A 19th century economic strategy in a 21st century economy: What could go wrong?

Back in January of 2010, Georgia leaders were advocating additional tax cuts as a way to boost the state economy, even though revenue shortfalls were already forcing layoffs of teachers, police officers and other public employees.

However, leaders of other states were proposing a different course.

In Oregon, for instance, voters had just approved ballot measures that would impose $733 million in tax hikes on businesses and those earning more than $250,000 a year, with the revenue being used to keep teachers in the classroom and police officers on the beat. The Oregon business community wasn’t happy — Phil Knight, the influential founder of Nike — predicted that “There are words to describe what we are doing with (measures) 66 and 67: It is called a death spiral.”

At the time, I proposed that Oregon and Georgia might serve as an informal test case of their respective economic strategies. It has now been almost five years, so let’s check in to see how things are going.

Let’s start with unemployment. Oregon was hit even harder by the recession than Georgia had been, with an unemployment rate of 11 percent in January 2010 compared to 10.4 percent in Georgia. Since then …

stateunemployjp

Georgia’s unemployment rate, which began the test period below that of Oregon, is now almost a full percentage point higher than that of Oregon.

How about economic growth? Did those 2010 tax hikes cause growth in Oregon to flat-line or even go into a death spiral, as Knight and others had predicted?

stategdpjpNot exactly. GDP growth in Oregon in the last four years has averaged 4.05 percent, compared to 1.225 percent in Georgia.

OK, how about median household income? As I noted, the two states were quite similar in 2010. How about now?

statemedianjpAt the time this experiment began, Oregon’s median household income was $330 higher than that of Georgia. By 2013, the differential had increased to $2,422.

Just to be clear, this is hardly a controlled experiment, because such things are impossible in economics. Both Georgia and Oregon have economies in which wood products and housing are major sectors; both are dominated by a single large metropolitan area. But they have more than enough differences to make it impossible to claim a scientifically valid apple-to-apple comparison.

Clearly, however, the predictions of disaster that accompanied Oregon’s decision to protect its education system from the worst ravages of the recession have not come true. Clearly, the simplistic notion that economic calamity follows tax hikes as surely as night follows day is wrong. Quite the contrary.

One more point: Georgia’s conservative Legislature has bought into the claim that we’re being held back by our state income tax. If we lower or even abolish the income tax and replace the lost revenue with a higher sales tax, GOP ideology holds that businesses will flock into the state. Maybe, maybe not. It’s worth pointing out that Oregon has no sales tax, and its income tax is considerably higher than that of Georgia, topping out at 9.9 percent on income above $125,000. Yet somehow it’s doing OK.

In addition, we know for an absolute fact that lowering the income tax in favor of a higher sales tax would constitute a major tax break for wealthier Georgians and a major tax increase for lower-income and middle-income Georgians. We also know that even without such a change, Georgia’s state and local tax system is already heavily skewed in favor of the affluent.

To document that fact, let me throw one more chart at you:

taxstructjpIn Georgia, the lowest-earning 60 percent of households already pay almost twice as much of their income in state and local taxes as do the richest 1 percent, which at the time the data above were collected meant those with income of $433,000 and above. The long-term Republican tax strategy is to make that differential even larger, on the theory that it will eventually trickle down to the rest of Georgia.

In effect, we insist on applying a 19th century economic strategy to a 21st century economy, and then wonder why it doesn’t work.

Reader Comments 0

616 comments
einhard
einhard

As usual, the argument is skewed by Bookman’s partisan bias. More meaningful indices of economic well-being paint a different picture. Oregon’s employment-population ratio is the lowest in the pacific region and falling, while Georgia’s ratio is among the highest in the region and rising (http://www.bls.gov/lau/maps/aastep.pdf). Georgia is a leader in economic growth, while Oregon is at the bottom of the heap (http://www.bea.gov/newsreleases/regional/gdp_state/2014/qgsp0814.htm). The tax increases needed for Jason Carter to raise an extra billion dollars for education would kill the economic growth we are now seeing.

