Bernie Koch runs the Kansas Economic Progress Council, which studies the state’s economy and makes proposals to stimulate growth. In a press release Monday, Koch took a look at the effect government austerity was having on the recovery. He wrote:
“Private sector job growth in Kansas is being canceled out by government job cuts. Overall employment was down 400 jobs from July of 2010 to July of 2011, according to the latest Kansas Department of Labor employment report. That’s down 0.4 percent.
“However, private industry grew 1,300 jobs, while there were 1,700 fewer government jobs. Some quick calculating shows that if Kansas had not reduced those government jobs, we would have had employment growth instead of decline, nearly 1 percent growth over the past year.’
Koch prefaced his report on the Kansas situation with comments made on the Internet by Gavyn Davis, a British macroeconomist, investment executive and visiting professor at the London School of Economics.
Davis blames government budget cuts for weakening demand in world economies and singles out state and local government budget cuts in the United States as examples.
“In the United States,” Davis wrote, “there has been a lot of focus on the fiscal policy of the federal government, which has barely changed this year compared to last, but in fact the main change in the fiscal stance this year has come from expenditure cuts by the state and local government sectors.
“This has tightened overall fiscal policy by about 1 percent of GDP in the first two quarters of the year. In Britain, fiscal tightening has been at about 2 percent a year and in peripheral Europe the austerity program is now much bigger than that.
“A year ago, we knew that the era of fiscal easing has ended in the developed world, but the extent of the tightening which has occurred in 2011 has come as a surprise. Governments have responded to any form of financial trouble by tightening the near term fiscal stance, while failing to address their long term sustainability problems.
“This, according to almost all economists who have written on the subject, is precisely the wrong way around, but that has not stopped them. It now seems most unlikely that this trend will be reversed, short of a second leg of recession.”
TO TRANSLATE FROM professorese, Davis thinks slashing spending at the state and local levels is killing economic recovery. The Kansas Department of Labor report bears him out. The jobs gained by the private sector in Kansas are canceled by those lost by state and local government budget tightening.
To brighten this picture, Kansas and the other 49 states should solve their budget problems by increasing revenue and then hiring more workers to build roads and bridges and make other improvements that will make their economies stronger. Following this course of action — a decision that would be applauded by most economists and business leaders — would boost the general economy and re-start the recovery.
To get there from here would require a combination of tax increases and a reduction of tax exemptions. Those initiatives would be ritually opposed by those who will proclaim at the top of their voices that increasing state revenue would kill jobs. They will not offer a jot or a tittle of evidence to prove that claim.
It is very clear that hiring more state workers would put more money into the Kansas economy and reduce unemployment. That’s a given. That raising the revenue to pay those workers would harm the state economy cannot be proved by any historical example. The last tax increase at the federal level of any size occurred in the early 1990s under President Clinton and was followed by a decade of extraordinary economic growth and the first balanced budgets since Eisenhower.
Raising taxes and reducing tax giveaways to balance budgets and stimulate economic growth at the state and local levels would put the people’s money to work in their own communities where they can see and control the results and would help jump-start the nation’s economic engine.
Let’s do it.
— Emerson Lynn, jr.
