It wasn’t so long ago that Republicans were genuinely the party of fiscal responsibility. Ronald Reagan, who presumably now occupies a throne at the right hand of The Lord, raised taxes eleven times over the course of his Presidency.
Why did he do something so foul? Because his original tax cutting plan generated the highest budget deficits the nation had ever seen in peacetime. Back then that sort of thing really upset Republicans.
The same dynamic has played out over and over again, yet Republicans continue to tell themselves that tax cuts make the sky rain money. Kansas is the latest and most celebrated example, though Texas residents have their own story to tell.
Kansas Republican Sam Brownback was elected Governor in the 2010 Tea Party wave. He immediately set to work “fixing” a state that had actually weathered the economic collapse fairly well. On the principle that taxes make Baby Jesus cry, Brownback, facing the specter of a remarkably large budget surplus, passed the largest tax cut in the state’s history. He boldly predicted a new era of economic growth and “fiscal responsibility.”
It turns out that when you slash government revenues, the result is a dramatic reduction in government revenues, something no one could have anticipated. The state is now running hundreds of millions of dollars in deficits, and will soon exhaust the surpluses built up in the dark era when the Communistic Democrats held the Governor’s office, despite the consequences of the economic collapse.
But the economy must be booming, right? Well, no. Job growth in Kansas has lagged behind the rest of the country while education and other key government services have been slashed. More interesting though is the general trend. The tax cuts, at least so far, seem to have no effect at all on general economic activity. That’s interesting and important.
Despite all the hullabaloo about places like Texas and Kansas that have been attacking government, the biggest economic drivers in recent years have been places like New York City and the San Francisco Bay Area. They led the way in the recovery of real estate prices and they are leading the way in wealth, job growth and general economic activity just like they did before the crash. Needless to say, these are high tax, high-regulation regions.
The net of it seems to be that marginal tax rates do not actually matter much in terms of economic growth. People don’t locate their business in San Francisco because they love being micro-regulated any more than place their business in Lubbock for the freedom. Economic decision-making is more complex than that.
Governments that want to create an environment friendly for business need a long term balance between effective, limited regulation, infrastructure, education, education, education, and education. Kansas’ experiment in tax cutting is unlikely to move the economic needle one way or the other.
So who is to blame for the collapse in government revenues that has resulted from slashing government revenues? The same force that causes floods, earthquakes, unintended pregnancy, the rising popularity of soccer, and declining church attendance – Obama. Gov. Brownback blamed the state’s lagging economy and collapsing tax revenues on the far right’s default excuse for everything. I’m not making this up, here’s what he said:
What we are seeing today is the effect of tax increases implemented by the Obama administration that resulted in lower income tax payments and a depressed business environment
‘Natch! Obama is clearly to blame for everything that has happened to our country except for a record bull market in stocks, four straight years of employment growth, declining budget deficits, a new real estate boom, declining health care costs, and the radical drop in the number of uninsured.
Our last reasonably competent President was a Republican who described supply-side theory as “Voodoo Economics.” It turns out that Art Laffer was wrong and George H.W. Bush was right. Laffer has continued to be wrong over and over again, disastrously, with no negative consequences. Why do people keep listening to this crap?
First of all, it just sounds so good. More importantly though, since the Dixiecrats bedded down at the center of the Republican Party, no one actually cares anymore about making government work. Truth be told, there are very few idiots who actually believe Arthur Laffer’s ridiculous theories, it’s just that no one on the right cares that they are false.
Back in 1981 when we first rolled out Laffer to justify a tax cut, the top marginal rate was over 70% and the country was being strangled in government regulation. Within a couple of years after that tax restructuring, Reagan was already looking for ways to shore up government revenues and repair the widening deficits he had created.
Republicans in that era were not trying to re-fight the Civil War. They wanted to change the balance between government and individual power, but they did not genuinely view government as an enemy. Those days are long gone and the goals over the conservative movement have evolved. Neo-Confederates couldn’t care less whether tax cuts pay for themselves. Central government is the enemy in any of its potential forms. Whatever weakens government is a good idea.
So you can be sure that the Kansas fiscal disaster, just like the similar disaster a few years ago in Texas, will be re-branded by the right as a Kansas miracle. When your only goal is a crippled government, the bar is pretty low and the facts don’t matter. Just one more indication among many that these are not your grandfather’s Republicans.