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Reform Government First, Cut Taxes Later

Enthusiasm for state-level tax cuts is on the wane nationwide as legislators and governors behold the budgetary carnage that doctrinaire Tea Party policies have wrought in Kansas and Louisiana, two states once touted as exemplars of starve-the-beast governance. Governing magazine reports:

Two of the states that have been most ardent about cutting taxes in recent years now find themselves with serious and apparently chronic budget problems. That may be one reason other states have been more reluctant to cut taxes today than they have been in previous years. […]

In Kansas, Republican Gov. Sam Brownback promised back in 2012 to conduct a “real live experiment” on whether cutting taxes to the bone would fuel economic growth. He’s been haunted by those words ever since. Even after extensive spending cuts and some tax increases were enacted last year, the state has since fallen short of its revenue projections every month but one. The jobs boom Brownback promised has simply failed to materialize.

But some GOP stalwarts see the the Kansas and Louisiana fiascos as bumps in the road, rather than as signs of the perils associated with massive front-loaded tax cuts:

Slicing and even eliminating income taxes remains very much a goal among many Republican lawmakers. If this leads to shortfalls and spending cuts, that may not be entirely a bad thing, suggests Chris Edwards, an economist at the libertarian-leaning Cato Institute. “Some small-government-minded governors may want to cut revenues substantially, to force legislators to cut spending substantially,” he says.

The strategy Edwards describes, as we’ve said before, is rooted in a long-running (and understandable) sense of right-wing desperation. Republicans have for years looked at the steady expansion of government programs and figured that they would never be able to win the argument for reining them in. The best approach, the thinking goes, is to slash budgets and hope that spending will eventually have to fall into line.

But while this strategy might make sense for Republican insurgents navigating divided government, it makes less sense in deep-red states like Kansas, where small-government conservatives control both houses of the state legislature and the statehouse. In that context, Republicans would be better-served by working to reform government—streamlining bureaucracies, beating back public sector unions, reducing the burden of needless occupational licensing rules and land use regulations—and then turning their attention to tax-cutting.

The goal must be to create an environment for a leaner bureaucracy and more dynamic economy, and return the dividends from these innovations back to the taxpayers. Too many GOP state leaders have been giving out budget-busting tax cuts while punting on the far more difficult and involved work of genuine government reform. As a result, their citizens are merely paying for tax cuts with debt and diminished schools and infrastructure. And there is nothing fiscally responsible about that.

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  • QET

    Agreed. The obverse of this is what I have long argued regarding Deep Blue Massachusetts: namely, that because it is completely controlled by the Democrats (the occasional Republican Governor is functionally always a Democrat, even poor old Mitt Romney, and in any case the Governor has next to no effective policy-making or -thwarting power vis-a-vis the Legislature), it ought to be the “laboratory” for all of the inequality-reducing, social justice-ensuring policies that national Democrats (even our very own US Senator E. Pocahontas Warren, who spends all of her time denouncing Trump and precious little urging her own state not to wait for the Feds but to act now) complain the Republicans are always blocking. There’d be no need for any sit-ins; MA Democrats could, overnight, turn the state into a paradise for “working families and our most vulnerable.” Instead, the MA government is busy congratulating itself on the fact that GE has just moved its world HQ here. Isn’t that the sort of thing Republicans do? I once wrote a letter to my state representative (D) complaining about Democrat fixation on tax increases and he wrote me back crowing that he personally had just seen though a bill to REDUCE corporate taxes here. Reduced. Corporate. Taxes. A Democrat. In a solid Democrat, Blue state. This applies also to guns. Sure, MA has a fairly restrictive regime, but “assault weapons” are not banned here. Subject to certain restrictions like maximum magazine capacity, yes. But not banned. No one can believe after Scalia’s death that the Supreme Court won’t overturn Heller & McDonald at the very first opportunity, so MA could simply ban all semi-automatic weapons (handguns included) today, right now, and know they’d get away with it. No sit-in here necessary; the legislation could be passed tomorrow. So why hasn’t it been?

