Bill Richardson, Fiscal Conservative? Not So Fast!

As the jockeying heats up for the 2008 presidential race, the field remains wide open, with potential candidates from both parties working hard to position themselves with their specific constituencies. New Mexico Governor Bill Richardson has indicated that he will run, and for a number of reasons he will be a formidable contender. Specifically, Democratic party leaders hope Richardson’s Hispanic background will restore this fast-growing demographic group to their base.

But Richardson’s ethnic background is certainly not all he has going for him. He also has a national image as a moderate on fiscal issues, which will be very helpful in a run for national office. Can we call Bill Richardson a fiscal conservative? Not so fast.

One of Richardson’s first moves as governor was to cut New Mexico’s top income-tax rate, which at the time was an elevated 8.2 percent. This was rightly praised by fiscal conservatives around the country, most notably Steve Moore and Steve Slivinski, authors of the Cato Institute’s 2004 Fiscal Report Card on America’s Governors. Largely due to his income-tax cuts, Richardson rose to near the top of that study, achieving a “B” rating. Moore and Slivinski were effusive in their praise, calling Richardson “an aggressive tax cutter, the best Democratic Governor in the nation bar none,” as well as “one of the best new governors in the nation.”

This was high praise, indeed, and at the time the numbers backed it up.

Of course, future elections will not be decided on 2004 data. And with Richardson running for reelection this year and planning a bid for the presidency in 2008, his less-than-stellar fiscal record since 2004 bears noting.

Though Richardson did cut New Mexico’s top income-tax rate — something his predecessor Gary Johnson had tried but failed to do because of a hostile legislature — his well-publicized cuts were more than offset by increases in other taxes and fees. In fact, overall tax-policy changes under Richardson have resulted in a net tax increase of some $174 million through fiscal-year 2006. Richardson should not be denied credit for reducing income-tax rates because of the salutary economic impact of such reductions, but calling him a “tax cutter” is not entirely accurate.

Aside from cutting income taxes, Richardson’s fiscal record fails to live up to his reputation. First and foremost, spending has risen dramatically during his time in office. Under Gary Johnson (1995-2003), general fund spending grew by a modest 5.2 percent annually. Richardson, on the other hand, has boosted spending an average of nearly 7 percent per year. This trend to spend shows no sign of slowing since the just-passed fiscal-year 2007 budget will grow by more than 8 percent.

More, in the aftermath of this year’s legislative session, taxpayers in New Mexico will be on the hook for several projects that will cost millions of dollars in coming years. The state will spend $318 million to create a new commuter rail project, for which only $1 out of every $10 will come from passengers. While gleefully throwing taxpayer dollars at 19th century transportation technology, Richardson also convinced the state legislature to subsidize 21st century transportation. Thus, $100 million in tax collections will be used to construct a first-of-its kind spaceport that will theoretically become the home base for future private space flights.

While spending hundreds of millions of dollars on special-interest goodies is bad enough, Richardson would have done far more economic harm if he’d succeeded in his attempt to push through a 46 percent increase in the state’s minimum wage. This legislation was thwarted at the last minute by a handful of senators from Richardson’s own party. Had it succeeded, it would have raised the minimum wage in low-cost, low-income New Mexico above that of high-cost, high-income states like New Jersey, New York, and California. Richardson, however, has vowed to continue trying to pass a massive hike in the mandated wage, and he may yet call a special legislative session to do just that.

The 2008 elections are still a long way off, but at this point Richardson’s income-tax cuts appear to be an aberration. It will be interesting to see how the governor positions himself over the next two years, and whether he shifts back to the right or continues moving left.