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California Sinking May 18, 2009

Posted by Dwight Furrow in Current Events, Dwight Furrow's Posts, politics.
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The ballot propositions being voted on in today’s election are likely to go down to defeat, according to latest polls, as well they should since they will not solve the budget deficit and will hamstring the state for years to come.

Even if they should pass, California is faced with at least a $15 billion dollar deficit.

Thus far, the only solution to the budget deficit offered by the clown show that is the Schwarzenegger Administration is draconian cuts to health, education, and social services.

In an economic crisis, budget cuts are the last thing we need. In a recession, consumers cut back on their buying and businesses cut back on production. As a result, the state has to encourage spending, so people can stay employed, businesses are encouraged to produce, and eventually grow buy hiring new workers. By contrast, state spending reductions that entail unemployment or underemployment for thousands of teachers and state workers reduces consumption and thus reduces production.

This is elementary economics and it is hard to fathom why Schwarzenegger and his Republican stooges in the legislature don’t get it.

What kind of response do we get from Republicans?  From Andrew Ross:

Gov. Arnold Schwarzenegger‘s latest grim budgets bring to mind assertions by opponents of Propositions 1A-1F that, in the words of gubernatorial candidate Meg Whitman, “We don’t have a revenue problem. We have a spending problem.” Given that the state is facing a $21.3 billion hole, does not a $11.7 billion revenue drop count as a problem? …The three major sources of state revenue – income taxes, sales taxes and corporate taxes – fell by $12.4 billion, a 16.4 percent drop.

How is this not a “revenue problem”?

Schwarzenegger, since he has been in office, has constantly used the argument that business will avoid the state if taxes are raised. But what business will want to stay or relocate here when schools are decimated, college is unaffordable and inaccessible, and unemployment is skyrocketing?

In a recent letter to New York Governor David Patterson who is facing his own budget crisis, Nobel Prize winning economist Joseph Stiglitz argued that raising taxes on the state’s wealthiest residents would help pull the state out of a recession more quickly by maximizing the total spending in the economy.

“Every dollar of state and local government spending enters the local economy right away, generating a greater economic impact,” he wrote.

“Raising taxes on high income households also will reduce spending, but by less than the amount of the tax increase since those with plenty of income typically spend only a fraction of their income,” he wrote.

Yet, raising taxes is not on the agenda.

Just as George W. Bush presided over the demise of the U.S., Schwarzenegger is presiding over the demise of the Golden State. I doubt that in 10 years anyone will want to live here.