State Budget Cuts

The PBS NewsHour reports on how state budget difficulties may impact Medicaid programs.

Around The Dial – Feb. 18

Economic policy reports, blog postings, and media stories of interest:

• Naked Capitalism finds flaws in the Treasury’s reform plans.
• Brad DeLong explains why the US doesn’t face a fiscal crisis.
• Free Exchange tabulates the Federal Reserve’s latest projections.
• Tax.com looks at upwards redistribution in the federal tax code.
• Rortybomb asks what a strong, liberal Federal Reserve governor would be like.
• Paul Krugman call the budget debate “a sham.”

Corporate Taxes In North Carolina

The N.C. Budget & Tax Center explains why a reduction in the state’s nominal corporate tax rate will do little to boost growth.

In the short term, corporate tax cuts are unlikely to provide the needed local boost to support the economic recovery and job creation.  That is because, as research has found, the impact of tax cuts on corporate investment would not only be small but require years to fully take effect. Additionally, businesses are likely to distribute these additional dollars to their shareholders who are often living out of state.   Evidence has generally found that a 10‐percent reduction in total state and local taxes paid by businesses is likely to boost economic output and jobs by only about 2 percent. However, again, this does not account for the negative impact of the offsetting cuts to public structures that would be required to pay for such tax cuts.
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The job creation goals of the Governor and other policymakers are important to the state’s economic recovery.  But investments to achieve that goal must be cost‐effective in the immediate and long‐term.Cuts in the corporate tax rate are not targeted to business undertaking new investments, job creation or research and development.  Thus, they do not generate the kind of new economic activity that is needed to create more jobs.

Remember This Picture

Via Economist’s View …  another reminder, this time from the U.S. Office of Management and Budget, that Social Security spending is not a real driver of the country’s long-term budget problems.

Around The Dial – Feb. 17

Economic policy reports, blog postings, and media stories of interest:

• Robert Reich sees “budget baloney.”
• EPI analyzes the effects of the Recovery Act.
• E.J. Dionne explains the games deficit hawks play.
• Ezra Klein wonders about the future of Keynesianism.
• Economix discusses the importance of cities.
• Naked Capitalism offers more evidence why outsourcing isn’t great.