Respectfully submitted by Lawrence E. Rafferty (rafflaw) Weekend Contributor
In these post Recession days, we have seen various stories of state and municipalities economies make positive strides toward recovery. According to economist Paul Krugman, the state of Kansas is not one of those success stories. If you don’t recall, the Republican Governor, Sam Brownback, signed legislation granting huge tax breaks for corporations and the wealthy.
Brownback crowed that these tax cuts would lead Kansas into the promised land of economic nirvana. Unfortunately for regular, non-wealthy Kansans, the recovery has not materialized. As Krugman states, the economy in Kansas tanked.
“Sam Brownback, the governor, proposed the legislation — in percentage terms, the largest tax cut in one year any state has ever enacted — in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom — “Look out, Texas,” he proclaimed.
But Kansas isn’t booming — in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state’s budget has plunged deep into deficit, provoking a Moody’s downgrade of its debt.” New York Times
I guess this story may have garnered more national coverage if the Hobby Lobby decision had not consumed the mass media last week. Should anyone be surprised that supply side economics would fail on any level? If you were alive during the Reagan years and seemingly ever since, the Right continues to bang the drum of tax cuts for the wealthy and too many times a compliant Congress or in the case of Kansas, the Kansas State Legislature has agreed. I consider the constant Republican call for austerity for social programs to be part of this supply side mantra.
You know the argument. The wealthy and big corporations will only succeed if we give them big tax breaks and then the trickle down of gains for the whole economy will lift all boats. However, it did not work for the Reagan Administration so why would the Kansas Legislature think it would improve the Kansas economy?
As Krugman suggests the answer to why Kansas took this ill-advised economic course is the American Legislative Exchange Council (ALEC) and an economist named Art Laffer.
“For the Brownback tax cuts didn’t emerge out of thin air. They closely followed a blueprint laid out by the American Legislative Exchange Council, or ALEC, which has also supported a series of economic studies purporting to show that tax cuts for corporations and the wealthy will promote rapid economic growth. The studies are embarrassingly bad, and the council’s Board of Scholars — which includes both Mr. Laffer and Stephen Moore of the Heritage Foundation — doesn’t exactly shout credibility. But it’s good enough for antigovernment work.
And what is ALEC? It’s a secretive group, financed by major corporations, that drafts model legislation for conservative state-level politicians. Ed Pilkington of The Guardian, who acquired a number of leaked ALEC documents, describes it as “almost a dating service between politicians at the state level, local elected politicians, and many of America’s biggest companies.” And most of ALEC’s efforts are directed, not surprisingly, at privatization, deregulation, and tax cuts for corporations and the wealthy.” New York Times
If anyone was on the fence as to the ALEC connection to these austerity and tax cut for the wealthy and for corporations, this Kansas story should convince you. Prof. Krugman suggests that these cuts and policies are not designed to help anyone but the wealthy and the corporations that are paying for the ALEC service.
“But how can you justify enriching the already wealthy while making life harder for those struggling to get by? The answer is, you need an economic theory claiming that such a policy is the key to prosperity for all. So supply-side economics fills a need backed by lots of money, and the fact that it keeps failing doesn’t matter.
And the Kansas debacle won’t matter either. Oh, it will briefly give states considering similar policies pause. But the effect won’t last long, because faith in tax-cut magic isn’t about evidence; it’s about finding reasons to give powerful interests what they want.” New York Times
It seems evident that ALEC and Brownback and Laffer are not serious in their stated desires to help all the citizens of Kansas. Am I just being cynical? Are we expecting too much from State legislators and governors when we ask them to do what is best for all citizens? Or at least most citizens? Supply side economics has been long discredited, but Governor Brownback threw his unwavering support to principles and policies that only work to make certain people richer. The facts seem to indicate that Brownback and the Kansas State legislature are only concerned about corporations and the wealth.
