Supply side economics test.

According to an LA Times story:

"Steve Pierce(R), majority (Arizona) Senate whip, said the state may be able to come up with ways to raise money -- by cutting taxes. He said that cuts in business taxes may raise tax revenues, an argument made by believers in supply-side economics, a theory that most economists say is flawed."

I think this is swell; we might finally get to test the idea of whether or not supply-side economics work. Of course, I'm quite sure it doesn't work, in so far that it takes a very long time for the money to trickle down, and for value to be added to goods that are created by these new jobs, if at all. In reality, what would happen is that small businesses would either use that money to pay down debt that they've been accumulating to maintain payrolls or invest in hardware to increase efficiency of their existing workforce, or maybe post a profit. Who really knows what these people will do with the tax return they'd get, but I do know that they won't hire new people until they're sure that the economy is on a solid growth path.

Of course, news broke on Thanksgiving - belated happy thanksgiving - that Dubai World requested a 6 month hold on repayment of a $60B debt, which has triggered shock throughout the entire global financial system, as investors are worried about their money. Because of the terse request by Dubai World, investors are left to guess as to how serious of an issue this could be, and people are fleeing stocks for the good ol' USofA Treasury Bonds. Point is, if this situation is as dire as indicated by the request for a 6 month reprieve (hey, can I stop paying my mortgage for 6 months?), banks are about to be steamrolled once again, and we could see the collapse of many large investment firms.

I mention this Dubai World problem, because if the worst case scenario comes true, the supply-side test could spell complete disaster for Arizona, and a quick double-dip of the world and US economies. Look for the ensuing Conservative criticism, even though it was their lack of market controls that would have triggered this second dip.