Kansas Tries to Shrink Its Way to Prosperity

[MachineGhost]

Sadly, it looks like Tea Partiers are simpletons of economic thought decades behind the times.

A little more than a year has passed since the first phase of the Brownback tax cuts went into effect on Jan. 1, 2013, so it’s possible to make a preliminary assessment of their effects. The early verdict: not too good. The jury is still out on whether lower taxes will stimulate businesses to expand and hire over the long term. But the immediate effect has been to blow a hole in the state’s finances without noticeable economic growth.

http://www.businessweek.com/articles/20 ... udget-cuts

[clacy]

Speaking as a new Kansas resident.....

One year is way to early to judge one way or another but I will say this:

Kansas is in direct competition with Missouri for businesses and residents in the Kansas City area.  The KC metro is split between both states.  Recently there have been many initiatives including reduced taxes for business owners.  Missouri is pretty much a "purple state" because of the Kansas City and St. Louis (more red in outlying areas and pretty blue in KCMO and St. Louis proper).

As to the KS vs MO competition in the Kansas City area, it's really a bloodbath with Kansas "winning easily".  The City of Kansas City Missouri is very typical of the dying cities that are scattered throughout the upper Midwest and rustbelt states. The infrastructure is decaying rapidly, while the Dems in charge of KCMO push for a lightrail to be built at massive expense.  (KC is far too spread out for this type of transportation to work, IMHO).  Violent crime is very high on the Missouri side, whereas violent crime is virtually unheard of in KS. 

All the growth and prosperity is and has been for decades, moving to Kansas from Missouri (in the KC metro). 

The Johnson County Kansas suburbs have some of the best school districts in the country, while the Kansas City, MO public schools are unaccredited.  That means they are so bad that the State of Missouri revoked their credentials.  If you graduate from a KCMO public high school, you literally have to get your GED in order for universities to recognize you have a HS diploma.  The KCMO public schools have been run by liberal Dems for decades and the results show.  In fact, it's a topic that would make a great case study for white flight, as the tax base has fled KCMO in favor of the Kansas suburbs for decades, as the KCMO public schools descended into chaos. 

Anyway, I've lived on both sides of the state line and I can assure you that there is a stark difference in quality of life, schools, crime, etc.  Now that I have kids, it's a no-brainer on which side to live.

I can't say that's entirely because of politics, because demographics obviously has something to do with it, but for me there certainly is a case to be made that the more conservative political choices Kansas has made have led to a much more desirable area to live relative to the more liberal policy minded Missouri side.

[barrett]

Clacy, what are state tax rates like in Missouri versus Kansas?

My initial thought when I read the article was that I pay so much more in federal and real estate taxes than I do in state taxes that I would really have to be looking to live in a state for a long time in order to take the state tax rate into account... unless there was a huge difference.

[clacy]

Clacy, what are state tax rates like in Missouri versus Kansas?

My initial thought when I read the article was that I pay so much more in federal and real estate taxes than I do in state taxes that I would really have to be looking to live in a state for a long time in order to take the state tax rate into account... unless there was a huge difference.

Without getting into the weeds of the lower income brackets, let's take an example of someone earning $50,000/yr, which puts you in the highest bracket in both states.

It's 4.9% in KS and 6% in Missouri  *The City of KC Missouri also has a 1% income tax, so that's relevant to the discussion of the economic war that rages between KS and MO. 

Anyway, I would say that tax rate didn't really contribute much to my decision to move from KCMO to Kansas.  It had more to do with schools, crime, infrastructure, etc.

[moda0306]

Sadly, it looks like Tea Partiers are simpletons of economic thought decades behind the times.

A little more than a year has passed since the first phase of the Brownback tax cuts went into effect on Jan. 1, 2013, so it’s possible to make a preliminary assessment of their effects. The early verdict: not too good. The jury is still out on whether lower taxes will stimulate businesses to expand and hire over the long term. But the immediate effect has been to blow a hole in the state’s finances without noticeable economic growth.

http://www.businessweek.com/articles/20 ... udget-cuts

Businesses hire when they are swamped with demand, not when they have high profits.

Boom. It's about the capacity, or lack thereof, within their current productive sources. If a company is running at 75% capacity and making disgusting amounts of profits, They don't need to hire.

