Dean big on redistribution

As Howard Dean gains in popularity, he is also gaining a reputation as a paradox. On the one hand, Mr Dean is campaigning for the Democratic nomination for president from the feral and populist left. He is making 1970s-style anti-authoritarian statements, such as: "We're going to take our country back!"

On the other hand there is the Dean record as governor of Vermont (1991-2003), from which office he religiously tended the state's bond rating. The Vermont period, we are told, proves him to be a judicious, moderate and fiscal conservative.

In the course of his Vermont tenure, Mr Dean did indeed balance the books. But he also supported legislation that led to a doubling of the state budget in 10 years. What is more, the change involved more than increased tax and spending. Mr Dean also participated in - and at points led - a dramatic centralisation of government to the state capital, Montpelier. In the Dean era, Vermont's steepled villages and mill towns had their budgets stripped and lost core powers they had taken for granted for centuries.

The mechanism of this audacious power-grab was education. In America, secondary and elementary schools were historically a local matter, even a village matter. Citizens paid property taxes to their towns. The towns in turn built the school and hired the teachers. The education provided was far from perfect. Over the past 50 years many state governments have topped up local budgets - as does the federal government to varying degrees. Nor could the old local system rectify racial injustices: ghetto neighbourhoods suffered from narrow tax bases and, therefore, often worse schools.

But most of the time, and for most of US history, local finance worked pretty well. And, more often than not, it perpetuated a virtuous cycle. In towns with good schools, property values increased, which in turn generated more cash to pay for their schools.

And that was the case in Vermont, a small state with a strong history of home rule (after the Thirteen Colonies revolted against Britain, Vermont revolted against the Thirteen Colonies). School policy was, for example, often set at an annual town meeting, where every citizen had a say, as in a Norman Rockwell painting.

But, of course, spending in the states, including Vermont, was rarely "equal" in the sense that every town spent the same for every child. And throughout the 1980s and 1990s, state courts increasingly ruled that individual pupils were entitled to equal dollar spending. Many of these rulings concerned issues that did not affect homogeneous places like Vermont, such as race. Nonetheless, in a 1997 decision known as Brigham, Vermont courts followed the trend and ruled for equal education entitlement.

Enter Governor Dean and the Vermont legislature. There were a number of ways to comply with the court finding, at least in theory. They could, for example, have tried to fight for a simple increase in state subsidies. But everyone - the courts, the state legislature, the school unions in their Montpelier headquarters and, in the end, Mr Dean - wanted something radical. They would throw out the old town hall system. They would create a uniform state property tax at a statewide rate, diverting hundreds of millions in local property taxes to Montpelier. The state would then share the money out in a flat, per child payment - something over $5,000 - to ensure equity. From now on Montpelier would control purse strings and policy. The new school law, known as Act 60, also imposed a range of new state regulations on schools. (Ironically, Mr Dean now criticises President George W. Bush's education mandates.) Governor Dean called the new era "joyous".

The change did indeed mean that per capita spending on some children in the poorest towns increased. But it also did much to destroy the civic culture. Localities now had less say in a number of areas of education - curriculum, staff and, of course, budget. Many towns' school budgets were reduced by 20 or 30 per cent. Communities that had paid high taxes still paid high taxes. But they no longer received value for their money in the form of high-quality local schools. The virtuous circle was broken.

Act 60 generated class antagonism in Vermont, especially between the "have not" towns that received subsidy for schooling and the "haves" that paid for it - wealthy ski towns such as Stowe and Killington. There was more bitterness: if the "gold" towns, as they were also called, wanted to sustain their old high level of school spending, they were allowed to do so. But only if they poured yet more cash for every additional dollar they spent on themselves into a special pot for needier towns. People called the new legislation a "Robin Hood law".

Mr Dean can point to a number of facts in his defence. One is that Vermont was merely part of the national trend. Another is that the Vermont courts and legislature left him no choice but to follow suit. But for all his avowed pragmatism, Mr Dean ultimately pushed for a redistribution of wealth and political power. As John McClaughry of Vermont's free market Ethan Allen Institute points out, Mr Dean presided over increases in the sales tax, the petrol tax, the corporate tax and the tobacco tax.

The point is a simple one. In the context of Vermont's left-leaning legislature, or a Wall Street bond house, Mr Dean may be a moderate compromiser. But as the Vermont schools story shows, he is clearly comfortable with big government.

© Copyright 2003 Financial Times

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