Expert: Trump Is Modeling The US Economy On Kansas, A Wholesale Failure

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Financial expert Barry Ritholtz said it's a "no-brainer" which state's economic policy should be emulated: California.

Fashioning economic policy to model that of Kansas is a major mistake, financial expert Barry Ritholtz wrote last month for Bloomberg, but that is precisely what President Donald Trump is doing at the federal level.

If one had to choose a state after which to model national policy, Ritholtz said it’s a no-brainer: one should choose California.

> Kansas has been a disaster, with giant budget shortfalls, service cuts, slashed education budgets and a brain drain with young people leaving the state. The economy has failed to keep up with growth in the rest of the country and is much weaker in terms of job gains, wage increases and gross domestic product growth than neighboring states with similar economies. In 2015, for example, Kansas had one of the worst job growth rates in the country, at 0.8 percent, adding just 10,900 nonfarm jobs.


> In the five years before Donald Trump was elected president in 2016, no state economy performed worse than Kansas. Things became so bad that Kansas decided to simply stop updating the public about state economic news. There's no reason to do this other than to obscure the obvious: Kansas's wounds were self-inflicted.

California is the total economic opposite of Kansas: “robust economy, increased tax base, balanced budget and job growth that exceeds the national average.”

Still, Trump chooses to follow after the failed economic policies implemented in Kansas via tax cuts and deregulation.

> But here is the thing: If the Kansas economic formula were applied to California, you have to wonder if the state would be as well off as it is. Between the two states, only one has a minimum wage law that's higher than the federal $7.25 an hour (it's $11 now and going to $15). One has environment rules, including for automobiles sold in the state, that exceed federal standards. Only one has made a goal of social inclusiveness, welcoming immigrants and their entrepreneurial energy.


> Still, in the face of the evidence, Trump has championed the Kansas model of deregulation, tax cuts and antipathy to immigrants. Indeed, the president finds much to dislike about California, though as one might expect, his criticisms aren't well-grounded in facts. He has inaccurately blamed California wildfires on regulations that he seems to think divert water from fire fighters. He has complained about its high taxes, calling them “way, way out of whack,” and said the state's approach to immigrantion (sic) "put the safety and security of our entire nation at risk." Beyond that, Trump wants to end the state’s policy of requiring fuel efficiency and pollution standards for automobiles that exceed federal rules. The state has fought back by taking Trump to court.

California isn’t perfect, Ritholtz confesses, and certain elements make it an unfair comparison — like California’s advantage of a fast-growing technology industry, and Kansas’ disadvantage of an economy that has long relied on agriculture and manufacturing — but he contends there are important takeaways nonetheless:

> When Jerry Brown retires as governor next year, part of his legacy will be leaving the state with a $6.1 billion budget surplus. Kansas, meanwhile, is trying to dig itself out from the deficits that are a consequence of tax cuts -- cuts that the state legislature has since reversed.

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