[clacy]

Sadly, it looks like Tea Partiers are simpletons of economic thought decades behind the times.

A little more than a year has passed since the first phase of the Brownback tax cuts went into effect on Jan. 1, 2013, so it’s possible to make a preliminary assessment of their effects. The early verdict: not too good. The jury is still out on whether lower taxes will stimulate businesses to expand and hire over the long term. But the immediate effect has been to blow a hole in the state’s finances without noticeable economic growth.

http://www.businessweek.com/articles/20 ... udget-cuts

Businesses hire when they are swamped with demand, not when they have high profits.

This is a nice liberal soundbite, but it isn't always true.  Granted, demand, or reacting to demand, is one reason people hire.  Another is because they are making some sort of spend/invest plan that they think will result in higher profits in the future.

I am a business owner.  Often we hire when we want to increase service levels relative to our competitors because we think it will help create more demand down the road.

We also hire when we expand into areas that we previously haven't went because we estimate (it's never guaranteed) that there is a need for our product in a new area. 

Demand can be a reason for hiring, but much proactive hiring/expansion is done for tax reasons, strategic future growth, etc. 

[clacy]

Businesses hire when they are swamped with demand, not when they have high profits.

This is a nice liberal soundbite, but it isn't always true.  Granted, demand, or reacting to demand, is one reason people hire.  Another is because they are making some sort of spend/invest plan that they think will result in higher profits in the future.

I am a business owner.  Often we hire when we want to increase service levels relative to our competitors because we think it will help create more demand down the road.

We also hire when we expand into areas that we previously haven't went because we estimate (it's never guaranteed) that there is a need for our product in a new area. 

Demand can be a reason for hiring, but much proactive hiring/expansion is done for tax reasons, strategic future growth, etc.

If by "liberal" you mean "true", then I agree.

Of course it isn't the only reason businesses hire. 

But is it ever false?

My employer's R&D department is currently staffing up.  This is not in response to any demand for R&D, but is strategic.

But when my employer saw demand for its new product increase faster than any other new product of its kind, and saw that they couldn't make enough to satisfy the market, they decided "holy crap, there's money available on the table and we can't take it because our capacity is limited...we'd better build a new plant!", you'd better believe they hired a boatload of people.  How, exactly, is this "liberal"?

So are you telling me that if your business was swamped with demand that you wouldn't try to provide more of whatever it is that you sell?  That you wouldn't hire more employees, if that is what it took to sell more product?

OMG, you just cracked the code to capitalism.  Just kidding, but seriously, of course you expand when customers are beating down your door, however, that's usually not the case in most competitive businesses.

Your original comments were this....

"Businesses hire when they are swamped with demand, not when they have high profits."

I take that to mean:

-Businesses hire employees only after customers are beating down their door.

Then moda chimed in with.....

"Boom. It's about the capacity, or lack thereof, within their current productive sources. If a company is running at 75% capacity and making disgusting amounts of profits, They don't need to hire."

Which isn't true because generally companies are very greedy and when their profitable, they will want to expand.  Having huge customer demand IS NOT the only reason people expand.  Anticipating higher customer demand is often a reason as well.

I feel like liberal (maybe that's not the right word) feel like this is how capitalism, works in order:

1. Customers somehow miraculously have more discretionary income (either through government welfare programs, or their wage increases).
2. Customers then spend more money at businesses (greater demand).
3. Then only after greater demand, businesses hire more workers ONLY out of necessity.
4. They cycle repeats.

I guess it's the classic "chicken or the egg" dilemma.  As a more conservative minded person, and as an actual business person, I do believe that in some instances the above scenario can work, especially where some economic stimulation is provided from the government to sort of grease the wheels of commerce.

However, I also believe that much, if not most economic expansion is due to productivity gains and hiring that result from entrepreneurs taking calculated risks by investing money and time in the pursuit of offering a new -or- better -or- lower cost product to a market, thereby forcing their competitors to also figure out ways to offer a new or better or lower cost solution to a current problem or need.

[MachineGhost]

However, I also believe that much, if not most economic expansion is due to productivity gains and hiring that result from entrepreneurs taking calculated risks by investing money and time in the pursuit of offering a new -or- better -or- lower cost product to a market, thereby forcing their competitors to also figure out ways to offer a new or better or lower cost solution to a current problem or need.

