Kline and Kansas

In 2010, the voters of the entire state of Kansas made a mistake in who they elected to the office of Governor. In 2011, he came into office and began implementing his policies, in cooperation with a Republican legislature.  The result?  Credit rating agencies like Moody’s took a dim view, per the Wichita Eagle:

Moody’s had Kansas on a “negative” outlook since April of 2011, Jacobson said.

“The state’s ability to impose budget cuts over time may be limited in several areas: by court mandates in K-12 funding, by federal program mandates in Medicaid and by state legal requirements (for) pension funding,” the report said.

By itself, the Moody’s downgrade shouldn’t have too much effect on the interest rates the state will have to pay to borrow money, Kriz said.

However, he said that could change if the other major rating firm, Standard & Poor’s, follows suit.

“When they both go, that’s when markets start bidding down,” Kriz said.

He said both firms have similar rating methodologies, so “It would not surprise me if Standard & Poor’s at least had an eye on the state.”

And now that second credit rating downgrade, referred to above, has taken place.

In 2010 AND 2012, the citizens of CD 2 in Minnesota made a similar mistake.  It’s 2012; we can fix OUR mistake – and so can Kansas.  The mistakes were similar, in terms of electing rabidly ideological candidates who want bad right wing policy and radical right wing-nuttery economic policies.

On August 6th, the credit rating was downgraded AGAIN for the state of Kansas, the red state policy experiment under Gov. Sam Brownback that has been such an epic failure.  What struck me in reading this was how identical the politics and ideology are of both Brownback and Kline.  From KSN:

TOPEKA, Kansas – A second leading bond-rating agency has downgraded its credit rating for Kansas and cited what it calls the state’s “structurally unbalanced budget” following massive personal income tax cuts.

Standard & Poor’s said Wednesday that it is dropping its rating for Kansas to AA from AA+.

At the same time, Standard & Poor’s downgraded Kansas’ annual appropriation-secured debt to ‘AA-‘ from ‘AA’.

“The downgrades reflect our view of a structurally unbalanced budget, following state income tax cuts that have not been matched with offsetting ongoing expenditure cuts in the fiscal 2015 budget,” said Standard & Poor’s credit analyst David Hitchcock. “The negative outlook reflects our belief that there will be additional budget pressure as income tax cuts scheduled in future years go into effect, or if midyear revenue shortfalls resume, although the state recently announced a small positive revenue variance for July.”

Moody’s Investor Services downgraded its credit rating for Kansas in May.

Kansas is the state where a radical right wing legislature in cooperation with an even more radical right wing governor put in place policies like their massive tax cuts.  Sadly, for Kansas, as we already knew, those policies do not work.  Not only is the state government in massive trouble, the state Supreme Court had to FORCE them to spend adequate amounts of money on their state public schools.  Yet this is the same set of policies, written larger on the national level, espoused by Congressman John Kline.

This is not rocket science; that Republican policies do NOT deliver what they promise is pretty much old news.  As noted by the CBPP:

Tax cuts enacted in Kansas in 2012 were among the largest ever enacted by any state, and have since been held up by tax-cut proponents in other states as a model worth replicating.  In truth, Kansas is a cautionary tale, not a model.  As other states recover from the recent recession and turn toward the future, Kansas’ huge tax cuts have left that state’s schools and other public services stuck in the recession, and declining further — a serious threat to the state’s long-term economic vitality. Meanwhile, promises of immediate economic improvement have utterly failed to materialize.

As other states consider large tax cuts, they should heed these key lessons from Kansas:

  • Deep income tax cuts caused large revenue losses.  Kansas’ tax cuts this year are costing the state about 8 percent of the revenue it uses to fund schools, health care, and other public services, a hit comparable to a mid-sized recession.  State data show that the revenue loss will rise to 16 percent in five years if the tax cuts are not reversed.
  • The large revenue losses extended and deepened the recession’s damage to schools and other state services.  Most states are restoring funding for schools after years of significant cuts, but in Kansas the cuts continue.  Governor Sam Brownback recently proposed another reduction in per-pupil general school aid for next year, which would leave funding 17 percent below pre-recession levels.  Funding for other services — colleges and universities, libraries, and local health departments, among others — also is way down, and declining.
  • The tax cuts delivered lopsided benefits to the wealthy.  Kansas’ tax cuts didn’t benefit everyone.  Most of the benefits went to high-income households.  Kansas even raised taxes for low-income families to offset a portion of the revenue loss; otherwise the cuts to schools and other services would have been greater still.
  • Kansas’ tax cuts haven’t boosted its economy.  Since the tax cuts took effect at the beginning of 2013, Kansas has added jobs at a pace modestly slower than the country as a whole.  The earnings and incomes of Kansans have performed slightly worse than the U.S. as a whole as well.  (An exception is farmers, whose incomes improved as the state recovered from a drought.)  And so far there’s no evidence that Kansas is enjoying exceptional business growth: the number of registered business grew more slowly last year than in 2012, and the state’s share of all U.S. business establishments fell over the first three quarters of last year, the latest data available.
  • There’s little evidence to suggest that Kansas’ tax cuts will improve its economy in the future.  No one knows for certain how Kansas’ economy will perform in the years ahead, but it isn’t likely to stand out from other states.  The latest official state revenue forecast, from November 2013, projects Kansas personal income will grow more slowly than total national personal income in 2014 and 2015.[1]

