By Robert Mann
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on February 06, 2015 at 11:36 PM, updated February 07, 2015 at 10:43 PM
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Come on, conservatives, I dare you. If there ever was a time when Louisiana’s supply siders should enact their economic theories, it is now. Louisiana faces a devastating $1.6 billion budget shortfall in the coming fiscal year. Tumbling oil prices are partly to blame, but the state’s predicted revenue shortage before oil prices collapsed was a whopping $1.4 billion.
Louisiana government badly needs more revenue, and anti-tax conservatives like Gov. Bobby Jindal have preached for years that the surest way to stimulate the economy (and produce more revenue) is to slash or eliminate taxes.
So, why is it that when Louisiana faces its most serious budget crisis in a generation Jindal and legislative Republicans chicken out? Why won’t they put their tax cuts where their mouths are?
If they really believed that slashing income and corporate taxes supercharged the economy, wouldn’t this be an auspicious time to enact their theories? If trickle-down economics worked like Jindal and so many Republicans insist, then why aren’t we doing it now?
Could it be they know what serious economists have understood for years — supply-side economics is a fraud.
To his credit, Jindal did propose what he claimed was a revenue-neutral plan to eliminate the state’s personal and corporate income taxes in 2013. The plan didn’t survive the first day of that year’s legislative session. Some of the opposition sprung from Jindal’s proposal to increase state sales taxes by 50 percent. The whole plan was poorly conceived, clearly not revenue neutral and foisted upon lawmakers with little input.
The fact remains, however, that when economic conservatives in the Legislature had the chance to implement trickle-down economics, they lost their nerve. They blinked because they feared it wouldn’t work. Republicans seemed to say, “It makes for a nice theory, and it’s useful when attacking Democrats, but don’t expect us to enact this crazy idea.”
Legislators in Kansas were not so sensible after that state’s Republican governor, Sam Brownback, proposed a series of bills in 2012-13 to slash state taxes. The result? State revenue collections collapsed. It’s now so bad in Kansas that Brownback and Republicans are pushing tax increases to preserve critical services.
Anyone with a passing knowledge of recent American history would have known that Brownback’s plan would flop. President Ronald Reagan persuaded Congress to enact his supply-side tax cuts in 1981. A few short years later, as the federal budget deficit ballooned, Reagan reversed course and raised taxes.
In Louisiana, a large portion of our current budget shortfall is precisely because Jindal and legislators slashed income taxes in 2008, blowing an annual $300 million-plus hole in the state budget. They have also given away hundreds of millions more in dubious tax exemptions and credits to corporate interests.
Sensible legislators are now talking about ways to increase revenue — not by cutting taxes, but by eliminating or suspending some tax credits. Jindal will oppose this, of course, because staying pure on tax policy — and, thereby, not offending Republicans caucus goers in Iowa — is far more important than a sound fiscal policy for Louisiana.
But don’t expect all conservatives to give up on supply-side economics. Somehow, the idea persists that slashing taxes always supercharges the economy, resulting in more government revenue. Just last month, Republicans leaders in Washington instructed the Congressional Budget Office to begin adjusting its revenue forecasts to account for the purported economic stimulus of tax cuts.
Back in Louisiana, despite ample evidence that his economic policies have not produced enough revenue to balance the budget, Jindal continues to brag about an economic miracle, which he partly attributes to his 2008 income tax cut. Job growth is real, but Jindal’s budget is a disaster largely because he slashed one significant source of revenue — income taxes — that rapidly responds to economic growth.
Jindal’s economic medicine was budgetary poison and, like the economic snake oil salesman he is, he continues peddling his worthless elixir. And like most charlatans, Jindal won’t take his own medicine. If Jindal believed in supply-side economics, he would keep fighting for it. Instead, he made a half-hearted attempt and, after legislators rejected his plan, he never again pushed the idea.
Jindal won’t propose cutting taxes because he knows it will not produce any new revenue. But he will continue preaching the gospel of tax cuts to Republican voters in Iowa and South Carolina because he believes it will produce him new votes.
So far, at least, GOP voters in the early primary and caucus states can see for themselves Jindal’s disastrous management of Louisiana’s budget. Tax cut orthodoxy or not, it’s easy recognize that Jindal not only lacks the courage of his convictions; he hasn’t a clue how to balance a budget.
Robert Mann, an author and former U.S. Senate and gubernatorial staffer, holds the Manship Chair in Journalism at the Manship School of Mass Communication at Louisiana State University. Read more from him at his blog, Something Like the Truth. Follow him on Twitter @RTMannJr or email him at [email protected]