busy beaver25 Dec 2005
Mark Rose presents proof that the Bush tax cuts helped state governments:
Here’s another outcome from President Bush’s tax cuts that the left abhorred:
After battling red ink for the past few years, state officials are watching their revenues increase to create budget surpluses, a development some analysts attribute to the financial growth caused by the tax cuts signed into law by President Bush in 2003.
Unfortunately when you follow the link, you learn that the only real data is the NASBO’s survey of states, which noted that fewer states in 2005 had to scale back their budgets. Of course, the NASBO made no such correlation-equals-causation fallacy as to associate that with the Bush tax cuts. For that sort of nonsense, we have to go to the old Republican fallacy-generating standby, the Heritage Foundation, whose “senior fellow”, Dan Mitchell, says:
“there’s no question state government finances are very, very closely tied to the health of the national economy.”
There’s no question, Mitchell said, that the 2003 federal tax cut passed by Congress and signed by President Bush “had a very good effect on the economy.” State governments, he said, “are benefiting immensely, albeit indirectly,” from the $350 billion tax relief package.
Indirectly. Right. The tax cuts were enacted two years ago. Two years during which governments had to, you know, deal with the shortfalls in revenues by shrinking budgets and cutting services. But, as usual, the CBPP says it better than I ever could:
Despite recent reports of rapid state revenue growth and surpluses in some states, most states continue to feel the after-effects of the fiscal crisis. The spurt of current growth is occurring following several years of falling or stagnant revenues. During those years, states cut back on services, drew down rainy day funds, enacted temporary revenues, and used an array of fiscal gimmicks. As a result, state fiscal conditions today are weaker than they were before the last recession.
The current high revenue growth is taking place from a substantially depressed base; the rapid growth is more an indication that revenues have not yet returned to their normal levels than it is of strong fiscal conditions. State revenues remain below what would be required to support the pre-recession level of services states provided.
Analysis shows that state revenues would have to grow by more than 9 percent per year between now and 2008 in order to generate enough funds simply to restore the level of services that prevailed in fiscal year 2000, before the recession.
A budget “surplus” also can be a misleading indicator of whether or not a state’s fiscal situation is strong. Mid-year surpluses occur when revenues come in stronger than the state estimated when the budget was enacted. A state that at budget time cut important services in order to bring its expenditures into balance with what later turned out to be an overly-conservative revenue estimate would still show a mid-year surplus.
There’s more at the link, including actual data and analysis, rather than speculative correlation.