This doesn't equate to higher wages or hiring more employees as the last two decades of offshoring, crony immigration, wage stagnation and human labor replacements have illustrated.  In fact, it's becoming increasingly evident that the only employer en masse is bureaucracies where technology hasn't had a strong decentralizing effect yet, i.e. government, medical care and large corporations, especially as the share of employment by small businesses has dramatically declined for the last two decades also.

In the short term, sudden stupendous profits to a relatively small business is transient unless the demand becomes an established fad and survives into a trend, or is a startup or some other kind of disruptive force to the status quo.  If it does not last, it was just an inflationary mini-boom brought by an excess of money seeking productivity improvements (which is anti-inflationry).  Minor productivity improvements are not long-term profitable due to lacking economies of scale and a race to the bottom from competition; exactly why large, monolithic corporations take up that job for the next iteration of the PC, microwave or toaster.  Needless to say, minor productively improvements don't translate into more hiring either (in a small business).  Look at the experience of HTC vs Apple and Samsung.  They were once the market leader.

[Kshartle]

If you could print money or redistribute it to someone, increase demand and have that actually spur valuable production.....there would be no poverty or recessions or depressions, just a continuous improvement of practiaclly everyone's living standards everywhere.

I hope you guys can at least see there is no way that can be correct.

Demand is limited by productive capacity and productive capacity is NOT limited by demand. It's limited by profit potential since people won't produce unless they profit by it. Shifting profit potential from one product or service to another changes profit potential in both industries but can't make humans better off in total, only individual groups of humans.

When demand is artificially stimulated it can only be at the expense of something else. The money the government prints to hand out to welfare recipiants takes the purcahsing power away from savers. Savers are producers. By stealing the fruits of their labor you rob them of the incentive to produce. You also direct production to false growth that can only be sustained by theft and the threat of violence. Once the violence ends or if it isn't continuously increased the market re-asserts itself and a recession ensues as production rapidly shits.

Everyone in total is worse off because of the theft. Demand stimulated by theft and threats of violence can't make us better off because people don't need threats of violence to produce what we want. They only need threats of violence to produce what they don't want.

When we get more of what we want we are better off, when we get less of what we want we are worse off.

If you read Browne he explains clearly how every dollar the government spends makes us worse off since it's always at the expense of real un-coerced demand. 

When the government steals from me (and they do a lot), it's obvious that I am worse off. I can't spend it the way I want to, I have to settle for how someone who didn't earn it wants it spent. I can't invest it and make it available to someone with a profit motive. They will try to use it to increase production of valuable goods and services. Free market profit is the scorecard for value creation. If you make a profit without the threat of violence it's because you gave people what they want. That's what improves the standard of living across the board.

[MachineGhost]

When the government steals from me (and they do a lot), it's obvious that I am worse off. I can't spend it the way I want to, I have to settle for how someone who didn't earn it wants it spent. I can't invest it and make it available to someone with a profit motive. Free market profit is the scorecard for value creation. If you make a profit without the threat of violence it's because you gave people what they want.

We all know this; you don't need to keep repeating basic capitalist ideology around here.  The problem in the nuanced real world is you have to pay for certain things (military, police, etc.) and the way the system is currently setup, it doesn't trust people to have the freedom of choice and opportunity to pay or not pay for such services, so you pay for it via your taxes.  Stop complaining about the logistics and work on providing free-market alternatives.  Look at Uber and Lyft which have taken on the most egregarious examples of crony capitalism ever.  Traditional cab drivers in Chicago don't even earn the minimum wage after paying all the mandatory kickbacks.

[Kshartle]

When the government steals from me (and they do a lot), it's obvious that I am worse off. I can't spend it the way I want to, I have to settle for how someone who didn't earn it wants it spent. I can't invest it and make it available to someone with a profit motive. Free market profit is the scorecard for value creation. If you make a profit without the threat of violence it's because you gave people what they want.

We all know this; you don't need to keep repeating basic capitalist ideology around here.  The problem in the nuanced real world is you have to pay for certain things (military, police, etc.) and the way the system is currently setup, it doesn't trust people to have the freedom of choice and opportunity to pay or not pay for such services, so you pay for it via your taxes.  Stop complaining about the logistics and work on providing free-market alternatives.  Look at Uber and Lyft which have taken on the most egregarious examples of crony capitalism ever.  Traditional cab drivers in Chicago don't even earn the minimum wage after paying all the mandatory kickbacks.

