Posts Tagged ‘Reaganomics’

Let’s Hear it for Reaganomics!

Wednesday, November 5th, 2014

Republican governors bankrupt their states, steal from children, injured workers, retirees

By Mike Andrew

Remember Reaganomics? You know, cut taxes for the rich and money will somehow “trickle down” to working people. A nice story, but it just doesn’t work out that way. In fact, Reaganomics is a disaster for working families.

The sorry record of Republican governors who came into office in the “wave” election of 2010 lays out the real-world consequences of Reaganomics for the whole world to see. And it’s not pretty.

Kansas governor Sam Brownback, for example, swept into the governor’s mansion with supermajority Republican backing in his state legislature and promised a “real live experiment” in Republican governance.

Advised by Arthur Laffer, the father of supply-side economics, and supported by billionaire brothers Charles and David Koch, Brownback pushed through legislation that slashed taxes and spending, eliminated state jobs, and cut back on public assistance.

Brownback promised that this policy would drive economic growth, create jobs, and stabilize the Kansas budget. But the state is now reporting a revenue shortfall of more than $300 million. The poverty rate has increased, while the state’s economy expanded only 2.3% over the past two years, half the rate of its four neighbors. And Kansas’s credit rating has been downgraded, as investors doubted that the state could meet its obligations.

According to the Center on Budget and Policy Priorities (CBPP), other states have been able to reinvest money in key programs like education as the economy has recovered and revenues have bounced back. But Kansas has been moving in the opposite direction.

Schools, for instance, have suffered a reduction in per-student K-12 funding. In 2008-09, Kansas spent $4,400 in base state aid per pupil. Last year, it was $3,838, according to the Kansas Legislative Research Department.

“The tax cuts made it very difficult for Kansas to recover from the recession in terms of school funding and funding for other services,” said Michael Leachman, director of state fiscal research at CBPP. “In most states, school funding per pupil is up.”

Brownback is not the only Republican governor to wreck his state’s economy.

New Jersey governor and Republican presidential hopeful Chris Christie has consistently refused to raise state income taxes, and, in 2012, he slashed state payroll taxes.

The immediate effect was to defund the New Jersey Temporary Disability Insurance fund to the tune of $190 million per year, putting injured state workers in jeopardy of losing their disability incomes. The long-term effect was to plunge New Jersey into a series of budget crises and to wreck the state’s credit rating.

New Jersey’s credit rating has been downgraded eight times since Christie was inaugurated in 2010. Among US states, only Illinois is in worse shape. In fact, New Jersey’s credit has been downgraded twice this year alone.

The first time, Standard and Poor’s rating agency downgraded the state’s credit in April, followed by Moody’s and Fitch Ratings in May, after the governor announced an $807 million hole in his budget.

Fitch downgraded the state’s rating again in September after Christie said he would try to to plug the budget gap by cutting $2.4 billion in funding for the state’s already strained pension system. In other words, the governor is willing to rob state workers of their retirement funds to keep taxes low for his wealthy allies.

Fitch said Christie’s decision to cut the pension payments this year marked a “repudiation” of a bipartisan plan he signed to fix the retirement system for public workers, which is underfunded by nearly $40 billion, according to state estimates.

Instead of pumping bigger cash infusions every year into workers’ retirement accounts to save them from collapse, as Christie agreed to do in his first term, New Jersey is now stepping away from its plan, Fitch warned.

“New Jersey benefits from a wealthy populace and a broad and diverse economy,” Fitch wrote. “However, the state’s economic performance has lagged behind the nation in recovery from the recent recession, with improvement in 2013 trailing off at the close of the year, and very slow year over year … employment growth continuing through 2014.”

But wait, that’s not all!

Ohio Gov. John Kasich sliced personal income taxes by 10% and compensated by raising the sales tax. At a time when 32% of the residents of Ohio’s eight largest cities live below the poverty line, according to the Ohio Organizing Collective, Kasich wants to shift more tax burdens on to the poor, who have to pay out a larger proportion of their incomes in sales taxes than in income taxes.

And these guys were supposed to be the fiscally responsible ones!