Evidence from other states and academic studies casts further doubt on claims that the tax cuts will cause the state’s economy to boom.  States that cut taxes the most in the 1990s performed worse, on average, over the course of the next economic cycle than states that were more prudent.[2]  And the academic literature overwhelmingly finds that states with lower personal income taxes perform no better economically than their peers.[3]

Kansas’ Deep Tax Cuts Caused Large and Growing Revenue Losses

When states debate cutting taxes, an obvious fact sometimes gets obscured:  deep tax cuts sharply reduce state revenue.

Some tax-cut proponents claim that a state’s economy will respond so powerfully to tax cuts that the state will actually take in more revenue with the tax cuts than without them.  This claim has no backing in the serious economic literature, however.[4]  In truth, there’s no free lunch:  when states cut taxes, they lose revenue.  That’s certainly what has happened in Kansas.
In May 2012, Governor Brownback signed one the largest tax cuts, in percentage terms, ever enacted by a state in a single year.  It included dropping the top income tax rate by about one-fourth and eliminating income taxes entirely on business profits that are “passed through” from businesses to their owners.  (See text box for details.)  The state’s non-partisan Legislative Research Department estimates that Kansas received $803 million less revenue this year because of the 2012 tax cuts and that the cumulative revenue loss will exceed $5 billion by 2019. In 2013 Kansas cut income tax rates again, setting itself on a path eventually to eliminate its income tax entirely — the stated goal of Governor Brownback and his legislative allies.  The 2013 changes also offset some of the near-term revenue loss from the 2012 tax cuts by raising other taxes somewhat.

Not only is Kansas resisting public school spending, which does not tend to result in good educational outcomes, it is exacerbating the already serious problem in that state with wealth and income inequality.

Again from CBPP:

Incomes of Kansas’s Richest Households Dwarf Those of Its Poorest
A Lost Decade for Kansas’s Low- and Middle-Income Households
Inequality Worsening Since the 1970s
The richest 5 percent of households have average incomes 11.9 times as large as the bottom 20 percent of households and 4.3 times as large as the middle 20 percent of households.
After decades of widening inequality, Kansas’s richest households have dramatically bigger
incomes than its poorest households.

Why does this matter? Because poverty and wealth inequality, and radical right wing redistribution of wealth policies, from the middle and lower economic classes to the rich, are bad for health and bad for educational outcomes.

As noted here, back in 2012:

Working America members target John Kline for blocking middle-class tax cuts

BURNSVILLE – If millionaires don’t get a tax cut, then no one gets a tax cut.

That’s 2nd District Congressman John Kline’s stance, and it was the target of workers protesting outside Kline’s Burnsville offices Sept. 12 during a national day of action for tax fairness sponsored by Working America, the AFL-CIO’s community affiliate.

“John Kline voted against extending the Bush-era tax cuts for the 98 percent of Americans in the middle and working classes because those tax breaks for the richest 2 percent would have ended. He would not agree to that,” said Chase Brandau, a Minnesota organizer for Working America.

To drive the message home, Working America member Mike Adair, one of Kline’s constituents, delivered a three-foot-long check from Kline payable to “Millionaires.” The amount payable – $160,000 – represents the average annual tax cut people making over $1 million will receive if Kline’s efforts to extend the Bush tax cuts are successful, according to the National Economic Council.

“We’re here to deliver this check to Rep. Kline as a symbol of what he’s given (to millionaires) at the expense of working people in his district,” Brandau said.

Working America members from the 2nd District said tax fairness and a balanced budget are among their top concerns in this election year.

Ending the Bush tax cuts for the richest 2 percent would raise nearly $1 trillion in revenues over 10 years, helping to balance the federal budget. Extending the tax cuts for 25 million working Americans, meanwhile, would ensure consumers have the spending money necessary to keep the fragile economic recovery on track.

“Money at the top stays at the top,” said Adair, a small business owner and graduate student who lives in Eagan. “You can’t create jobs when money stagnates at the top.”

Voters in CD2 — don’t be fooled again. It’s shaping up that Kansas isn’t going to be making the same mistake either. We don’t want the bad outcomes of radical right wing policies to happen to Minnesota, and we don’t want them to happen to the entire country.  The ONLY way to avoid that is NOT to elect members of Congress like John Kline.

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