Today’s Brew 12-2-14

Rex Sinquefield at Forbes.com talks about why the critics of Kansas’ implementation of supply-side economics have egg on their face after the 2014 election.

Governor Brownback’s Promises Become Reality For Kansas

Justin McFarland, Kansas Director of Labor Market Information, rightfully proclaimed that the employment gain “continues to lead Kansas’ comeback from the Great Recession” and that the “increased income will continue to drive growth.”

This is good news for working families and their employers. Not so much for Brownback’s well-funded opponents, including the National Education Association and the American Federation of Teachers, which spent $60 million to defeat fiscal conservatives in the mid-term elections.

Powerful adversaries of Brownback’s pro-growth tax policies painted a dire “sky is falling” picture of the countless misfortunes that were sure to destroy the state’s economic future. While they may want to say and believe as they wish, the proof is in the numbers.

And while data is critical to the political process of creating good state fiscal policy, the most important figure is the 2.9 million people who live in Kansas whose lives are impacted by these policies. Kansans elect the people who are tasked with solving problems, and as the facts emerge, it appears that they have chosen wisely. The quantitative, 50-state data that is thoroughly documented in An Inquiry into the Nature and Causes of the Wealth of States (which I co-authored with Stephen Moore, Art Laffer, and Travis H. Brown) shows that every measure of economic prosperity is linked to taxation. Those states that limit or eliminate distortionary taxes, the worst of which are those placed on personal and business income, are able to expand their local economies.

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And this, from Allister Heath in London’s Telegraph on the upcoming Autumn Statement by George Osborne:

It’s time for George Osborne to explain why lower taxes are so good for growth

Changing tax rates also has an effect on incentives to work, invest, consume and transact which need to be taken into effect when setting policy and budgeting

So, given that there won’t be that much actual action, and only miniscule tweaks to the aggregate sums raised and spent, what we need to see instead is evidence of fresh philosophical and economic thinking from the Chancellor. We need him to embrace much more comprehensively supply-side economics and to paint a positive vision of an economy and society that are no longer weighed down by an oppressively large and unaffordable government sector.

In particular, the Chancellor needs to make it clear that he believes that lowering taxes on work would produce more of it, that cuts to the tax on the returns on capital would bolster corporate expenditure, productivity, jobs and growth, and that a smaller state is inherently a good thing, in terms of both improving the economy’s performance and by increasing the autonomy of individuals and families.

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Today’s Brew 11-6-14

David Weigel writes for Bloomberg about the election result in Kansas where Governor Sam Brownback was re-elected. And, Art Laffer is talking publicly about politics:

The Guru of Supply-Side Economics Had a Very Good Election

Art Laffer declares victory in Kansas.

Art Laffer was used to wearing the black hat. For much of 2014, as polls showed Kansas Governor Sam Brownback in danger of losing re-election, progressives expected supply-side tax cuts to be rejected. That meant a rejection of Art Laffer, the Steven Spielberg of supply side, the man whose napkin illustration of how lower taxes meant higher revenue changed American policy forever in 1981. A generation later, Laffer stumped with Brownback, endorsing his deep tax-cut plans because “states without income taxes have grown much, much faster.”

Most people expected Brownback to lose. Plenty of columnists, including Tom “What’s the Matter with Kansas?” Frank, pre-wrote the obituary of supply-side. And then Brownback won, taking 98 of Kansas’s 105 counties. Laffer’s verdict on the election?

“I liked it,” he said.

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“The states that cut their taxes really outperform the states that raise them,” Laffer said. “People will see that. It’s really hard to balance a budget on the backs of unemployed, and people really do leave states when that’s tried. Look, the problem with cutting taxes is that you are going to suffer short-term losses in revenues. When you raise taxes you think you’ve got a windfall. Then in a few years, you’re Detroit. Kansas, by contrast, is going to do very well. Kansas City is going to be located in Kansas, not Missouri, if you give it a couple years.”

Today’s Brew 11-5-14

Wow! What an election night!

Kansas Governor Sam Brownback was re-elected Tuesday. Of course, MSNBC can’t understand this, and their shots at all supply-siders start at the top:

With the help of Arthur Laffer, the mind behind supply-side economics, Brownback shaped a far-right economic agenda for Kansas. Slashing taxes and state spending, Brownback cut corners by eliminating government jobs and clamping down on the social safety net. The plan was to kick start growth and get the state’s economy humming.

Larry Kudlow is in today’s Investor’s Business Daily:

If Republicans Win, Blame Democrats’ Economic Failures

I’ve always believed the 1990s were Ronald Reagan’s third term. And while mistakes were made over the years, the U.S. created about 50 million new jobs between 1981 and the onset of the Great Recession in 2007.

Unfortunately, the free-market model has largely been discarded in recent years — not only in the U.S., but around the world — as Keynesian spending, over-regulating, tax-the-rich redistribution, and berserk money have come into vogue. It’s all wrong. The poor results show it.

A Republican victory won’t change this. But the GOP can make an early start on free-market energy reforms, lower corporate tax rates, holding back the regulatory tide and knocking down some ObamaCare tax hikes.

Republicans can also continue the war on overspending. Since the 2010 GOP landslide, government spending as a share of GDP plunged from 24.4% to 20.3%. This has had something of a tax-cut effect, and shows what Congress can do if it has a mind to do it.

Larry Kudlow IBD 11-5-14

Today’s Brew 10-7-14

A few days ago, The Krug put his crayons to paper and wrote what appears to be an op-ed, this one attacking supply-side economics and advocating Krugmanomics.

Voodoo Economics, the Next Generation

But now it looks as if voodoo is making a comeback. At the state level, Republican governors — and Gov. Sam Brownback of Kansas, in particular — have been going all in on tax cuts despite troubled budgets, with confident assertions that growth will solve all problems. It’s not happening, and in Kansas a rebellion by moderates may deliver the state to Democrats. But the true believers show no sign of wavering.

Meanwhile, in Congress Paul Ryan, the chairman of the House Budget Committee, is dropping broad hints that after the election he and his colleagues will do what the Bushies never did, try to push the budget office into adopting “dynamic scoring,” that is, assuming a big economic payoff from tax cuts.

Tim Worstall then wrote this response to The Krug at Forbes.com:

Memo To Paul Krugman; Dynamic Scoring Of Tax Changes Is Not Voodoo Economics

It does rather boggle the mind that a Nobel Laureate economist is against the idea that we should try to estimate the changes in peoples’ activities in response to changes in incentives. Maybe we’re not very good at it, maybe we won’t get the perfectly correct answer. But the core of the whole economics project is that people respond to incentives. So shouldn’t we try to work out how before we change public policy?