WGA1990
WGA1990

Interesting, while Kyle disclaimed his intention to do so, his current topic pretty much blew away Jay's contention utilizing the above Georgia/Oregon comparison that post recession high tax states are economically outperforming low tax states. He also pointed out that for all of the talk Georgia hasn't really lowered taxes.

woodscritter
woodscritter

Anyone else notice how far off-topic all the wingnut responders are on here?


They can't come up with any intelligent response to the facts, so they gotta try to deflect the discussion.


Pathetic.

breckenridge
breckenridge

Oh wow.  I see the stupids showed up in force this evening. 

td1234
td1234

Has the ss become so disillusioned by Obama that they have went from protector and turned into the Praetorian Guard on the eve of the Idus Martii

US_Patriot
US_Patriot

This is too funny, not even the SS are trying to protect POTUS:


From the AJC: 

Report: Armed contractor with criminal record was on elevator with Obama at CDC

td1234
td1234

@US_Patriot I have been wondering if what you just said might actually be true or is it just a conspiracy thinking on my part.  

poegoe
poegoe

Now Ebola is discovered in the US from a person travelling here from Liberia. Other countries are banning traffic from the effećted regions and Obama is doing nothing to protect the US. Just imagine what is coming across our southern border. Never mind the terrorists that have probably already crossed there. This is a matter of an immediate and known threat to our public health and what does Obama do? Nothing. Perhaps he hopes it will escalate and that he can somehow gain political points from trajedy. Rham taught him well. Never miss the political opportunity to be gained from a crisis. People such as himself will sacrifice anyone if they can stoke their ego. And Obama is all about his egomania.

WGA1990
WGA1990

@poegoe 

Well now Obama and his family's protected but in his ideological commitment to political correctness the nation won't be.

WGA1990
WGA1990

And there's Julia Pierson the first female head of the secret service with a nondescript resume of accomplishment. So, political correctness rules in this pathetic Obama administration even to the extent of compromising national security.

BSNBC
BSNBC

They should guard the White House with about the same effort as the border!

tireOfIt
tireOfIt

Why does the GOP support  Rick Perry who  allowed Ebola in Texas/USA?  

Moderate_line
Moderate_line

Interesting to note according to the same Source that Jay uses Georgia is about average for states in terms of how regressive their takes are. For example the average for the lowest 20% is 11.1% while  Georgia at 11.3. The top 1% average is 5.6 while Georgia is 4.9.


There are 12 states which have higher tax burdens on the lowest 20%.



http://www.itep.org/pdf/whopaysreport.pdf


Infraredguy
Infraredguy

When Bookman had a real job and was on the AJC payroll, he was employed by a " poor " Anna Cox Chambers so much for saying the rich don't pay their " fair share " I never was employed by a " poor " person

The-Centrist
The-Centrist

@Infraredguy 

There are a lot of dumb right wing themes out there, but this is one of the worst.

That rich guy employed you, redguy, because he sold his products to the middle class.  If the middle class doesn't have the money to buy the product you produce, you will be out of a job.  The wealth of your employer is totally irrelevant.

blah blah blah
blah blah blah

Where did all of Jay's troll-bots go???  I'm going to do an obama: Top Golf here I come...

LeftisnotRight
LeftisnotRight

Obama's golfs and golfs and golfs and golfs........

blah blah blah
blah blah blah

@gotalife intelligent briefings are important which he only attended 40% while the world burns...

LeftisnotRight
LeftisnotRight

Obama....more time on the golf course than going to meetings meant to inform him on what is going on....

gotalife
gotalife

Just tell the truth and stop attacking voting rights and let America vote.

Enoch19
Enoch19

Obama bombs Iraq and Syria and it's crickets from Jay.  


More of his crappy charts instead.  Yawn. 


As usual he is all about how smart he is and how stupid everyone else is.  Bookman is boring.

T2T
T2T

So Jay is suggesting we adopt Keynes economic strategy? Have the State tax a lot and spend a lot.  What century did that come from.

