Commenter Tom argues that a chart in my recent post is flawed. Here’s the offender:
Graph 2 is super noisy. Without 2008 and 2009 (off years by any measure), that trend line would be closer to verticle, (sic) and then even the strongest of correlation wouldn’t help the argument.
That statement raises several questions. First, what’s an “off year”? A recession? Should we only count good times? 2008 and 2009 were, by all indications, moderate recessions. Let’s not confuse the real economy with the stock market. Leaving them off wouldn’t change the trend line much; there would still be a strong negative correlation. In fact, if you adjusted 2008 and 2009 to discount the stimulating effects of TARP and the ARRA (which Dr. Yandle touched on in the presentation featuring this slide), than the correlation would be even stronger.
Second, why doesn’t this correlation matter? If you spend more than you earn, you run out of money. All the methods to escape debt, higher taxes, inflation, etc, are painful for citizens to live through. The question then becomes, are the short-term gains from spending equal or greater than the long-term costs? There are many philosophical arguments for or against any particular category of spending. However, given that many democrats are running against their own voting records, and that stimulus spending was apportioned with a partisan bias, I’d say no.
In the past decade, the nine states with the highest personal income tax rates have seen gross state product increase by 59.8%, personal income grow by 51%, and population increase by 6.1%. The nine states with no personal income tax have seen gross state product increase by 86.3%, personal income grow by 64.1%, and population increase by 15.5%.
If you think about it for a second, it’s easy to see who is hurt by these spending policies; the poorest states, which can least afford marginal losses in GSP. At best, it’s irresponsible for policy makers to ignore such correlations. At worst, it harms the most needy.