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Jon Huntsman

2012 Presidential White Paper #6

Former Utah Governor Jon Huntsman


INTRODUCTION

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Governor Jon Huntsman has a long history of public service. He was Deputy Assistant Secretary of Commerce and U.S. Ambassador to Singapore under President George H.W. Bush. He was Deputy United States Trade Representative under President George W. Bush. He was elected Governor of Utah in 2004 and was re-elected in 2008. On August 11th, 2009, Governor Huntsman resigned to become President Barack Obama’s Ambassador to China. Since Huntsman was never a member of Congress, he does not have a rating by the Club for Growth.  However, the free market Cato Institute publishes a biennial report card on governors.  According to their 2006 report, Huntsman received an overall grade of “B”, but this is misleading.  He received the top score – an “A” – on tax policy, but he received an abysmal “F” on spending policy.  For 2008, the results were similar.


TAXES

The Club for Growth is committed to lower taxes – especially lower tax rates – across the board.  Lower taxes on work, savings, and investments lead to greater levels of these activities, thus encouraging greater economic growth.

Governor Huntsman’s record on tax policy has some minor blemishes, but overall he deserves credit for generally maintaining a pro-growth stance throughout his career as Governor.

Huntsman ran for office promising tax reform and he delivered. After taking office, Huntsman proposed eliminating the corporate franchise tax for small businesses making less than $5 million.

More importantly, Huntsman successfully worked to replace Utah’s progressive income tax (with a top rate of 7 percent) with an optional flat income tax with limited deductions of 5.35 percent, which earned him the top grade nationwide for tax policy that year in the Cato annual report on the nation’s governors.  Huntsman eventually took the tax rate to a completely flat, 5% single rate by 2007.  

In addition, Governor Huntsman pushed for and signed into law a massive cut of the sales tax on unprepared food from 4.70% to 1.75%.  The statewide sales tax rate was also cut from 4.75% to 4.65% as part of the bill.

The 2007 tax cut package that created Utah’s new, flat income tax rates was the largest in Utah history.  The total package included:
  • $109 million in income tax cuts
  • $40 million in sales tax cuts on food
  • $41 million in reduced general sales taxes
  • $5 million in reduced franchise taxes on cable TV
  • $22 million in reduced businesses taxes
  • $2 million in reduced miscellaneous taxes
Not all is perfect about Governor Huntsman’s 2007 bill – it did include some very minor tax increases. The Deseret News reported that while “almost all Utahns will see an income tax cut” under the Huntsman bill, “several thousand taxpayers who make more than $250,000 and have large mortgage interest and large charitable payments can actually see a tax hike, maybe between $200 and $3,000.”  The Huntsman bill also increased the sales and use tax by .05% to .30% to fund the Utah Public Transit District and allowed resort communities to increase their sales taxes by .1% to 1.1%.  On balance though, this tax reform bill is quite impressive.

In 2008, Governor Huntsman signed another tax cut bill that included more proposals like tax credits for families purchasing their own health insurance, and income tax credits for capital gains and for solar projects. The bill also increased the sales tax rate by .05%. 

Overall, the Utah Taxpayers Association estimates that “tax cuts from 2005 to 2007 totaled $407 million, including local impacts of sales tax exemptions and reduction in municipal telecommunications license tax[es].”

Governor Huntsman’s proposed budget in December of 2008 did not include tax increases, but it did “boost motor vehicle registration fees by as much as $22 a vehicle to help secure bonding for state transportation projects.” 

By 2009, it was Governor Huntsman’s spending addiction (see our next section) that caused him to propose a cigarette tax hike from $0.70 to $3.00 per pack in order to balance the budget – an over 400% increase and a proposal that would have given Utah the highest cigarette tax in the country at the time.  Governor Huntsman proposed to offset much of this tax increase by eliminating the then 1.75% grocery tax, but it still left a revenue increase of $75 million, making this proposal a net tax increase.  The cigarette tax increase never became law before Governor Huntsman departed to China. Governor Gary Herbert, who replaced Huntsman as Governor after his resignation, later allowed a $1 per pack cigarette tax increase to become law without his signature.


SPENDING

The Club for Growth is committed to reducing government spending.  Less spending enhances economic growth by enabling lower taxes and diminishing the government’s economically inefficient allocation of resources.

While Huntsman shined on tax policy, he “completely dropped the ball on spending,” according to a Cato Institute summary of his record as governor.

As a candidate for Governor, Jon Huntsman wrote that he believed that “government has grown too quickly…for example, over the past decade government spending has exceeded both inflation and population growth.”  Candidate Huntsman proposed a spending cap “by constitutional amendment or otherwise” and favored setting up a review board similar to President Reagan’s “Grace Commission” to make recommendations on priorities and waste.

