GOP State Budgets

Ezra Klein reveals Republican incoherence in pushing for cuts in state spending in the name of closing budget gaps then giving away to savings in the form of corporate tax breaks in his Washington Post blog.

The trade-off between the benefits of social spending and the drawbacks of taxes is, of course, among the longest-running debates in American politics. But that’s not actually the debate being had in most of these states: Rather, the cuts to social programs are being justified as a necessary response to budget deficits. And the tax cuts? Well, it’s increasingly Republican orthodoxy that “we have a spending problem, not a taxing problem.” Unfortunately for them, their budgets don’t agree, and since these states are constitutionally required to balance their budgets, what’s actually happening is that the cuts to social services are, in part, going to pay for these regressive cuts.

The GOP orthodoxy Klein refers to is the myth that "tax cuts grow the economy" and thus should not count against calculating government budget deficits. Jonathan Chait checks this theory against recent history in his blog in The New Republic.

In 1993, conservatives unanimously predicted that Bill Clinton's tax increase on incomes over $200,000 would slow growth, reduce tax revenues, and likely cause a recession. Instead, of course, the economy boomed and revenue skyrocketed. Then George W. Bush cut upper-bracket tax rates, and conservatives predicted that this would cause the economy to grow even faster. Instead, the economy experienced the first business cycle where income was lower at the peak of the business cycle than it had been at the peak of the previous business cycle. It is rare that events so utterly repudiate an economic theory.

--Ballard Burgher