Kansas’ Projections Show Tax Cuts Aren’t Paying Off as Predicted

May 14, 2014 at 10:09 am

When Kansas enacted a major tax cut in 2012, many state lawmakers predicted it would spur economic growth.  Instead, economic performance in Kansas has been unimpressive, and updated projections from its Division of the Budget offer no reason to expect that the state’s economy is about to boom.  Personal income in Kansas will grow more slowly than U.S. personal income in 2014 and 2015, according to the new forecast (see chart).

The state’s budget office also projects that gross domestic product (GDP) in Kansas will lag the nationwide rate in 2014 and 2015.  That would mark a downward departure for the Kansas economy, which over the last two decades has generally kept pace with the national economy.

There’s no evidence to believe that the tax cuts will improve the economy in later years, either.  The vast majority of research finds that differences in interstate income tax rates have little or no impact on state economic growth.  For example, when six states made large tax cuts in the 1990s, their income and employment grew more slowly than the rest of the country.

The new forecast wasn’t the only bad news that Kansas received in the past few weeks.  Moody’s Investors Services downgraded Kansas’ credit, citing the revenue loss from the tax cuts as an important reason.  A lower credit rating could mean the state will pay higher interest rates in order to borrow money for public spending.  Moody’s also downgraded the credit of both the University of Kansas and Emporia State University, two of the state’s six public universities.

The negative effects of Kansas’ tax cuts are mounting:  lower state revenues, serious cuts to services like education, and now lower growth forecasts and a downgraded credit rating.  These cuts aren’t setting Kansas up for economic success.

Senate GOP Plan Would Cause Millions to Lose Health Coverage or Block Them From Gaining It in the Future

May 13, 2014 at 3:08 pm

Health reform opponents like Senator Richard Burr (R – NC) have repeatedly attacked the Affordable Care Act (ACA) over the past year by pointing to insurers that cancelled existing, non-ACA-compliant individual market health plans.  Yet, a health plan that Senator Burr and fellow Senate Republicans Tom Coburn (OK) and Orrin Hatch (UT) outlined in January would disrupt existing coverage far more.

As we explain in a new paper, their plan would likely cause millions who now have coverage through Medicaid, the new insurance marketplaces, and their jobs to lose it, while blocking millions more who are expected to obtain health insurance under health reform from gaining it in the future.

The Burr-Coburn-Hatch plan would repeal all of health reform except for certain Medicare provisions.  In its place, it would convert much of Medicaid into block grants and create a new tax credit for people to buy health insurance primarily in the individual market.  The plan has large gaps and lacks many essential details but, based on the public information available, it likely would:

  • Add substantially to the ranks of the uninsured and the underinsured by causing millions of people to lose their existing coverage and by making (or leaving) coverage unaffordable for many people of limited means through changes that would cause their premiums, co-payments, and other out-of-pocket charges to climb significantly;
  • Lead to states facing large shortfalls in federal Medicaid funding that could cause many low-income beneficiaries to become uninsured and go without needed care; and
  • Eliminate or significantly weaken health reform’s consumer protections and market reforms, especially for people with pre-existing conditions.

The Burr-Coburn-Hatch plan claims to ensure affordable health care for patients as an alternative to, and replacement for, the ACA.  In reality, it would make coverage less affordable, add substantially to the ranks of the uninsured, and move the United States backward, toward the poorly functioning individual market that existed before health reform.

Click here to read the full paper.

Voices Mount to Let Science Decide the WIC Potato Issue

May 13, 2014 at 2:42 pm

We’ve explained why nutrition scientists, not lobbyists, should decide whether WIC should add white potatoes to the limited list of foods that it provides — and numerous editorial boards and columnists agree.  Here are a few examples, the first two from major potato-growing states, Maine and Wisconsin:

Portland, Maine’s Portland Press Herald has editorialized:

. . . WIC is a supplemental nutrition program, meaning that it is used to make sure that certain healthy foodstuffs are available to pregnant women and families with young children.

Potatoes — unfortunately, mostly in their fried form — are already a part of the American diet, and they don’t need a nudge from a government program to remind people to eat them.

The potato industry admits that it’s less worried about the business it would lose than the bad publicity it would get from being left off the WIC list of healthy foods. But using the political muscle of the congressional delegations of the potato-producing states is not the right solution. . . .

Racine, Wisconsin’s Journal Times has editorialized:

. . . Wisconsin potato farmers insist the government data on the nutritional value of the potato is outdated.  They’ll get a chance to make that argument this year when the Institute of Medicine begins a new review of the nutritional value of all foods in the WIC package — as directed by the USDA [Agriculture Department].

But, for now, it would be a mistake for potato growers to lobby state congressmen for a political reversal of what is — and should be — a decision based on science.

If potatoes are already on the table of low-income families in sufficient quantity, it would be a mistake to add them to the WIC list just to boost the fortunes of one industry.

The WIC program, after all, is a nutrition program to help low-income Americans get a balanced diet.  It is not a potato jobs program and it is not a support program for potato growers, nor should it be. . . .

The Washington Post’s Catherine Rampell writes:

. . . [I]f the next scientific review finds that poor moms’ and toddlers’ eating habits have become severely white-potato-deficient, then by all means, the USDA should add white potatoes into WIC.  But Congress shouldn’t circumvent the process.

This is almost a caricature of an obvious statement, but here goes: Poor kids’ health, not special interests, should always come first.  Research has shown, again and again, that inequality begins in utero, and that disparities in earnings and well-being in adulthood are largely determined by disparities in nutrition, education and other conditions during the first few years of a child’s life.

WIC is one of the few federal programs that successfully narrows that early-life disparity.  Let’s not mess with it.