Yet after his election, he failed to follow through on his campaign rhetoric. In 2006, the Cato Institute reported that Governor Huntsman had “proposed an annual average hike in spending of close to six percent in real per capita terms, which substantially outstrips personal income growth in Utah, and makes him one of the biggest spending Governors in the nation.”

By the end of 2006, Governor Huntsman had proposed the largest budget in state history. Governor Huntsman’s $10.7 billion dollar budget included billions of dollars in spending on public colleges, millions in teacher bonuses, and a “7 percent increase in per-student spending designed to raise teacher salaries.”  Despite using spending as the metric to measure the growth of government in 2004, Governor Huntsman had decided to use growth in government employees two years later. “Utah has spending caps to keep government growth on par with population and inflation. But the Legislature gets to define what growth in government means,” reported the Associated Press. “Lawmakers typically define growth as state spending. But Huntsman said he considers it to be growth in full-time employees. His budget proposes a 1.3 percent increase, less than the recent 2.7 percent rise in population.”  In other words, Governor Huntsman could have doubled spending on salaries and subsidies and still kept the “growth” in government to a minimum. He deserves sharp criticism for this spending cap evasion.

When one examines the Cato spending score assigned to each Governor, Huntsman had a 27 in 2008, just over half the average score nationally and one of the worst spending grades in the nation.

In 2007, Governor Huntsman and the Utah Legislature took $1.75 billion in unexpected surpluses and tax revenue  and dramatically increased state spending. Overall state spending increased by 17% for the year. Bob Bernick Jr. of the Deseret Morning News noted that if one were to add state funds spent from the previous fiscal year to the following year, then state government spending increased 35.6%. “Think about that for a moment,” he wrote. “State government has grown by more than ONE-THIRD in just two years.”

After the economic downturn in 2008, Governor Huntsman’s last budget proposed cutting the budget of state agencies by four to seven percent, as well as bonding $2.5 billion and spending from Utah’s rainy day fund.  Utah’s population plus inflation from 2005-2009 increased 21.2%, while total spending increased 33.8%, a whopping increase of 12.6% overall. Put another way, spending grew 6.8% per year compared the population plus inflation benchmark of 4.2%  Per capita spending increased at about 10 percent annually during his tenure.

In 2008, Governor Huntsman “announced a plan in his state budget proposal that would include $400 million in bond funding through the Utah Housing Corp. to buy mortgage-backed securities from Utah lenders.”  The President of the Utah Housing Corporation at the time described the plan, which would “…essentially have the agency acting as the state's version of Fannie Mae or Freddie Mac.”

Incredibly, Governor Huntsman said in 2009 that President Obama’s failed “stimulus” spending bill didn’t spend enough – it should have been a trillion dollars. In a 2009 interview with Politico, Governor Huntsman said, “It’s easy to criticize the bill and if you don’t like it, you don’t have to take the money. It’s pretty simple.”   He then went on to say:
I guess in hindsight we can all say that there were some fundamental flaws with it. It probably wasn’t large enough and, number two, there probably wasn’t enough stimulus effect. For example, a payroll tax exemption or maybe even a cut in the corporate tax…for small and medium-sized businesses for three years, for example. We will take the money.
This quote makes it unclear if Huntsman was simply calling for more tax relief. It would be pro-growth if, for example, he was calling for billions in corporate tax cuts. However, when he was asked about how large the Stimulus should have been, Governor Huntsman said:
Well, the size of about a trillion dollars was floated by Mark Zandi, who’s a very respected economist. I tend to believe what he is saying about the size of the package, which didn’t necessarily hit the mark in terms of size.
This makes it clear that he is referring to the stimulus passed by President Obama. Governor Huntsman also stated that “if I were in Congress, I probably would not have voted in favor because it didn't have enough stimulus and probably wasn't big enough to begin with.” 

Huntsman was also unequivocal in his backing of the Wall Street Bailout, or TARP, saying in a 2008 debate with his Democratic opponent that, “Do we need a rescue package? Do we need the federal government to backstop to the tune of $700 billion? I don't think there's any way around it. Congress is going to have to step in and do something.”

Governor Huntsman stated in early June of 2011 that he will not be competing in the 2012 Iowa caucuses because he doesn’t “believe in subsidies that prop up corn, soybeans and ethanol.”


ENTITLEMENT REFORM

America’s major middle-class entitlement programs are already insolvent.  The Club for Growth supports entitlement reforms that enable personal ownership of retirement and health care programs, benefit from market returns, and diminish dependency on government.