You over-estimate everyone's understanding of basic economics. You also don't understand it yourself and demonstrate when you say things like "in the nuanced real-world yadda yadda..." You think it's some law of the universe and not a product of people's decisions and beliefs.

In what way (in the nuanced real world) is coercion not an inferior way to allocate resouces? If you think everyone gets that you are dead wrong. 

Complain about logistics? what are you talking about?

[Pointedstick]

You over-estimate everyone's understanding of basic economics. You also don't understand it yourself and demonstrate when you say things like "in the nuanced real-world yadda yadda..." You think it's some law of the universe and not a product of people's decisions and beliefs.

In what way (in the nuanced real world) is coercion not an inferior way to allocate resouces? If you think everyone gets that you are dead wrong. 

Complain about logistics? what are you talking about?

Bad reading alert! Try re-reading MG's post.

[Kshartle]

You over-estimate everyone's understanding of basic economics. You also don't understand it yourself and demonstrate when you say things like "in the nuanced real-world yadda yadda..." You think it's some law of the universe and not a product of people's decisions and beliefs.

In what way (in the nuanced real world) is coercion not an inferior way to allocate resouces? If you think everyone gets that you are dead wrong. 

Complain about logistics? what are you talking about?

Bad reading alert! Try re-reading MG's post.

I re-read...can you help me understand his point if I missed it?

[clacy]

When the government steals from me (and they do a lot), it's obvious that I am worse off. I can't spend it the way I want to, I have to settle for how someone who didn't earn it wants it spent. I can't invest it and make it available to someone with a profit motive. Free market profit is the scorecard for value creation. If you make a profit without the threat of violence it's because you gave people what they want.

We all know this; you don't need to keep repeating basic capitalist ideology around here.  The problem in the nuanced real world is you have to pay for certain things (military, police, etc.) and the way the system is currently setup, it doesn't trust people to have the freedom of choice and opportunity to pay or not pay for such services, so you pay for it via your taxes.  Stop complaining about the logistics and work on providing free-market alternatives.  Look at Uber and Lyft which have taken on the most egregarious examples of crony capitalism ever.  Traditional cab drivers in Chicago don't even earn the minimum wage after paying all the mandatory kickbacks.

Thanks for playing the role of thought police.  As if the MMT and more liberal soundbites aren't repeated over and over.

[MachineGhost]

Ught, I think I'm done with this forum for awhile.

[Kshartle]

When the government steals from me (and they do a lot), it's obvious that I am worse off. I can't spend it the way I want to, I have to settle for how someone who didn't earn it wants it spent. I can't invest it and make it available to someone with a profit motive. Free market profit is the scorecard for value creation. If you make a profit without the threat of violence it's because you gave people what they want.

We all know this; you don't need to keep repeating basic capitalist ideology around here.  The problem in the nuanced real world is you have to pay for certain things (military, police, etc.) and the way the system is currently setup, it doesn't trust people to have the freedom of choice and opportunity to pay or not pay for such services, so you pay for it via your taxes.  Stop complaining about the logistics and work on providing free-market alternatives.  Look at Uber and Lyft which have taken on the most egregarious examples of crony capitalism ever.  Traditional cab drivers in Chicago don't even earn the minimum wage after paying all the mandatory kickbacks.

Thanks for playing the role of thought police.  As if the MMT and more liberal soundbites aren't repeated over and over.

Don't forget the life-coaching. I bolded and underlined it. It usually takes the form of a suggestion to read "How I found freedom...". This is just a variation.

There is a slight difference between the MMT and liberal soundbite and an explanation of economics.........the latter is correct. 

[Kshartle]

Ught, I think I'm done with this forum for awhile.

MG if it's me I'll take a break from responding to you please hang around.

I prefer to discuss ideas rather than other posters and what they should or shouldn't do with their lives and their posting, except when it comes to understanding economics better or not supporting immoral behavior.

Arguments about ideas are interesting. Arguments about individuals here is NOT interesting to me and I'm certainly not interesting to discuss.