At the heart of the Senate’s controversial “TABOR” constitutional amendment is the notion that state spending growth would be limited from year to year to the combined rates of population growth plus inflation growth. Inflation is defined as the percentage rise in the federal Bureau of Labor Statistics’ Consumer Price Index (CPI).
At first blush, this may strike some as reasonable. This is, after all, one of the best known and most respected measures of inflation.
But here’s one of the critical problems with such a formula: the costs of the many of the things that government buys don’t follow the CPI. As the chart below demonstrates, the cost of things like health care and education have been rising much faster than inflation for years. Indeed, over the last decade and a half, the cost of medical care has risen more than 60% while the overall CPI has risen less than 40%. Education costs have more than doubled during that same period.
In other words, to the extent TABOR limits spending in those areas to the CPI inflation rate, it builds in structural shortfalls — shortfalls that are cumulative and increasingly destructive over time — right from the start.