Taxes: January 2008 Archives

The country's economy may be experiencing another stock market crash, and the housing bubble has been bursting, causing a housing market crash. And this is all happening before the expected recession hits and causes unemployment to increase. This is grim news indeed for state government budgets.

In particular California just experienced a sharp rise in unemployment. Saturday's San Francisco Chronicle reports, California's jobless rate up sharply,

California's employment market took a sharp turn for the worse in December, the strongest sign to date that the state's economy might be falling into recession.

California faces a large budget deficit, and the Governor has declared an emergency. The Governor has proposed "across-the-board" spending cuts -- which means cutting all state services by an equal amount.

This inability to prioritize the importance of any particular spending cuts should be taken as a de facto declaration that there is no waste or unimportant spending left to cut -- that all spending is equally crucial. Driving home this point, the Governor is asking for the release onto the streets of prisoners.

If we don't want prisoners released onto our streets the legislature must raise revenue.

California is said to be having a budget "crisis." Last week the Governor signed an emergency proclamation forcing the legislature to meet and act on the budget within forty-five days.

"Crisis" and "emergency" are serious words, and the public is upset about hearing them. This is, of course, the intent of those using the words -- to get the public upset and demanding action. When people are shocked and worried they will accept solutions that might not be what they would accept if they had time to think, consider all reasonable alternatives and weigh all the consequences. In an "emergency" the public just wants the problem solved. (This is a "Shock Doctrine" approach.)

So having created a crisis atmosphere the Governor is asking for "across the board" cuts in state government spending. This is a tactic that let's him avoid specifying any particular cuts. The reason the Governor does not want to specify any particular spending cuts is because people will realize that such cuts are not a good idea.

Asking for cuts "across the board" sounds so fair. But not specifying also means not prioritizing. By setting no priorities for spending cuts the Governor is saying that one area of spending matters to him no more than another.

Let's be clear about what the Governor is doing. He is cutting police and other law enforcement and public safety. He is cutting schools -- when California already is 43rd in spending per pupil. He is letting prisoners out onto the streets. He is cutting disaster assistance. He is letting roads and bridges deteriorate. That is what government spending is -- and we are who it is for.

Do taxes drive California's economy? An analysis by the Institute for the Renewal of the California Dream's Senior Fellow Dave Johnson:

The governor says California is in a budget crisis. He says we need to cut the state's spending "across-the-board," and the Republicans insist that tax increases and other alternatives are off the table. The media largely seem to be going along with taking discussion of alternatives off the table, and consequently Democrats are too intimidated to bring them up.

But what they are missing is that taxes drive the economy.

Tax-cut proponents say that increasing taxes on the wealthy "takes money out of the economy." I wonder where they think the money goes? Do they think it just goes up into the air and disappears?