    Unless and until Democrats can demonstrate on a small scale (such as tiny MA) that the policies they routinely whine are prevented by evil Republicans will actually be effective and beneficial as they claim, they have no business demanding those policies on a national scale.

    Ditto Republicans, of course, the subject of this TAI piece.

    • Pait

      What one learns about Massachusetts is that common-sense, middle of the road liberal policies work fairly well. Unemployment in the state is small, crime rate low, growth fairly steady, and education is best in country, comparable with the most successful international examples. Massachusetts is not a lab for radical proposals, and that serves its citizens well, though not perfectly for sure.

  • Andrew Allison

    TAI is deluded. The problems in Kansas and Louisiana are a result of failure to reduce expenditures. The whole point of starve-the-beast is to force a reduction in government spending.

    • Jim__L

      It’s more popular to cut taxes than it is to cut spending. Even Republicans have trouble with that part.

      • Andrew Allison

        You are correct. I fear that the only solution is to throw the rascals out and elect replacements committed to cutting spending. Unfortunately, a majority of voters appears to be on the public dole.

  • GS

    To reform a government one has to apply coercion to the vested interests. Such coercion does not have to take the form of an occupation army or of a mass uprising with pitchforks [which are NOT being advocated, I hasten to add for the benefit of the NSA monitors], it could take the “starve the beast” fiscal form. But to expect an unforced reform is wishful thinking. All such “thinkers” are to be thoroughly beaten with magic wands.

  • Pait

    The premise of the post, that there has been a “… steady expansion of government programs..”, is incorrect. US federal government size has remained essentially constant, as a percentage of the economy, for decades, with peaks during wars or recessions. The data is easily available; a quick search suggests https://fred.stlouisfed.org/series/FYONGDA188S

    Of course better government is always desirable. Reality-based arguments are not hard to make.

    • Tom

      Pait, did you willfully miss the part where this was a post about state government?

      • Pait

        The expansion didn’t happen with state government programs either. In fact federal expenses, which I mentioned because they’re are easier to find and reference, increase during recessions, unlike state and local expenses, which tend to decrease. Also, the conservative argument, which tends to defer states’ rights, should be less disapproving of state expenditures – I agree that is besides the point.

        Nevertheless, the premise of the post is false. It is possible that the sense of desperation of right-wingers is real, but the reason given is baloney.

        • Tom

          Except not, but thanks for playing.

          • Pait

            Well perhaps the expansion did happen in Kansas. It didn’t ahppen in the country as a whole.

            It’s not so easy to come up with data for state and local government, at least not easy enough to justify spending time sorting what’s correct and what’s false in each article one comes across.

  • FriendlyGoat

    “The jobs boom Brownback promised has simply failed to materialize.”
    One would think when you can’t get a jobs boom by cutting taxes and NOT cutting spending as fast as you cut the taxes, that it would take a total moron to believe you can get a jobs boom by cutting taxes AND cutting spending more vigorously. Seeing as how government spending is almost always the direct funding of jobs or the enabler of economic demand satisfied by jobs, the standard GOP spin has never really made any sense. Thanks to the “laboratory for experiments” which the states in federalism are sometimes called, can we please finally acknowledge what we see in Kansas, gather enough composure to form a rational conclusion and stop listening to Republicans? They have been “full of it” on economics for almost 40 years. Enough is enough.

    • Anthony

      FG, something to entertain you: “This is the sort of magical, fantastical thinking all too common in the Republican Party and among American conservatives. Slash taxes and regulation and watch economic growth accelerate to warp speed.” (theweek.com/articles/632841/magical-thinking-americas-probrexit-conservativws

      • FriendlyGoat

        Thanks. That’s interesting talk coming from Pethokoukis. When I used to read him regularly at U.S. News and World Report (years ago), I could never get anything from him but the conservative line. I kinda think he’s still there, with “new and different” spin tactics.

        • Anthony

          You’re welcome and I agree – I thought Pethokoukis’ perspective would be a surprise. The struggle continues!

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