Governor Huntsman’s general ideological attitude towards health care is very concerning. He once said “health care is a right,”  and he once threatened insurance companies in Utah with adding mandates if they did not reduce the price of health insurance, saying that after a year of asking “If that doesn't work, then I think we're looking very realistically at an individual mandate in getting us to where I think we need to be.”

During his time in office, Governor Huntsman’s primary health care reform bill contained some positives, but it did contain some similarities with ObamaCare and with health care reform in Massachusetts. One of the positives was the premium aggregator, which allows employees to combine multiple funds towards premiums.   On the bad side, Utah also created a government-run market exchange, something that Massachusetts did under Governor Romney.  We must note that the Utah exchange, as signed into law by Huntsman, is much less intrusive than the Massachusetts version. The Massachusetts exchange cost $25 million to set up, is funded in part through premiums, and has a staff of 45 employees as of 2010. Utah’s exchange, by contrast, cost $600,000 to set up, is funded through annual appropriations and technology fees, and has a staff of 2 employees.  While the Massachusetts’ exchange is significantly worse than Utah’s, it does not make Utah’s a free market improvement. We worry that any exchange, even as one that just organizes the marketplace as Utah’s does,  may lead to more government regulation in the future, especially with the implementation of ObamaCare looming in the future.

Utah’s main health reform  contained no individual mandate, no employer mandate, and has very limited regulatory authority.  It contained no provision for a massive expansion of subsidized care, unlike ObamaCare or the Massachusetts Health Care reform plan. It also included a “defined contribution market” which “allows businesses to offer workers the option of making a specified contribution in order to purchase health insurance on their own, rather than providing workers with a single and specified benefit level of health insurance.”  This is a particularly positive step as it empowers individuals to take ownership of their own health insurance and to choose coverage that works for them.

The legislation also allowed insurers to offer something called “NetCare” as an alternative to COBRA when an individual leaves a job. NetCare is “a plan insurers will be able to offer at a third to half of the cost of the average large-group premium … [by] allowing the exclusion of some mandated care, such as diabetes management, but also from building in wellness incentives, setting higher deductibles and placing caps on preventive care.”  Allowing insurers to offer a diversity of plans with less regulation from the government is a free-market step in the right direction.

Governor Huntsman appears to have never taken a public position on Medicare Part D, or on Social Security reform. Governor Huntsman did call on Congress to reauthorize the S-CHIP program in 2007, an expansion of government opposed by many fiscal conservatives. “I am committed to working with Senator Hatch, who was instrumental in creating S-CHIP, and the other members of our Congressional delegation to reauthorize the program as soon as possible to avoid unnecessary and potentially harmful disruptions to the well being of our children," Governor Huntsman said at the time. 

 
REGULATION

Excessive government regulation stymies individual and business innovation necessary for strong economic expansion. The Club for Growth supports less and more sensible government regulation as a critical step toward increasing freedom and growth in the marketplace.

Governor Huntsman did not do much to decrease regulation in Utah, which already had a very favorable business climate. Utah was ranked the #3 state in the country for doing business by CNBC in 2007 , and #5 in 2009.  But Governor Huntsman did push for some energy policies that would have increased costs to Utah businesses and families.

Governor Huntsman is on record supporting cap and trade. For example, Governor Huntsman was one of only two Republican Governors (the other was Arnold Schwarzenegger) to sign onto the Western Climate Initiative, which “is an alliance of states and provinces along the western edge of North America seeking to reduce greenhouse gas emissions and lay the groundwork for a regional cap and trade system.” 

Governor Huntsman also established a “Blue Ribbon Advisory Council on Climate Change” in 2006 in order to provide “a forum where government, industry, environment and community representatives could identify proactive measures that Utah might take to mitigate the impacts of greenhouse gases.”  The final report included recommendations that Utah should “promote ‘urban and community trees’ and implement a greenhouse gases registry, greenhouse gas reduction targets, and a regional or state cap and trade program or tax.”  He defended cap-and-trade during a 2008 debate against his Democratic opponent as well, saying, “I do know this, whoever is elected on November 4th is going to move forward with a cap-and-trade program, and I think it’s better for us to be there early on with a model that works for coal-rich states as opposed to having something foisted upon us from those who don’t quite understand the economics.”  Since returning to the United States from China, Governor Huntsman has said that cap-and-trade “hasn’t worked.”

In 2006, Governor Huntsman wrote a letter to the Federal Energy Regulatory Commission, the Commodities Futures Trading Commission, and the U.S. Senate “to initiate investigations into whether market manipulation of gas prices is occurring,” he wrote. “I am asking our federal regulators, who are tasked with monitoring the markets, to ensure that they are working properly and in the best interests of consumers of natural gas,” said Governor Huntsman in a statement.    More regulation doesn’t drive down energy prices, greater access to supply and competition in the free market will.

