Thursday, June 8, 2017

The Laffable Curve Flatlines In Kansas. South Dakotans, Take Heed

     In an eye-catching repudiation of the "Laffer Curve," the Kansas state legislature yesterday said "no thank you" to yet more of the economic self-flagellation that has driven that
Take Heed, South Dakotans
Brownback's A Huckster
state's economy into the ground.  
The pain started in 2012, when newly elected Governor Sam Brownback turned his state into a laboratory for litmus-testing Economist Arthur Laffer's theory that tax-cuts have a stimulative effect on the economy.  Laffer's "curve" reputed to show that lower tax rates boost economic growth, a dogma that is the centerpiece of trickle-down, Tea Party-ish economics.  Often dubbed a "miracle" by Brownback's devotees, the result after 4 years has been so disastrous for Kansas that Brownback's plan was trashed by his own heavily-Republican legislature.  State reps yesterday overrode the governor's veto of their plan to roll back those tax cuts, which have left a $1 billion hole in the state's budget.  

     Brownback's claims that his plan has boosted the Kansas economy are just as dubious as his promise that cutting taxes would increase state revenues.  Last October The Wichita Eagle did an item-by-item refutation of the governor's bragging points, which showed that the state's economy has been limping along, its economy growing at about half the national rate.  To me the final proof in that pudding is the sharp drop in anticipated tax revenues, which should have gone the other way if the state's economy was indeed doing well.  In any event, yesterday's legislative override couldn't be a starker assessment of how even devoted Republicans realize the futility of trickle-down economics.  There is no evidence, none, that shows tax-cuts have a stimulative effect on the economy and subsequent tax revenues.  In fact, using President George W. Bush's cuts as an example, exactly the opposite transpired.  Some say Reagan's worked well, but private sector job growth and tax revenue growth during the Reagan years were so-so at best.
     From our South Dakota perspective we should be wary of this nonsense on two levels. First,
We're Not In Kansas Anymore
We're In Brownbackistan

given our propensity for shortfalls in state revenues that occur because of our regressive sales tax/no income tax structure and its dependence on high commodity prices to stimulate our economy, we need to think about reforming our tax system in a way that doesn't rely on swings in world market prices for grain and livestock.  Next, our congressional delegation should be wary of jumping on President Trump's promise to supercharge the economy with tax cuts for high earners.  Last Fall our Congresswoman Kristi Noem breezily and uncritically touted a tax reform package of tax cuts that she claimed would result in a 9.1% growth rate, which showed that she knows neither History, nor Economics, nor what she's talking about. The Kansas growth rate under Brownback has been 1.2%.  Given that the Laffer Curve has been a floppola at both the national and state levels,  this notion that cutting taxes automatically does all of us some good is the kind of snake oil that sells well to rubes but in the end only makes its hucksters some money.  


  1. I swan, Republicans making policy based on reality assumes facts not in evidence — especially in those states that comprise the Great Plains.

  2. And don't forget our junior Senator bragging a couple of weeks ago that he has introduced a bill for another 150 billion in tax cuts at the federal level. I get the biggest kick out of people (and the media is partially to blame with their broadcasting daily the doings of the Dow, NASDAQ and S&P500) thinking that the stock market is a sign of how the economy is doing.

    When WE bailed out the banks and the auto companies, 9 years ago, that brought the stock market back, but it did nothing for the shareholder or homeowners who had been crushed, and it sure as heck did nothing for Main Street, because the banks used the money three different ways. They either paid it in bonuses to their executives, or they invested in foreign securities or they bought back US bonds. They invested in neither Main Street or the homeowners who had been crushed.

  3. Excellent column John. But if the "laffers" are correct, business, fortune and fame should be flocking here to SD. No income tax. No corporate tax. Trickle down galore. Of course that what's tricklin' down will probably require a strong disinfectant, eh ?

  4. After being fed a steady diet of Thune, Rounds and Noem Journal columns, it's refreshing to read something more than political fluff. Thanks.

    Ever notice that when Senator Thune stands behind Senator McConnell, his expression is one of extreme heartburn. "Anyone have a Tums"?