The New York Times’ Teresa Tritch writes:

. . . The experts at the Institute of Medicine of the National Academy of Sciences, who devised the WIC diet, found that white potatoes would provide no “supplemental” nutritional benefit because WIC participants already eat more than the recommended amounts of starchy vegetables, while under-consuming other vegetables.

[Several senators advocating inclusion of white potatoes have] advanced a specious argument about the WIC food rules being hopelessly out of date.  They are not.  The rules took effect in 2009, and a review is currently underway.

But the senators don’t want to wait for a science-based review.  Rather, they say that the WIC food package should be based on the government’s Dietary Guidelines for Americans from 2011, which basically lumped potatoes in with other vegetables as part of a healthy diet.  That’s a bad argument.  The WIC food package should not blindly follow the D.G.A, because the D.G.A. applies to everyone over the age of two.  It does not apply to the “special” and “supplemental” needs of pregnant and breastfeeding women, and of infants and toddlers. . . .

USA Today has editorialized:

The potato exclusion, like every other decision about WIC’s menu of the last 40 years, is based on nutritional science — which is exactly the way things like this ought to be done.  In 2005, the Institute of Medicine specifically recommended excluding white potatoes because low-income people were already eating plenty of them.  The Agriculture Department accepted the advice.

But that riled the potato industry, which insists the issue isn’t money but image. “We can’t let our federal government perpetuate those negative stereotypes,” says Mark Szymanski of the National Potato Council.

So in a classic case of a special interest trumping the public interest, potato growers and their allies are fighting back the Washington way, boosting campaign donations and enlisting potato-state politicians to force the Agriculture Department to let potatoes into WIC.  They claim science is on their side, insisting newer studies show that potatoes are nutritious and that people aren’t eating enough of them. . . .

Potatoes aside, that is a dreadful idea with broader implications.  It would undo 40 years of allowing science — instead of cash and political influence — to determine which foods taxpayers will subsidize.  That in turn would open the door for other big food lobbies to try the same end-run. . . .

WIC defenders have always been able to argue that no food has ever been able to trump science with money and muscle.  That would no longer be true if the potato lobby wins.

Nutrition Experts, Not Lobbyists, Should Decide WIC Potato Issue

May 13, 2014 at 9:00 am

Senators Susan Collins (R-ME) and Mark Udall (D-CO) essentially argued in yesterday’s USA Today that Congress should, for the first time, override the science-based process for deciding which foods the WIC program provides by requiring WIC to add white potatoes.  That would be a serious mistake — and set a dangerous precedent.

It’s a mistake because every dollar that participants use from their WIC fruit and vegetable vouchers (which amount to just $8 or $10 a month) to buy white potatoes is one less dollar available to buy foods that they don’t eat enough of, like dark green leafy vegetables.

As WIC’s formal name — the Special Supplemental Nutrition Program for Women, Infants, and Children — makes clear, WIC was never intended to provide a full range of foods.  Instead, it provides the key nutrients that nutrition experts say are missing from the diets of low-income pregnant and nursing women, infants, and young children.  And studies indicate that WIC participants already consume enough starchy vegetables, the most popular of which is the white potato.

Forcing WIC to include white potatoes would set a dangerous precedent because Congress has never, in WIC’s 40-year history, required it to include (or exclude) any particular food, wisely leaving that to experts in nutrition science and child and maternal health.  The sound scientific basis for WIC foods is one reason for WIC’s well-documented success at improving birth outcomes and participants’ nutrition and health.

Breaking Congress’s commitment to insulating WIC foods from political pressures could open the floodgates for lobbyists to pressure Congress to add any number of other products, irrespective of their nutritional value.  That could jeopardize WIC’s success at improving participants’ nutrition and health.

The Agriculture Department (USDA) conducts periodic, comprehensive reviews of the WIC food package based on the latest nutrition science and the most current food consumption data.  In February, in response to congressional interest in WIC offering white potatoes, USDA started the next such review earlier than planned.  If the review finds that adding white potatoes would benefit the millions of low-income women and young children that WIC serves, we would favor it.  We’d also favor expediting the review process.  But for Congress to override the science-based process and force WIC to include white potatoes would constitute, as USA Today editorialized yesterday, “a classic case of a special interest trumping the public interest.”

No, the OECD Didn’t Say We Already Do a Lot to Reduce Inequality

May 12, 2014 at 12:29 pm

Critics of proposals to reduce income inequality sometimes cite a 2008 Organisation for Economic Co-Operation and Development (OECD) report that found, among other things, that the United States has the most progressive tax system among developed countries.  But, as a whole, the report doesn’t support the implication that the United States does a lot to address income inequality; nor do more recent OECD data.

In fact, various taxes and “cash transfer” programs (such as Social Security, unemployment compensation, and means-tested benefits like SNAP) do less to reduce inequality in the United States than in any other OECD country examined except South Korea, Chile, and Switzerland, according to the OECD’s latest data (see graph).

As a result, while the United States had the tenth-highest level of inequality among the roughly 30 OECD countries studied before taxes and transfers, it had the fourth-highest level after taxes and transfers.

There are two main reasons why the U.S. tax and transfer system does relatively little to reduce inequality:

  • While the taxes that the OECD analysis examined are more progressive in the United States than in other OECD countries, they also collect less revenue (as a share of household income) than the OECD average.
  • U.S. cash transfers are only about half as large as the OECD average, measured as a share of household disposable income; they’re also less progressive than in other OECD countries.

The OECD analysis omits some taxes and transfers due to data limitations.  It’s unclear how including all of the missing pieces would affect the findings.  But citing only the OECD’s finding about the progressivity of the U.S. tax system while ignoring its other findings, as some have done, provides a misleading picture of the OECD report.