I guess I should not be surprised since the Republicans and some Democrats in Congress are hell bent on boosting the corporate profits at the expense of the rest of us. Maybe the citizens of Kansas will remember this come election time. Maybe the debacle in Kansas will convince other States and Congress to stop the corporate entitlements and tax cut rhetoric and start legislating with all of us in mind. I can dream can’t I?
Does it surprise you that state legislatures and Congress for that matter never seem to be interested in tax cuts for the 99%? What do you think?
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bigfatmike:
What do you think the rate should be? I think it should be somewhere between 10 and 20% with no deductions of any kind and it should be on all income earned or not. You make $100.00 send in between $10 and $20.
@Bron
I don’t know the right tax rate and I cannot make a good argument. But I think you might be on the low side.
My recollection is that the people who used to advocate single rate flat tax were in a range close to 20% for federal income taxes.
I would guess somewhere around 20% for the federal government would be about the minimum to allow government to continue what I consider essential government functions.
Income taxes for state governments would seem to be much less than that but I don’t have a guess for what magnitude is reasonable.
And soon, Brownback and his hapless cut throats will wake up at the same and know – FOR SURE – they have collectively bankrupted Kansas. AND, others will follow.
I’m taking bets on how many nano-seconds it’s gonna take before lynching actually becomes legal..
The problem is that America has a Preamble, Constitution and Bill of Rights.
The problem is that the Revolution and Founders established freedom for citizens and severe limits on government.
The problem is all your “modifications” are unconstitutional.
The singular American failure has been the SCOTUS.
America threw off one monarch to be subjugated by another monarch.
Americans are supposed to be free whether you like it or not.
If you don’t like it, don’t buy it. Old “Crazy Abe” should have conducted boycotts in the private sector, not nullified and destroyed the Preamble, Constitution and Bill of Rights. The North should have boycotted cotton not controverted the founding documents.
Freedom. Live with it.
bigfatmike:
I would love to have a national vote on whether capitalism or socialism is going to be our economic model and the percentage of income we should pay in taxes.
@Bron
If it is any comfort to you i doubt there are many advocating for socialism.
I do think there are many who would like to see a form of capitalism that is more responsive to the needs of citizens who who have problems.
For example, the job market now is a bit like musical chairs. There are about 3 candidates for every job opening. It does not matter how hard people try or how resourceful they are; 2 of 3 are going to come up without a job.
And responses like ‘we just have to grow the economy’ are glib platitudes. Even if we knew how to grow the economy consistently under all economic conditions, what are people supposed to eat while the jobs are created?
When it comes to the tax rate I am with Goldilocks on that one. I want the tax rate to be just right.
So how will reloading the high taxes onto the backs of “regular” Kansas enable Kansas to “boom”?
Wow, no one mentions “voodoo economics”.
In 1980 the american people had the choice between an accomplished man who had been the director of the CIA and the ambassador to China and actor who even before his election had been confusing his roles with reality. Then continued his decent into senility.
“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”
“Democracy is a pathetic belief in the collective wisdom of individual ignorance. No one in this world, so far as I know—and I have researched the records for years, and employed agents to help me—has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.”
– H. L. Mencken
Yet:
“Democracy is the worst form of government, except for all those other forms that have been tried from time to time.”
– Winston Churchill
bigfatmike:
the right is going to have to come off some money for the rank and file and left is going to have to do some deregulation and let the internet do some of that by word of mouth. A company today cant sell coca cola as a cure for what ailes you. Work with the transparency created by the internet and find the real culprits and take them down using the courts and public opinion.
In todays climate with things like Angie’s List putting eyes on your operation, you would have to be stupid to misbehave.
I agree with you compromise is necessary.
I can’t tell you how unfortunate I think it is when I hear people argue for no compromise.
Without compromise we would not have the country or the constitution.
In my opinion, if there is anything exceptional about the US in has been our ability to reach compromise on important issues.
The idea that every issue, every bill, every amendment to every bill is worthy of filibuster leaves me cold and unconvinced.
At some point, on most issues, we need to count the votes and move on.
