Supply Side Kansas and ALEC

Sam_Brownback,_official_Governor's_portrait

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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103 thoughts on “Supply Side Kansas and ALEC”

  1. “over the past ten years, economic growth has been greatest in states that have lowered their tax rates which is far from a statistical aberration.”

    That is a documentable, knowable fact. Which states have lowered their personal income or corporate tax rates in the past 10 years? And from what rate to what rate?

    If tax rates play that important a role in economic activity I would also expect to see some correlation in the amount of decrease in the tax rate and increase in economic activity.

    St Louis federal reserve (FRED) makes easily available GDP by state going back at least as far as 1997.

    It ought to be pretty easy to see if that is a statistical aberration or not.

  2. “Kansas reformed its tax code about a year and a half ago which is hardly and adequate period of time to conclude that it;s an abject failure. ”

    Why isn’t 18 months enough time to see the effects in the change in policy. General consensus used to be that changes in fiscal policy began working their way into the economy in a measurable way in about 6 months. Changing tax rates might take a bit more than 6 months to work their way through the economic system.

    But Changing tax rates is like putting money in the hands of businessmen.

    If they have an economically useful way to send that money why would they do it immediately? Spending that money on plant, equipment, or employees to serve waiting customers would mean making even more money. What is the hold up?

    Why wouldn’t we see the effects of that of that policy change relatively soon?

    Why wouldn’t we see businesses opening more branches, hiring more workers, planning for new expansion in plant or equipment and hiring more talent – engineers, accountants, managers – to handle that expansion.

    We just do not see any of that in Kansas. The policy is a failure on it own stated terms. Cuts in the tax rate did not generate new business activity. Eighteen months demonstrates that truth.

  3. “he (Krugman) often contradicts his own published academic work. ”

    If Krugman has misrepresented his academic work in his blog then name one instance in the past 10 years.

  4. Good article, rafflaw, I continue to be baffled by those who believe that Reagan was some sort of economic savior. Tax cuts for the sake of tax cuts make no more sense than tax increases for the sake of tax increases.

    As for ALEC, I have become increasingly convinced that it is really a religious organization, since it appears dedicated to the proposition that economic power should remain concentrated among the most deserving, a form of economic Calvinism.

  5. Paul Krugman ceased being an economist the moment he became a leftist polemicist for the NY Times. His columms are saturated with gross misstatement of economic data and he often contradicts his own published academic work. Kansas reformed its tax code about a year and a half ago which is hardly and adequate period of time to conclude that it;s an abject failure. More generally, the facts are unassailable; over the past ten years, economic growth has been greatest in states that have lowered their tax rates which is far from a statistical aberration. In contrast, New York, California, Illinois, not so much.

    1. “His (Krugman’s) columms are saturated with gross misstatement of economic data”

      His statements of economic data are usually backed up with references to the St Louis Federal Reserve (FRED)or the Bureau of Labor statistics which make economic data available to anyone with a computer and an internet connection. The St Louis FED site has about 4,000 time series available.

      Occasionally Krugman discusses the situation in Europe. Then he frequently references OECD publications to support his claims.

      Everyone gets it wrong once in a while. If there is any systematic misstatement of fact by Krugman name three in the past 10 years.

  6. You don’t tell Mr. Market what to do.

    Mr. Market does what he wants when he wants.

    You prepare for the worst and hope for the best and keep your nose to the grindstone.

    Stay out of the way of Mr. Market.

    You make a huge mistake when you start believing you are smarter than Mr. Market.

    You’re not.

    You make a huger mistake when you listen to fools who tell you they are.

    They’re not.

  7. Annie wrote “there should be backlash, the jobs should be going to our citizens”

    I completely agree, hence why I posted the link. But I find it interesting that all articles concerning the immigration “reform” bill S.744 never mention that the number of H-1B visas will be significantly increased.

    I realize there are only one or two people here who will bother to read it, but I wrote on this subject in “American schadenfreude and the Senate Gang of Eight’s fraudulent immigration reform bill S.744 (saucymugwump.blogspot.com).

  8. Saucy, Thankfully, he comes here, takes a few dumps, and then leaves. I think he has IBS because his dumps come rapidly if you take note. I completely ignore maybe 5 or so people here. They are not worthy of one word. Maybe one finger.

  9. Of course, there should be backlash, the jobs should be going to our citizens.

  10. All I know is that the Obama Economy is not friendly to small businesses and the large ones are leaving for tax breaks elsewhere as corporate tax for those over 18 million is 35% which is very high http://corporatetax.procon.org/ Just because you can raise minimum wage in Seattle is no guarantee it’s going to work in other states such as the South where the wages have typically been low. Hey look at the Governor’s conclusion to how to fix the problem with the stalling in his economy – Brownback’s official response to the state’s poverty problem was a brief report that advocated fighting poverty by encouraging traditional family structures through eight-hour “pre-marital education” classes for couples wishing to wed, kicking tens of thousands of residents off of food stamps so that they will work harder, and finding mentors for the state’s kids.
    http://thinkprogress.org/economy/2014/05/16/3438587/kansas-growth-projections/

  11. Annie wrote “Did Republicans deliberately crash the US economy?”

    Don’t be reading the British Pravda for the truth. If Obama was a great president, he’d find a way to get things done.

    Teddy Roosevelt, a Republican, was the greatest progressive (NOT liberal) president we had. He and Taft eliminated over 100 trusts between them. Roosevelt was president from 1901 to 1909, yet the Sherman Antitrust Act, the first anti-monopoly legislation, was not passed until 1890. The second anti-monopoly legislation, the Clayton Antitrust Act, was not passed until 1914, in other words, Roosevelt and Taft were the pioneers in fighting monopolies. Congress and business interests fought them, but they found a way to win.

    Obama could have intervened (in the FDIC sense of the word) the Too Big To Fail banks, but he chose to hire a Clinton retread, Timmy Geithner, and continue the Bush tradition of transferring the assets of the middle class to fat cats.

    P.S. In Russian, the word “pravda” means “truth.”

  12. And 4.5 thousand American lives, plus thousands of maimed and disabled.

  13. Nick wrote “Don’t waste one second of your time”

    Yeah, he reminds me of the clowns who threaten people online and challenge them to a fight. If anyone ever does that to me, I will ask for the name of their city, look it up using one of the online mapping tools, choose a random landmark, and tell him to meet me there tonight at midnight. 🙂

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