{"id":18280,"date":"2014-07-08T21:32:48","date_gmt":"2014-07-08T19:32:48","guid":{"rendered":"http:\/\/www.w-t-w.org\/en\/?p=18280"},"modified":"2014-07-08T21:32:48","modified_gmt":"2014-07-08T19:32:48","slug":"using-a-state-as-an-economic-laboratory-in-the-us","status":"publish","type":"post","link":"https:\/\/www.w-t-w.org\/en\/using-a-state-as-an-economic-laboratory-in-the-us\/","title":{"rendered":"Using a State as an Economic Laboratory in the US"},"content":{"rendered":"
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Steven Hansen writes: Economic\u00a0theory is interesting. There never has been “scientific” proof documenting how any theory performs against the wide range of economic dynamics because there is no experimental control sample for comparison. Like most of us, I have opinions (based on theory) but I do not confuse opinions with data or facts.<\/p>\n
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This past week, everyone’s “love him or hate him” economist Paul Krugman wrote:<\/p>\n
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 \u2014 in percentage terms, the largest tax cut in one year any state has ever enacted \u2014 in close consultation with the economist Arthur Laffer. And Mr. Brownback predicted that the cuts would jump-start an economic boom \u2014 \u201cLook out, Texas<\/strong>,\u201d he proclaimed. <\/em><\/p>\n
But Kansas isn\u2019t booming \u2014 in fact, its economy is lagging both neighboring states and America as a whole. Meanwhile, the state\u2019s budget has plunged deep into deficit, provoking a Moody\u2019s downgrade of its debt.<\/em><\/p><\/blockquote>\n
Yah, Kansas is not booming but consider the following and let’s see where these items might take us:<\/p>\n
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the debt in Kansas is not much worse than any other states.<\/li>\n
more than two states bordered Kansas;<\/li>\n
how fast does any economic theory work? Should it be judged in the short, medium or long term?<\/li>\n
raising income\u00a0<\/span>taxes removes money from consumers.<\/li>\n<\/ul>\n
There is no question that based on employment, Kansas is doing worse than its neighbors (about the same as Missouri) and the average for Kansas and all its neighbors looks to be slightly below the national average. Remember that employment is a lagging indicator of economic growth.<\/p>\n
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GDP growth for Kansas appears also be very near the national average – but GDP growth is less than 3 of its 4 neighbors.<\/p>\n
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If raising taxes were an answer – the USA economy should be flying.\u00a0You cannot condemn a single element of an economy without examining all elements. I am not for or against raising taxes per se<\/em> on a state level. My opinion would be conditional when judged against all the other economic dynamics.<\/p>\n
Consider also that the Federal Government has different monetary dynamics than the states (being a sovereign monetary issuer) – and the examples given in Professor Krugman’s oped were based on Federal Government experience.<\/p>\n
The individual states in America, like countries in the EU,\u00a0<\/span>\u00a0are potential economic laboratories. States should be encouraged to leave the trodden trail and experiment. Most experiments end in failure, but without failures – our understanding of economic dynamics is not enriched. Professor Krugman is the mouthpiece for liberal partisan politics, and partisan politics have no place in “factual” economic discussions.<\/p>\n
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