Some states have been experimenting with ways to jump-start their economies, and they’re starting to see interesting results. In North Carolina, a cut to the unemployment program has reduced unemployment:
A year ago, North Carolina became the first state in the nation to exit the federal government’s extended-benefits program for the unemployed. . . . North Carolina didn’t descend into the Dickensian nightmare critics predicted. For the last six months of 2013, it was the only state where jobless recipients weren’t eligible for extended benefits. Yet during that period North Carolina had one of the nation’s largest improvements in labor-market performance and overall economic growth.According to the U.S. Bureau of Labor Statistics, the number of payroll jobs in North Carolina rose by 1.5% in the second half of 2013, compared with a 0.8% rise for the nation as a whole. Total unemployment in the state dropped by 17%, compared with the national average drop of 12%. The state’s official unemployment rate fell to 6.9% in December 2013 from 8.3% in June, while the nationwide rate fell by eight-tenths of a point to 6.7%.
It seems, furthermore, that this development is not a statistical oddity, nor the result of labor market atrophy.But if one right-wing nostrum has been vindicated in the Tarheel State, another is under fire in Kansas, which Paul Krugman took to the woodshed last week:
Two years ago Kansas embarked on a remarkable fiscal experiment: It sharply slashed income taxes without any clear idea of what would replace the lost revenue. 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.
Stephen Moore, whom Krugman called out by name, shot back in the Kansas City Star, and it appears that in Krugman’s case, the partisan wish might have been at least partly father to the economic thought. But at the same time, Krugman’s underlying sources are the Wall Street Journal and the Bureau of Labor Statistics, not Talking Points Memo. Brownback’s revolution, which has attracted bipartisan critics for some time, may be discovering its limits.