Nick Spinelli
… The love affair progressives have …
======================
Is not with the cans ass dorky gummnor you cornservatives adulate.
bigfatmike:
“If all the policy does is pull business from one state to another, the nation has not really gained at all. We need policies that actually help businesses grow, and create new jobs and generate new income not policies that beggar our neighbors.”
I agree but how do you propose to do that?
@Bron
That is a great question. I just wish I had a good answer.
Unfortunately everything I can think of is a balancing act and halfway measure – the Goldilocks approach.
Education, actually investment in human capital, regulation and yes tax policy all need to be examined. After that it gets complicated.
rafflaw:
if taxation and spending are such wonderful job creators, how come Vermont is dead last in production? And how come it has one of the highest per capita tax rates in the country?
Nick: Moody’s downgraded US bonds because of Republican efforts to drive the economy off the cliff over the debt ceiling, another ALEC inspired plot.
RTC, I agree w/ you on Moody’s being apolitical. However, that does not stop politicians from going after them. You will remember Obama blasting Moody’s over their downgrading of the US over Obamacare.
Kiplinger ranked the top 10 states for job growth.
1 Utah
2 Nevada
3 Hawaii
4 SC
5 Colorado
6 Idaho
7 Florida
8 Texas
9 NC
10 Arizona
These are not tax and spend states. Except for Hawaii, they are moderate to very fiscally conservative states. Kansas is akin to these top 10 states. I don’t know enough about their economics to make an assessment of them. But, I go back to my Mo. attitude, “It’s Kansas, what do you expect?”
Figuring out which states are adding jobs and increasing income is a good start. But that probably does not, by itself, give a complete answer regarding which states are doing well and which are not.
At the least, your probably need to consider population growth along with increases in jobs. When you evaluate state income, GDP, you probably ought to look at state per capita GDP.
The reason for that is simple to understand. If population grows, say, 5% we would expect to see increased purchases for all kinds of things like groceries, gasoline, housing, clothes. Those increases in purchases would lead to increases in state income, business activity and perhaps increases in employment.
So if population increases, say, 5% and employment and income only increase 2%, then in some sense the economy is not keeping up.
If state policies really are effective at creating a good environment for business we would expect to see growth in things like income and jobs that exceed growth in population.
The Kiplinger list is a good place to start looking for high performing states. But the raw numbers on employment don’t tell the whole story. One criticism of the Texas economic miracle has been that when you factor out population growth, economic performance has been mediocre at best.
One last point. What data you need to consider depends very much on the use you are making of the data.
For example if you are considering investing in a business you may not care why a state is growing. You may just want to get in on the rapid growth.
If you are trying to bench mark economic policy it matters very much whether growth is occurring because people are moving into the state or whether growth is occurring because state policies favor business.
We also ought to remember that some state policies that favor business and promote growth within the state are not really useful.
If all the policy does is pull business from one state to another, the nation has not really gained at all. We need policies that actually help businesses grow, and create new jobs and generate new income not policies that beggar our neighbors.
Nick and all those who focus irrationally on Krugman in this post:
You guys seem to be all too willing to overlook the one unassailable fact in rafflaw’s/ Krugman’s article, which is that Moody’s downgraded Kansas’ bond rating.
It was Moody’s that precipitated the attention on Kansas’ budget woes; Moody’s doesn’t have a political axe to grind – if it did it would be for the Right. Moody’s is merely taking a cold hard look at the balance sheet and issuing a grade to inform the smart money not to park in Kansas.
The Hi-Fi guys on Wall St. trust in Moody’s, Krugman’s just a reporter in this case; point out the misinformation in his article, not what he may have said a year or two ago.
You guys are doing the same thing to Krugman that you do with the climate change debate – focus on the messenger, not the message.
ALEC’s policies have been a miserable failure for the citizen of every state they have had an influence. BTW, Wisconsin is 37th and falling in job creation
I think with ALEC you have a Fifth Estate, the Fourth Estate being your so-called journalists.