Over the last few years, Kansas Republicans learned a seemingly obvious economic lesson: Tax cuts don’t pay for themselves. Not even close.
Can national Republicans finally catch on as well?
Elected governor in 2010, Republican Sam Brownback pushed through big income tax cuts, with particularly favorable treatment for small business owners. Brownback predicted those tax cuts would be “a shot of adrenaline into the heart of the Kansas economy,” making his state the best place in the country to start a business, creating tens of thousands of new jobs, and attracting tens of thousands of new residents to the Sunflower State. Further, “an expanding economy and growing population” would “directly benefit our schools and local governments.” Translation: a revenue boom would ensue.
It would, Brownback exclaimed, be “a real live experiment” in conservative economics.
Well, his own party just declared that experiment a failure. Faced with chronic budget deficits, Kansas’s Republican-led legislature passed a big income tax hike, basically reversing Brownback’s cuts. And when Brownback rejected it, they overrode his veto.
Even anti-tax crusader Grover Norquist, once a big Brownback booster, acknowledges in back-handed fashion that the Kansas experiment isn’t exactly a billboard for supply-side success.
“The lesson of Kansas is that of the 50 states, the Democrats can find one that, looked at sideways and upside down, makes their case plausible,” he says.
Norquist would like to leave Kansas in the rear-view mirror. But given the intellectual investment supply-siders had there — Arthur Laffer and Stephen Moore, supply-siders enamored of the notion that pro-growth tax cuts can result in enough new revenue to offset their cost, helped with Brownback’s plan — it’s significant that once-hopeful Kansas Republicans came to realize Brownback’s policy folly.
“People always need to relearn the lesson that there really is no free lunch,” notes Bob Bixby, executive director of the Concord Coalition, a nonpartisan fiscal watchdog.
Now, let’s be clear: Most serious economists don’t believe that tax cuts pay for themselves. Not at or near our current levels of taxation. After all, we’ve run this experiment twice nationally in the last 40 years, first under Ronald Reagan and again under George W. Bush — and both times, the results were expanding deficits.
The end of Brownback’s failed experiment comes as the Trump administration and the Republican Congress prepare their own tax-cutting plans. As they go about that task, Treasury Secretary Steven Mnuchin has been trafficking in supply-side mythology.
“The plan will pay for itself with growth,” he said recently.
“No serious economist would make such a claim,” Holtz-Eakin wrote in The Washington Post. “At best, according to the prevailing consensus, the positive feedback effect from tax cuts would recoup in the range of 25 to 35 percent of the cost.” And at worst? Well, when the CBO modeled a 10 percent income-tax cut during Holtz-Eakin’s time as director, it found that under the worst scenario, the revenue loss could be greater than the overall cost of the tax cut itself.
In Kansas, it was worry about the future, expressed as concerns about education cuts, that helped drive the legislature to hike taxes. Nationally, there should be similar concerns. After all, if Congress passes tax cuts that aren’t offset by budget cuts, that shortchanges young Americans.
“We shouldn’t be leaving mounting debt to future generations,” says Bixby. “And we end up not investing in education and transportation and science, things that can boost future productivity.”
Make no mistake. That isn’t winning. Or making American great again.
It’s robbing the future to please the present. And that’s both selfish and unwise.Scot Lehigh can be reached at email@example.com. Follow him on Twitter @GlobeScotLehigh.