Governor Huntsman created a “minimum wage working group” in 2005 and after the working group detailed its findings, namely that increasing the minimum wage would increase the salaries of minimum wage workers (and result in higher costs for small businesses), Governor Huntsman lobbied Utah’s Congressional delegation to urge them to support a federal minimum wage increase.

Governor Huntsman has shown some deregulatory tendencies. For example, he vetoed legislation that would create penalties for sellers of violent or explicit movies and videos games to those underage.  Despite the Mormon heritage of Utah, Governor Huntsman also deregulated Utah’s strict alcohol rules – before Governor Huntsman, patrons of bars had to fill out an application and pay a fee to enter. 


FREE TRADE

Free trade is a vital policy necessary for maximizing economic growth.  In recent decades, America’s commitment to expanding trade has resulted in lower costs for consumers, job growth, and higher levels of productivity and innovation.   

Governor Huntsman appears to excel on free trade. He served as Deputy United States Trade Representative for generally pro-free trade President George W. Bush. "I have witnessed first-hand that economic freedoms reinforce political freedoms. Promoting open markets promotes democratic values in those markets and enhances opportunities for American farmers, workers, entrepreneurs, and families," said Huntsman in a press release at the time. "I intend to do everything possible to help maintain America's preeminence in global economics. Yet with the United States party to only two of the 130 free trade agreements worldwide, it is crucial to get off the sidelines by launching a new WTO trade round and establishing a Free Trade Area of the Americas. Trade Promotion Authority, the President's top trade goal, is important for both." 

In 2002, then-Trade Representative Huntsman called NAFTA “a success beyond anyone's expectations… It has allowed the average family to save in terms of what they pay for goods, products that would otherwise carry a higher cost.”  Indeed, Huntsman seemed to demonstrate an understanding that free markets lead to economic growth. He said in a stop in New Hampshire in May of 2011 that imposing tariffs on Chinese imports “would throw us into a depression.”


SCHOOL CHOICE

The Club for Growth supports broad school choice, including charter schools and voucher programs that create a competitive education market including public, private, religious, and non-religious schools.  More competition in education will lead to higher quality and lower costs.   


Governor Huntsman at best lacks conviction on issues pertaining to school choice. As a candidate for Governor, Huntsman supported an override of former Governor Olene Walker’s veto of the Carson Smith Special Needs Scholarship Program, which gave vouchers to children with disabilities to attend private schools.  He supported a 2004 bill proposed by Rep. Jim Ferrin that offered tuition tax credits for private school education. Yet, Huntsman wrote in response to a candidate questionnaire that “I want to focus eligibility for these reform efforts on children our public schools have chronic difficulty in educating -- not those students who are currently doing well in public schools. Public schools will always be the first choice of the overwhelming number of Utah parents. Accordingly, any program of tax credits must hold public education harmless. Using targeted credits will pose the least risk to our public schools and will also provide a market test for choice in education.”

Nevertheless, in 2007, Governor Huntsman signed the Parent Choice in Education Act, “the largest school-voucher bill to date in the United States. This massive school-choice program provides scholarships ranging from $500 to $3000 to help parents send their children to the private school of their choice. The program is open to all current public school children as well as some children already in private school.”

However, Huntsman later “disappointed conservatives” by not actively defending the legislation during what ended up being a successful referendum election to repeal vouchers in Utah.  "I didn't lead the charge for vouchers. I'm not going to lead the charge against vouchers," he said. "I will support the will of the people come Feb. 5. Whatever then follows in the legislative session that is consistent with the will of the people, I will be inclined to support."

On the federal level, Huntsman called No Child Left Behind an “unmitigated disaster.”  He showed leadership by signing legislation in 2005 that “promotes state education guidelines over the federal No Child Left Behind Act,”  by allowing Utah to use their own standards to evaluate student performance.


TORT REFORM

The American economy suffers from excessive litigation which increases the cost of doing business and slows economic growth. The Club for Growth supports major reforms to our tort system to restore a more just and less costly balance in tort litigation.   

Governor Huntsman signed SB79 as part of the 2009 Utah Health Care reform legislation. SB79 increased the level of evidence plaintiffs must show from “preponderance of evidence” to “clear and convincing evidence” for emergency room-related malpractice claims, and increased “oversight of out-of-state medical expert witnesses.”   Other than that, the American Tort Reform Association does not list major Utah Tort Reform legislation that passed while Governor Huntsman was in office.  Of course, Utah may not need too much as far as tort reform: it traditionally has received excellent rankings from most non-partisan analyses of tort liability.


