The Kansas Supply-Side Experiment Unravels
Tax cuts were supposed to spur growth, boost revenue and create jobs. The results were the exact opposite.
By Barry Ritholtz
June 19, 2017, 11:19 AM EDT
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When a governor announces an economic theory as a solution to a state’s fiscal problems, while challenging all comers to observe the results, that’s something I want to pay attention to. And so for the past five years, I have been watching the public-policy experiment in Kansas with great fascination.
With the state legislature now rejecting the governor’s experiment, we can move onto to the next phase: Not recrimination and blame, though there is lots of that going around. Instead, I want to look at how the experiment played out, and what lessons there are to be learned from it.
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By just about every measure, Kansas’ economic laboratory experiment is now over, and the results are in. Supply-side tax cuts as executed in Kansas don’t generate more economic growth or create more jobs. They reduce tax revenue and forced the government to cut spending on essential goods and services like roads and schools.
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I don’t think Ritholtz’s analysis goes quite far enough.
He doesn’t consider that “time” in his lessons learned.
It takes more than a generation to get folks to change. So a quick tax slashing with a large deficit spend is not how to spur the growth promised in the Laffer curve. It takes time to adapt.
Hence, the tax rate needs to be gently reduced over time with cutting waste and abuse. Then, strategic complete cuts to programs that are ineffective, and inefficient. With those savings either “banked for a rainy day” or returned to the taxpayer.
A one trick pony shot is not going to “fix” the decades of “training” that “We, The Sheeple” have in what Gooferment will do for them.
Rigorous fiscal discipline, while not showy, will bring prosperity.
IMHO this is needed at all layers of Gooferment.
Sad to say, but at one time, it could be found in both parties. Not any more in either.
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