Who remembers the “Anyone, anyone?” scene from Ferris Bueller's Day Off, where the dry civics teacher, played by Ben Stein, walkes students through the history of supply-side economics? (If you’re drawing a blank, you can watch the clip here.)
At the end of the scene, Stein asks the barely-conscious class what Vice President George H. Bush called the idea that if you cut taxes sharply enough, you can generate huge amounts of economic activity and thereby keep revenue rates steady. Do you remember the answer? The answer is “voodoo economics.”
Coming full circle from 1986, I had an economic voodoo experience of my own today. On one computer screen, I was reading the NC Senate budget, with continued cuts to state revenue and unrealistic revenue projections. On the other, an article from Politico, detailing how Kansas Governor Sam Browback is instituting an emergency sales tax in his state to rescue the economy there from the most extreme attempt to implement supply-side policies in recent history. (It has been, even by the Governor’s own admission, a complete disaster.) So, what do the two have in common?
Let’s call it the voodoo connection.
If you haven't been keeping up with the disastrous ordeal in Kansas, here's the quick summary: In a misguided effort to boost his state's fortunes, Gov. Brownback and the conservative legislature in Kansas passed a budget that slashed taxes but only moderately cut spending. The hope was that by slashing taxes, businesses would invest, create jobs, and grow the economy, thereby keeping the state's finances in check.
It hasn't worked out that way. As The Atlantic described in an an appropriately titled article Kansas's Failed Experiment:
Kansas's budget has for months resembled a wallet with a hole in it—every time the state's bookkeepers peek inside, they find less money than the government thought would be there. Just a few days after the November election, the Kansas budget office revealed that revenue projections were off by more than $200 million, bringing the budget gap facing Brownback to $600 million in all.
The yawning deficit is widely blamed on the deep income tax cuts that Brownback, along with a Republican legislature, enacted during his first two years in office. They not only slashed rates, but more importantly, they created a huge exemption for business owners who file their taxes as individuals. By Brownback's own description, the tax plan was a "real live experiment" in supply-side economics, with the idea being that lower taxes would spur investment, create jobs, and refill Kansas's coffers through faster growth. Yet even under the most charitable analysis, revenue has plummeted much faster than the economy has expanded.
The problem for us here in North Carolina is that Governor McCrory and the conservative-led General Assembly seem to be big Brownback fans. We have been moving in the direction of cutting taxes for the magical unicorn of economic growth for the past few years. The argument has always been that if states like Kansas are doing it, we can't be left behind. But now that we know how Kansas’ economic performance has failed to live up to the promises made by Governor Brownback and his legislative allies, are we really going to try the very same economic approach and expect to see a different result?
But maybe all is not lost. As Ferris Bueller himself said, "Only the meek get pinched. The bold survive." Perhaps someone at the NCGA is an experienced voodoo practitioner and knows how to summon the dark spirits of Ronald Reagan and Arthur Laffer (who isn't even dead yet) to make these numbers work in the spirit word.
Which would, of course, be great, because we will need the help of spirit world to get this budget to work in the real word.