Republican Governors Are Associated with Lower Rates of Growth

May 13 2011 Published by under Uncategorized

Difference between Individual State and U.S. Average Growth Rates, 1947-1997

Days after it was discovered that Wisconsin isn’t really broke at all (they are actually enjoying economic growth), a new study suggests that state spending has a positive impact on growth, while Republican governors are associated with lower rates of economic growth.

Tulane University economists James Alm and Janet Rogers of Nevada’s Department of Budget and Planning tracked 50 years of data on the impact of state tax and spending policies, from 1947-1997 in a study entitled “Do State Fiscal Policies Affect State Economic Growth?”

They found states that spend more have more economic growth than states than tighten their budgets.

Republican governors are pushing fiscal miserliness in some areas while spending wildly in others, all the while preaching about the need for “shared sacrifices”. Republicans want to cut taxes for businesses, claiming that will create growth, but the Tulane study says that tax impacts are quite variable, while expenditure impacts are more consistent.

The Tulane study differs from many other similar studies in that “it examines annual data over a longer period than most other studies, it includes a much more comprehensive collection of explanatory variables, and it addresses the measurement errors inherent in per capita income data.”

They conclude, “…there is strong evidence that a state’s political orientation, as indicated by whether the governor is Republican or Democrat, whether the state has enacted tax and expenditure limitation legislation, and whether the state frequently elects a governor of the same party as the incumbent, have consistent, measurable, and significant effects on economic growth. Perhaps surprisingly, having a Republican governor is associated with lower rates of growth.”

Don’t expect Republicans to change their tune, though, since their current agenda was never about the fiscal emergencies they claimed were prompting their cutting of education and killing of collective bargaining. In Wisconsin, The Wisconsin State Journal reported:

A potential $636 million boost to the state’s coffers the next three years has Republican leadership at the Capitol optimistic about the future but wary of changing course during the ongoing budget debate.

The nonpartisan Legislative Fiscal Bureau on Wednesday released a revised estimate of state tax revenues showing Wisconsin collecting an additional $233 million this fiscal year, $204 million the next year and $199 million in 2012-13.
Officials with the agency said the increase is likely due to an improving economy, a stronger stock market and higher business profits….

But on Wednesday Walker said he intended to use the additional funds to continue paying off state debt…“We are going to do what families have been doing all across Wisconsin,” Walker said. “We are going to pay our bills.”

Walker is not only going to kill growth in Wisconsin but he has no intention of reversing any policies he based upon the supposed economic emergency he previously claimed as justification for his miserliness toward the people. But Walker and his Republican governor posse have plenty of money for tax breaks for corporations. Guess what?

“Corporate income taxation is represented as a per capita amount, as a percent of income, or as a percent of total tax revenue. It might be expected that greater reliance on the corporate income tax would have a negative effect on economic growth. However, the coefficient on rvTXINCcor is never significantly negative, and is frequently significantly positive at conventional levels, especially in regressions E, F, and G.” (see study for breakdown of factors)

Corporate income taxes do not depress economic growth. There isn’t a negative relationship between corporate taxes and economic growth. Also, revenue appears to be a good thing for growth. Modern day Republicans should really investigate this notion.

Governor Walker of Wisconsin is perhaps the modern day poster boy of Republican governorship. Walker’s fiscal approach is based on the ideology of serving corporations, not on real data regarding growth. There are several other Republican governors joining Walker in the growth failure boat; Rick Scott and Rick Snyder come to mind immediately.

The red states that have voted in Republican after Republican are lagging in economic growth but still so steeped in Teapublican ideology that they keep mouthing the same failed notions of a fiscal jingles that they themselves fail to live up to. It’s about time these red states pulled themselves up by their own bootstraps and stopped relying on the rest of us to bail them out from their bad economic decisions.

Let’s see. In the past few years, we’ve learned that National Republicans are not so great at fiscal conservatism but have morphed into corporate whores who don’t believe revenue is part of a balanced budget. Then, in the past week, we’ve learned that Republicans are not the masters of national security; a Democrat got Osama bin Laden. And now, we learn that Republican governors are bad for growth.

All in all, this is a bad, bad time to be a Republican. But you probably already knew that from looking at their 2012 field.

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