POLITICAL FREE SPEECH

Maximizing prosperity requires sound government policies.  When government strays from these policies, citizens must be free to exercise their constitutional rights to petition and criticize those policies and the politicians responsible for them.

Utah is one of four states in the country with no limits on campaign contributions – a system under which Governor Huntsman won his election in 2004 and his re-election in 2008.

On January 22nd, 2009, Governor Huntsman created the Governor’s Commission on Strengthening Utah’s Democracy, which was tasked originally to look for ways to increase voter turnout and reform Utah’s ethics laws.  After Governor Huntsman had been appointed Ambassador to China, the Commission released its final recommendations, which included capping contributions for the first time in state history,   and increased disclosure for contributions and independent expenditure advertisements.

“We have wide open campaign-finance laws. There is unlimited giving and no immediate (financial) disclosure…And I think that can lead to political mischief, that level of influence unregulated in the system,” Huntsman said, just before departing to China.  Without more information, we can only presume that Governor Huntsman will be no ally to the pro-free speech cause.


POLITICAL ACTIVITY & ENDORSEMENTS

Robust political activity is essential to producing a federal government that is more respectful of free markets and produces more pro-economic growth policies. The Club for Growth’s PAC has been active in some of the more central battles within the Republican Party nominating process in recent years, supporting pro-growth candidates over pro-government ones.

Governor Huntsman has an extremely limited history of endorsements on the federal level. He endorsed fellow Utahn Senator Orrin Hatch for re-election in 2005,  and was an early endorser of Senator John McCain’s 2008 Presidential campaign.  He did not endorse his former campaign manager and chief of staff, now-Rep.  Jason Chaffetz during his primary run against RINO Rep. Chris Cannon, but he did endorse him after the primary.   Governor Huntsman also expressed support for President Obama’s choice of liberal Kathleen Sebelius to be Health and Human Services Secretary more than two months before he was appointed Ambassador to China by President Obama. “Kathleen brings a fundamental wealth of knowledge and experience that will be indispensable in leading the reform efforts that are so critical to our nation going forward,” Governor Huntsman said at the time. 

We would be remiss if we did not note the over-the-top “Love Letters” Governor Huntsman wrote to President Obama and former President Bill Clinton in 2009. “You are a remarkable leader…and it has been a great honor getting to know you,” Huntsman wrote to President Obama. “I have enormous regard for your experience, sense of history and brilliant analysis of world events. Please save some time for me when I’m next in New York,” Huntsman wrote to former President Clinton. “I must report that Sec. Clinton has won the hearts and minds of the State Dept. bureaucracy — no easy task. And after watching her in action, I can see why. She is well-read, hard working, personable and has even more charisma than her husband! It’s an honor to work with her,” Huntsman added.


SUMMATION

Governor Huntsman is often a frustrating political figure. He pushed for and passed significant pro-growth tax policies, but promoted and passed large increases in state spending. He’s demonstrated a clear understanding of the benefits of global free markets, but is lukewarm on school choice. Governor Huntsman also supported a bigger stimulus bill, TARP, and was a leading advocate of cap-and-trade.

 In a 2009 interview with Politico, Governor Huntsman laid out his vision for the Republican Party as compared to the Tory Party in the United Kingdom, saying:
“They were a very narrow party of angry people. And they started branching out through, maybe, taking a second look at the issues of the day, much like we’re going to have to do for the Republican Party, to reconnect with the youth, to reconnect with people of color, to reconnect with different geographies that we have lost. How do you win back the intelligentsia? How do you win back some of the editorial boards of major newspapers that Richard Nixon used to carry?”
We are concerned that Governor Huntsman chooses policy positions based on what the so-called “intelligentsia” believes, and too often, that happens to be the anti-growth position. For example, cap-and-trade, more stimulus, and bailouts were all anti-growth positions supported by the editorial board of the New York Times, as well as Governor Huntsman.   

In addition, we find Governor Huntsman’s statement that “health care is a right” to be simply flabbergasting. We’re not sure what part of the United States Constitution Governor Huntsman was referring to when he made that statement, but he certainly needs to explain what he was thinking.

In the end, it is Governor Huntsman’s spending record that is inexcusable. There is now widespread recognition that the next President must address the enormous threat posed by federal spending that threatens national bankruptcy. Huntsman’s failing grades on controlling state spending raise serious questions about whether he would be equal to that task.

We believe that pro-growth conservatives looking for a kindred spirit in Governor Huntsman will probably find common ground on trade and taxes, but they will most likely be disappointed overall if he is elected President.

 
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