the cronies.

        Forty percent of Vermont’s workforce are employed in the heavily tax subsidized health, education, and government sectors of our economy. Vermont has the highest per capita non-profit (tax subsidized) business formation in the country. It can, by any measure, best be described as a dysfunctional, dystopian, and perpetual voting majority. There is no way to stop it, short of convincing its membership to understand the short-sightedness of its ways.

        But how many of us, for example, are prepared to extricate ourselves from a lucrative (albeit short-term) position when we continue to think that all we have to do is work long enough to retire and leave these worries to someone else?

        We have become victims of the prosperity our ‘American Experiment’ allowed our forefathers to create for us. But now we are, yet again, worshiping at the altar of the ‘Golden Calf’, rejecting individual responsibility and hiding in the shadows of the collective. It seems to be our human nature.

        In fact, Benjamin Franklin was correct when he prophesized:
        “In these sentiments, sir, I agree to this constitution with all its faults — if they are such — because I think a general government necessary for us, and there is no form of government but what may be a blessing to the people if well administered; and I believe, further, that this is likely to be well administered for a course of years, and can only end in despotism, as other forms have done before it, when the people shall become so corrupted as to need despotic government, being incapable of any other.”

        What can be done, you might ask?

        First, come to realize the extent of the predicament. It is, virtually, everywhere.

        Second, understand that it’s never over until its over. Vote for those representatives who espouse not just a decrease in the size of government, but those who realize our resources will always be best managed by individual effort in that ‘free market’ so elegantly facilitated by our Constitution. Understand that the ‘Tyranny of the Commons’ is not just a spiritual myth but the darker side of our nature. Vote wisely until you can vote no more.

        Third, and most importantly, get your house in order. If you don’t know what that means, figure it out. Your survival and the survival of your family depends on it.

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