What would Stalin do? 

Build a Reaganomics gulag in Star

This column is not about change. And it sure as hell is not about hope. It's about the simple economic precept of out with the old and in with the new.

But, in a made-for-TV moment, two senior Idaho House members recently came up with a way to take the nation's developing new economics, put them in a time machine with a meager $44.8 million, and send them back to 1981.

"The way you get more revenue is to have more, increased economic activity," Assistant House Majority Leader Scott Bedke, an Oakley rancher, said.

Bedke was attempting to explain his idea of taking the small portion of Idaho's stimulus money over which Gov. "Butch" Otter has some discretionary control and using it to lower corporate and personal income tax rates. Bedke and Majority Leader Mike Moyle, of Star, pitched the idea to the Idaho Association of Commerce and Industry recently.

Why lawmakers were pitching a tax break to a prominent state business group rather than the other way around is a question for another day.

IACI leaders dismissed the stimulus cum tax break idea the next day as Otter released his stimulus plan, sans tax cut; but they were eager to discuss another Bedke/Moyle pitch—canning the state's investment tax credit and using that approximately $40 million to relieve some corporate taxes.

But the meddling of the House Revenue and Taxation Committee aside, Idaho's role in the nation's emergence from this recession is an important question.

The state cannot borrow money to stimulate the economy, but it can be strategic about spending it and about talking about spending it.

In justifying his idea for cutting business taxes, Bedke posed a question: Say you won $75,000 in the lottery, what would you and your wife do with it?

Bedke personalized this interview, and we were willing to play along.

"We'd put it in the bank, (or under the mattress)," we replied.

OK, bad example. Most people, Bedke continued, would use the money to pay down some debt, making more of their income disposable and spending it.

Since Unda' doesn't comprehend income that is disposable, we asked someone who might.

"If I were in business today and somebody gave me a tax break, you know what I'd do with the tax break?" an incensed Otter asked. "I'd put it in my pocket."

Otter has deep pockets, and he knows something about economics, too.

Since Ronald Reagan nearly halved taxes for the wealthy in his first term, justifying the cuts with supply side economics—the theory that leaving cash in the hands of the market would stimulate a commensurate demand for market products which would in turn stimulate the economy—Bedke's assertion has not materialized.

The result, according to the same sprawling source that Bedke suggested we read—Wikipedia—has been less revenue coming into the government.

Neoconservatives have been clever about this though. They are not calling it supply side or trickle down economics anymore.

Except Moyle, who apparently didn't get the memo yet. As he told IACI or the Idaho Statesman's Dan Popkey: "I've been asking, 'What would Ronnie do?' Ronald Reagan. If you want to stimulate the economy, you've got to get money into people's hands."

But Bedke dropped the newish term "dynamic scoring" on us to back up his claims that corporate tax cuts would help boost the state's bottom line by stimulating the economy.

"When you change tax rates you change behavior," Bedke said.

Check Wikipedia, he recommended.

So we did. Dynamic scoring is an academic exercise in predicting how policy changes will affect revenue streams. According to everyone's favorite information source, it is endorsed by economists like Newt Gingrich and former President George W. Bush's budgeteers.

This is not a new debate, people. The rising tide does not float all boats, according to, uh, Wikipedia links to the Wall Street Journal and various think tanks and Congressional Budget Office reports and common sense dot com (do Bedke and Moyle have any clue what bankers and insurers and CEOs of chip manufacturers have been doing with their tax breaks for the last eight years)?

And, rhetoric aside, President Barack Obama's stimulus, budget and tax proposals are breaking the tired partisan molds in place since the '80s, molds that many in the Idaho Legislature seek to perpetuate.

A lengthy New York Times magazine article on Obamanomics published in August 2008 linked Obama's economic thought to both Robert F. Kennedy and to Ronnie.

After reading the treatise, one letter writer termed Obama, "A Free-Market-Loving, Big-Spending, Fiscally Conservative Wealth Redistributionist."

A little something for everyone.

When New York Times economics writer David Leonhardt asked Obama to describe his economic philosophy, he replied: "My core economic theory is pragmatism, figuring out what works."

So Obama has rolled out billions in spending on safety nets and billions on infrastructure and proposes jacking taxes on the wealthy and narrowing the nation's growing wealth gap.

But he's trying to cut taxes for the masses of Americans and talks of reducing the federal deficit and of free market solutions to renewable energy production, healthcare and the housing slump.

"Idaho is going to be hurt by the way Republicans have failed, year after year after year by failing to invest in the new economy," said Jim Hansen, executive director of the Idaho Democratic Party.

Hansen falls for the partisan bickering as well, but makes a good point about the new economy.

While Bedke posited an ad campaign in the Journal showcasing Idaho as the state that used federal stimulus for corporate tax breaks, Hansen said that notion betrays a deep misunderstanding of economic development.

Large corporations want decent schools and universities, clean, inexpensive power and smooth, straight highways.

"They want good ways of getting their goods and services to the market," Hansen said.

Otter seems to understand this as well, though he refuses to articulate it that way. He put the $44.8 million toward new water treatment systems and roads. The Legislature is balking at his ideas.

But here's the buried lead in this column. The American Recovery and Reinvestment Act empowers governors to certify how state funds are going to be spent.

The 1,000-plus people that wanted stimulus funds, Bedke and Moyle and even the legislative budget writers, have little to no say in the matter. The Legislature could stop agencies from spending the money when it comes to Idaho, but that could get awkward.

So Otter, pockets full of cash, is letting Obamanomics play itself out. In a few years we'll check Wikipedia to see who won.

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