Monday, February 9, 2015

Bobby Jindal: "Shrinking government was the goal, not an unfortunate side effect"

One of the ironclad, universal truths in conservative economics is that tax cuts always lead to more revenues. Unfortunately, in the world of reality, it doesn't always work out that way. And by "doesn't always" I mean "almost never". Tax cuts did not lead to increased revenue in what was formally the great state of Kansas, nor did it happen in other states such as Wisconsin, Maine and Louisiana.

The current financial situation of that last state in particular, was the subject of a New York Times piece over the weekend. It detailed how Louisiana's Republican governor, Bobby Jindal, and his extreme right-wing legislature, helped put the state into the situation it's currently in.

“Since I’ve been in Louisiana I’ve never seen a budget cycle as desperate as this one,” said Robert Travis Scott, the president of the Public Affairs Research Council, a nonpartisan group based in Baton Rouge.

Louisiana’s budget shortfall is projected to reach $1.6 billion next year and to remain in that ballpark for a while. The downturn in oil prices has undoubtedly worsened the problem, forcing midyear cuts to the current budget. But economists, policy experts and lawmakers of both parties, pointing out that next year’s projected shortfall was well over a billion dollars even when oil prices were riding high, turn to a different culprit: the fiscal policy pushed by the Jindal administration and backed by the State Legislature.

Class, can anyone guess what fiscal policies Jindal and his ilk tried to push?

Mr. Jindal’s first term began in 2008 with a heady surplus of around $1 billion, high oil prices and a stream of federal disaster recovery money after Hurricanes Katrina and Rita in 2005. He threw his support behind the largest tax cut in the state’s history and, for a time, had reason to boast about an economy that outperformed the nation’s. But oil prices are fickle, and the recovery money dried up and the recession arrived, if late and in a milder strain than in other states. Since 2010, here as elsewhere, middling has been the new normal.
“The underlying economy has been weaker or more sluggishly growing than we might want to believe,” said Greg Albrecht, the chief economist for the Louisiana Legislature, ticking off a list of metrics that are not picking up steam, including total payroll employment growth and personal income tax receipts.

Well I never would have seen that coming.

As you would probably guess if you knew anything about the Republican Party by now, Jindal has refused to consider reversing his tax cuts and any other tax hikes, instead opting to plug the budget hole he helped create by cutting government services:

With revenues limited, Mr. Jindal has turned to privatization and cuts to balance the budget, commended by some policy experts as corrections to a bloated government and roundly condemned by others as shortsighted.'

Louisiana’s higher education budget, one of the few discretionary targets, has been slashed by more than just about any other state since 2008; there are a thousand fewer full-time college faculty members on the state payroll, and next year Louisiana State University, the state’s flagship institution, is facing a potential 40 percent cut in its operating budget. Possible cuts to health care for next year, when compounded by the loss of matching federal dollars, could approach $1 billion.

Now, none of this is really surprising in the least. But what was surprising was the following comments from Jindal:

In a telephone interview, Mr. Jindal defended his record, attributing “the vast majority” of the shortfall to the downturn in oil prices and insisting that a shrunken state government was the goal, not an unfortunate side effect.

“We made an explicit decision and commitment that we were going to cut the government, the public sector economy, as opposed to the private sector economy,” he said, adding that per capita income in the state is at its highest. “We made the intentional policy decision we think it’d be better to shrink government and cut taxes. That’s unusual for Louisiana.”

Well, isn't this interesting? Everyone knows Republicans want to shrink government, but there was always this weird disconnect where they also seemed to argue that there would never be a need to shrink government because supply-side fairy dust would result in more than enough revenue to pay for everything. And yet here's Jindal giving the game away.

This is someone who thinks he has a shot at becoming president, by the way.

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