What’s the Difference between A Unicorn and A Fiscally Conservative Democrat?

Last week the House of Representatives cast a vote that would have gotten a lot more media attention were it not for the fact that it coincided with the Supreme Court’s hearing of the case against the Affordable Care Act. With 414-0, a vote that appears to be unprecedented in federal fiscal history, the House firmly rejected president Obama’s budget. These numbers, which look more like the Giants beating the Patriots than a Congressional budget vote, are indicative of how Democrats are beginning to abandon Obama’s fiscal shipwreck.

In fairness, the Democrats’ own House budget bill contained most of the critical fiscal policy elements of the president’s budget, so Obama’s defeat was more symbolic than substantial. Nevertheless, there is something refreshing over the fact that Democrats feel the urge to at least symbolically distance themselves from the most irresponsible government spending binge in American history. This could represent the birth – or at least conception – of a new breed of fiscally conservative Democrats. As I explained in the Daily Caller in July 2011:

There is a fiscal awakening under way in the ranks of state-level Democrats. Recently, California Governor Jerry Brown, a Democrat, struck a deal with the Democrat-run state legislature to start closing the budget gap without any net increase in the tax burden on the California economy. Governor Brown is joined by another Democratic governor, Andrew Cuomo of New York. In December, right after he was elected, Cuomo criticized the Democratic-dominated New York Legislature for kicking the budget deficit can down the road. Since then he has pursued spending cuts and managed to pull together a budget that closed a $10 billion deficit without raising taxes.

Governor Brown has since become a fence-sitter, but that is, more than anything, a consequence of the fiscal recklessness among his fellow Democrats in the California state legislature. As for Governor Cuomo, he has for the most part maintained his fiscally conservative ambitions. The reality of his politics, though, have been more of fiscal moderation than fiscal conservatism. Cuomo is still a far cry from even the doorstep of fiscal conservatism, but at least he has led his fellow Empire State Democrats closer to the political centerfield. This has been good for New York and also put some healthy distance between himself and out-of-control spenders like president Obama or Democrat governors like the raging tax bull of Connecticut, Dan Malloy.

It is worth keeping an eye on Governor Cuomo. Unlike most other governors, he has actually been able to sign a budget that – at least for now – keeps state spending flat. The Albany, NY based Times Union reports on the last leg of the Empire State’s budget process, which took place last week:

Gov. Andrew Cuomo and legislative leaders closed down much of the state budget on Monday, settling issues ranging from education spending to the creation of a New York Gaming Commission to oversee all legal betting operations statewide. The move for the seven-member panel comes amid a push to expand casino development in New York by up to seven more gambling emporiums. … Legislative leaders said voting on this year’s budget bills would begin on Wednesday and conclude no later than Friday — two days ahead of the March 31 deadline. Three such bills were printed late Sunday, detailing half of a roughly $132.5 billion spending plan for the fiscal year beginning April 1. “Years of late budgets symbolized Albany’s dysfunction. On-time budgets show state government is working again,” said Senate Majority Leader Dean Skelos, R-Long Island.

In 2009 the state of New York spent $121.6 billion. In 2010 they were up to $128.9 billion. Preliminary numbers for 2011 show $132.8 billion. This means that Cuomo has been able to not only put brakes on the growth of state government spending, but bring that growth to a halt. 

It remains to be seen how long he will be able to keep spending flat. Cuomo’s acceptance of expanded gambling in New York is a warning sign: gambling taxes are part of the group of addiction taxes that many states put on addictive behavior, with the firm expectation that people continue to be addicted to alcohol, tobacco and gambling (and in some cases medical marijuana). If Cuomo is willing to pursue more addiction taxes, he either has his back against the wall on trying to cut spending and needs to agree to more addiction taxes to get his flat budget; or his fiscally conservative ambitions are not as strong as they have seemed.

