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Supply Side Economics: A Bad Idea that Will Not Die

May 16, 2017

Dominic Rushe, wrote an article in yesterday’s on-line Guardian titled “We Are A Cautionary Tale: Kansas Feels the Pain of Massive Trump-Style Tax Cuts”, describing the horrific consequences of Governor Sam Brownback’s supply-side economics on Kansas’ budget and citizens. The article describes the Laffer Curve that purportedly “proves” that tax cuts will yield increased hiring as businesses are freed from paying taxes. But all of the evidence from Kansas and the national experiment with Loafer’s ideas demonstrate that the tax cuts go into the pockets of the wealthiest people in the state and do nothing to increase hiring.

Mr. Rushe quotes Duane Goossen, the former Kansas secretary of administration, who examined the consequences of the GOP legislature’s tax cuts and concluded “There is no evidence whatsoever that suggests this plan worked.”

Instead, Goossen claims, the money has gone to a small group of wealthy Kansans while the state’s budget has been left with a roughly $1bn shortfall. Its school system, once its crown jewel, has suffered year after year of cuts, and its savings are gone. The non-partisan Tax Policy Center calculates Trump’s tax plan would cost $6.2tn over the first decade.

“We are a cautionary tale. It sounds great, everybody gets a tax cut and it’ll balance – but it just doesn’t work,” said Goossen.

As noted in many previous posts on Kansas, and underscored in the Guardian article, public schools have taken the biggest hit as a result of this plan, which is loathed by virtually everyone:

Part of the dislike stems from what the cuts have done to Kansas schools. In March, the Kansas supreme court ruled that state was underfunding schools by hundreds of millions of dollars per year.

One of the parents affected is Judith Deedy, who moved from Cleveland to Johnson County, by the Missouri state line, in 2004 – in large part because of the great reputation of the local schools. “During the recession I got it that budgets were being cut, but when we came out of recession, it just kept on happening. We are seeing cuts year after year that add up to an entire academic career.”

Class sizes are up, teachers are not being replaced, art and music are being slashed. “I’m lucky. This is still a relatively good area, [but] small towns are losing schools. In Wichita, they shortened the school year and increased the length of the school day. No one likes it,” she says. Small towns that lose a school are being devastated by the cuts, and parents are worried schools may not reopen after the summer break unless an agreement can be reached in Topeka.

“I chose to live in Kansas. We don’t have beaches, we don’t have mountains, but we have great public schools. Well, not any more. There was no shot of adrenaline – you didn’t have to be an economist to see that. The cuts have been so deep we may never get back to where we were,” said Deedy.

Mr. Goossen is appalled to think that this “model” is being advocated in Washington. He notes that the plan’s similarity to the one that has left Kansas in crisis is “unbelievable”. While he and all but the wealthiest Kansans have witnessed the failure of the Gaffer curve, those in Washington want to believe in the agreeable fantasy that tax cuts will yield higher employment and greater affluence for all. It won’t happen… and if the cuts are as deep as Mr. Trump wants them to be, we may never get back to where we are now… and that is not nearly good enough to help those children who are raised in poverty.

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