Paul42
Paul42

@T2T

You may want to read up on Keynes before posting further - 

ThulsaDoom
ThulsaDoom

@T2T


I would suggest Hayek instead for jay and the rest of the kooks. We'll start with The Road to Serfdom. Then a heavy dose of Milton Friedman. Then a little dash of Ludwig von Mise, then some Allan Reynolds. Gradually we'll help the kooks get they minds right. And for the humor part of the curriculum we'll throw in some Emmanuel Saez and Thomas Piketty.  

CommonSenseisntCommon
CommonSenseisntCommon

@Normd 

Give them the right to vote and next thing you know they will want to get paid like the menfolk LOL

ThulsaDoom
ThulsaDoom

Stands for decibels,


Enough with the grandstanding about the woman's unfortunate death. She died because a can of gas tipped over and she died of monoxide poisoning. She didn't die because her body just gave out over long hours. You progs are such lazy arses and excuse making whinery machines. It was her choice to work a lot of hours to get caught up or get ahead, which a lot of us do. And as the math shows she should easily have been able to live on 60 hours a week, which is no big deal. If she was behind on rent she was probably just working like crazy to catch up and get ahead. The bigger story would be how she came to be behind on her bills to begin with so it doesn't seem like we're getting the full story. Its just another emotion based story to tug at the heartstrings of outraged progs. And btw did you know that in the 1800s the average work week was 70 hours and at the start of the 1900s the average person still worked 60 hours a week. The new 35 to 40 hour work week is a phenomenon that's very recent in the course of human history. And yet you guys still whine.Heck, its the only thing you guys do well. 

ThulsaDoom
ThulsaDoom

@gotalife @ThulsaDoom


Naw. Just sick and tired of you lazy, sorry progs who think everything is a travesty. Lord knows don't hardly any of you have a dang job. People like you and stands are on here everyday all day. What ya'll need is a dang J- O- B. 

DownInAlbany
DownInAlbany

A federal judge in Oklahoma has ruled that Obamacare subsidies cannot go to residents of states that are not running their own insurance exchanges, a second blow to the Obama administration on a issue that threatens a key element of the health law’s coverage expansion.

Judge Ronald A. White said that the administration’s decision to allow subsidies to go through either a state-run health insurance exchange or the federal exchange is an improper and invalid reading of the Affordable Care Act and must be struck.

White’s ruling marks the second judgment against the government on the subsidy question and comes as the Supreme Court could decide whether to weigh in.

“The court holds that the IRS rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law,” White wrote in his ruling. The IRS had allowed people to get subsidies in all states.



Read more: http://www.politico.com/story/2014/09/judge-rules-against-white-house-on-affordable-care-act-111474.html#ixzz3Epg3IQIv

This, I'm sure, ends up in the SC, but...

blah blah blah
blah blah blah

@Nobody_Knows  whats wrong you lonely??? 

See his comments???  What comments???  One line talking points???  He's not obama nobody..

ThulsaDoom
ThulsaDoom

@DownInAlbany


The IRS is arbitrary, capricious, and abusive with its power? And we now have the understatement of the year. 

StraightNoChaser
StraightNoChaser

@DownInAlbany subsidies cannot go to residents of states that are not running their own insurance exchanges....How is a set back for the average American a win for the Republicans?  I just can't wrap my head around your logic.  Average Americans have to pay more and the Republicans are celebrating versus fixing the problem of over priced insurance policies and co-insurance pre ACA.  ACA is not going any where so my question to you once Republicans dismantle it piece by piece is what?  What is the republican solution to healthcare overhaul in this country?  Do you really think that us against them is going to win a presidential election in this country?  What is your plan?  Please do not feed me that let the health insurance industry take care of itself BS because it was a run away train prior to ACA.

DownInAlbany
DownInAlbany

@StraightNoChaser ....How is a set back for the average American a win for the Republicans?

I simply posted a link.  My only comment was, that I am sure that it will end up in the SC.  I'm not celebrating anything.  I have said many times...as a healthcare finance guy, I wish EVERY citizen had insurance. 

Otherwise, your rant was a classic lib meltdown.