Regardless of which, it is important to recognize that even the most passionate fiscal conservative in the Governor’s office would be up against a formidable enemy. Decades of fiscal decadence have established habits, lobbying practices and groups with an insatiable sense of entitlement that for a long time have taken as much as they ever could from New York taxpayers. Cuomo cannot eliminate this environment overnight. He knows, e.g., that New York has one of the most aggressive teachers’ unions in the country:

Legislators and Cuomo agreed to set aside $125 million in education aid for a Cuomo-sought pot of competitive funding — half the $250 million the governor originally proposed. Teachers unions and school boards fought to redirect this funding through the state’s general education aid formula, which distributes money based on population and district wealth. Legislators proposed redirecting $200 million, and Cuomo suggested last week that his $250 million had been a “placeholder” number. Overall, education aid will increase by $805 million.

Another problem for Cuomo is that his state has received massive infusions of federal cash over the past couple of years. Uncle Sam’s kindness to New York increased by 29 percent in two years, with Federal Aid to States reaching $44 billion in the Empire State’s coffers in 2011. This is of course in good part the result of the “Stimulus bill” – better termed “State Bail-Out Bill” – but this cash which now represents one third of the state budget also forces Cuomo to listen to the president. This probably explains why the governor is so adamant about establishing a health insurance exchange in New York  – a move that will cost the state even more money:

The budget will not create a health insurance exchange in compliance with the 2010 federal health care restructuring law, something Cuomo had sought but Senate Republicans resisted. Over the weekend, Cuomo suggested he would set up an exchange using an executive order.

Making New York more dependent on, and compliant toward, the federal government is not a good idea if you want to be fiscally conservative. But given Cuomo’s overall success in reining in spending and putting an end to habitual tax hikes, it is fair to give the governor the benefit of the doubt on the federal funds side.

Another indication that Cuomo is walking a fine fiscally moderate line is his fight to put an end to one of the most punitive tax measures concocted by New York’s notoriously greedy state legislators: at 8.97 percent, New York imposes one of the highest marginal income tax rates in the country. One of the true spendoholics in Albany, Assembly Speaker Sheldon Silver, has fought hard to keep this punishment on high incomes in place. Governor Cuomo took on the Speaker, apparently realizing that New York should stop encouraging its most productive citizens to leave the state:

Sheldon Silver … betrayed some uncharacteristic joy last week just before he reached an agreement with Governor Andrew Cuomo and the Republican-controlled State Senate to salvage half of a high-earner tax surcharge he spearheaded in 2009. “We’re all partners in this,” the speaker said, shuffling between his office and the closed-door conference room where he’d discussed the deal with the 99 other members of the Assembly’s Democratic majority. “There’s always pushback from people who think we should have been raising $4 billion, or $3 billion, but I think this is a fair compromise and takes care of some of our needs, and it also does something very important by giving some progressivity to our income-tax code.”

In terms of strict tax code progressivity, New York ranks solidly mid-pack among the states with the 23rd steepest climb from the lowest to the highest tax bracket. However, the Tax Foundation’s overall ranking puts New York right at the top with the highest taxes in the country. With that in mind, Speaker Silver should be more careful with pushing for higher taxes.

And once again, Governor Cuomo has done a fair job at moving New York closer to fiscal moderation.

It remains to be seen if Cuomo Jr. can be a fiscally more conservative governor than his father, Governor Mario Cuomo, who left office in 1994 after eleven years, or George Pataki, another long-term governor. Both these gentlement took a hands-off approach to the state’s fiscal affairs, effectively letting the state legislature throw annual tax-and-spend parties at the expense of New York’s hard-working families. The flight from New York began under their administrations, leading to a 2009 net outflow of 107,000 New Yorkers. It was not just a matter of retirees escaping Tax Hell to Florida with their retirement savings – a surprisingly large part of outbound New Yorkers moved to lower-tax states like Pennsylvania and North Carolina.

So, to answer the question in the headline: the difference between a unicorn and a fiscally conservative Democrat is that there are substantiated sightings of the latter. Not many, but they are out there. Andrew Cuomo appears to be one of them. So far, Cuomo has not done enough to turn New York and those outbound U-Hauls around. But, as they say, even the longest journey begins with one first step…

Cuomo is a competent governor. If he continues to walk the fiscally conservative walk, he might not stop until he reaches the Oval Office.