Today and Tomorrow

Three quotes.

To cut the tax out on these certain types of income - business income - is an incentive for people to hire more people, and they're going to pay taxes to Kansas. That's the way this is supposed to work.
Leslie D. Donovan, Sr., Kansas State Senate (R - Wichita)

You hire people not based on how much money you have - but based on your business. So it didn't really have immediate help on the business. I didn't really notice any more business purchasing, you know, around here. So didn't really trigger anything to hire more employees.
Alex Harb, United States Small Business Administration's Kansas Small Business Person of the Year, 2014

I'm sorry, it takes people a long time adjust to new a tax code. It takes a long time, and that's why I do all of my work over a decade and look at what the results are over long periods of time which is what a governor should do when he governs or she governs a state. And to expect that to occur in the first year is - is nonsense.
Authur Laffer, Economist, member of Ronald Reagan's Economic Policy Advisory Board, Wall Street Journal columnist

After soliciting the quote from Authur Laffer, NPR's Zoe Chace points out that state governors are not elected for 10-year terms - they tend to have four years to make things happen. Viewed in this light, it's likely that the reason why Sam Brownback is in political hot water, with even prominent Kansas Republicans endorsing his Democratic challenger is that, like most politicians, he avoided framing his policy for what it really was - uncertain. It's a uncertainty where the pain of shrinking state budgets - and the resulting loss of services (and public-sector jobs) was a given and immediate, while the benefit of increased growth - and the revenue from shifted taxes was only a possibility and in the future. While Governor Brownback described what he was doing as an "experiment," what many people heard was "surefire thing," as noted in the quote from state Senator Donovan.

Governor Brownback and Athur Laffer (whom the governor consulted before implementing this plan) are both convinced that Kansas had set tax rates above the optimal level set by the Laffer Curve, and so, given enough time, the money that the state of Kansas is forgoing now will be multiplied in the future. But without having set expectations as to what that time frame would be, and what the interim would look like, the governor is now in the uncomfortable position of either hoping that something unlikely will happen or that the public believes him when he says that the growth is coming any day now (something that even Laffer may disputer with him).

Business people like Alex Harb didn't immediately run out and hire more people in the way that Governor Brownback proposed that they would because businesses are generally reactive. They wait until they're more or less sure that they need to make certain expenditures, and then make them. Which is why Supply-Side economics takes so long to get off the ground - it may help enterprises be ready for upticks in business, but it doesn't do anything to directly stimulate those upticks because it doesn't spur demand for goods and services at the public level. It makes sense to assume that when businesses prepare for the future, the money they put into doing so may result in a modest net increase in employment. That modest number of new workers may, in turn, put pressure on the the businesses they patronize to provide better service, meaning that more new workers need to be brought on. One can see how the snowball effect would work. But the more diffuse the initial preparations are, the smaller the snowball starts. Alex Harb noted that he increased his inventory of iPads at his Ribbit Computers stores with the money that he was no longer paying in business taxes. Which would have kicked off the snowball - were iPads made in Kansas. In a globalized economy, the effects of business investment can easily diffuse completely out of the area they are intended to stimulate, making the snowball even smaller.

The idea that lowering business taxes will link directly to greater hiring is a side effect of a particular tenet of Republican economic orthodoxy - that a lot of hiring is effectively a form of charity and business owners are inherently charitable people. But jobs, more than simply being a way in which people support themselves, are also the way in which things are accomplished - how the goods and services that people need and want are created. Simply allowing businesses to lower their taxes does not increase the level of goods and services that the public needs or wants; or can afford to obtain. Until conservative economics is able to bridge that gap, its experiments are going to fail, brought down by the same unrealistic expectations that created the enthusiasm for them in the first place.