Well, the Center on Budget & Policy Priorities (CBPP) is at it again…pushing their political viewpoint disguised as economic analysis. CBPP’s November 30 blog post attempts to use Gross Domestic Product (GDP) data to warn other states that Kansas’ tax reform is failing.
CBPP’s simplistic look at annual changes in GDP seems merely designed to support their political preference for higher taxes and spending, as a look at the underlying data throws a lot of cold water on their contention.
First of all, CBPP is talking about total real GDP, which includes government and is adjusted for inflation. The intent of tax reform was to grow the private sector, not government, so an honest analysis would at least show the difference. The CBPP chart shows 2013 growth at -0.3% for Kansas and 1.9% for the nation; Kansas also trailed (1.8% to 2.2%) in 2014. The adjacent table shows private sector growth is closer to the national average, but that is just the beginning.
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Tax policy certainly has an impact on economic growth but some change is unrelated to tax policy. For example, Kansas is much more reliant on aerospace that most states and changes in that industry are driven by global demand more than anything else. The Kansas economy is also more reliant on oil and gas than most states, so declining oil prices have disproportionate economic impact on extraction and refining.
Each of those three areas declined in 2013 (aerospace is a sub-sector of Other Transportation Equipment Manufacturing) in Kansas but they increased in the nation as a whole. But Kansas outperformed the nation on everything else(97% of the U.S. economy, 95.4% in Kansas), growing 2.5% to the nation’s 2.2%.
That’s not to say that tax reform is a success – it’s far too early to judge – but it does show that factors other than tax reform had a very significant negative impact in 2013.
Let’s now look at 2014. BEA has not yet published sub-sector data for 2014 but we can look at the sectors that include them. Mining (oil & gas extracting) increased in Kansas and the nation, but much less so in Kansas. Non-Durable Goods (petroleum manufacturing) did slightly better in Kansas than across the nation but Durable Goods (aerospace) declined in Kansas while the nation as a whole increased. But once again, everything else grew faster in Kansas (2.5%) than the nation overall (2.3%).
We won’t know for certain until the sub-sector data is published, but there is a reasonable possibility that, aside from those three relatively small sub-sectors, Kansas again outperformed the rest of the nation in private sector GDP.
This is really easy information to find if one bothers to look, but CBPP apparently isn’t interested in real economic analysis; they distort data to support their political perspective as we have shown here and here.
The 2015 projection comes from Kansas Legislative Research and appears to include government rather than just reflect the private sector. Their underlying rationale has been requested and will be addressed here once they provide the data.
Post Script December 5: Chris Courtwright , chief economist at Kansas Legislative Research Department, confirms that 2015 GDP estimates include government and there is no disaggregation of government and private sector available. Asked whether any disaggregation of industry sectors existed, he said, “It’s at least possible that there is, but it isn’t anything I recall having in front of us at the Consensus table.”
Mr. Courtwright also notes that the Consensus memo published by KLRD is a joint work product of a number of different entities.
