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Beyond Stimulus: It's the Revenue, Stupid
One big reason: a 30-year reign of anti-tax hegemony has strangled California's ability to do everything from rehabilitating its ever-ballooning prison population, to educating its youth away from crime and toward opportunity, to building roads and bridges - both real and metaphorical - to a thriving economy. To borrow a Clintonian line: it's the revenue, stupid.
California needs massive economic stimulus - yesterday. Yet incomprehensibly, a Republican tax revolt is holding the state hostage. The Legislature and Gov. Arnold Schwarzenegger seem incapable of compromise - even when their insatiable scuffling renders the earth's 8th largest economy unable to meet payroll and provide vital services to its residents.
All sides could use a trip to the political wood shed, but it is the immovable anti-tax ideology of Republican lawmakers that has hog-tied solutions to California's fiscal crisis. Etched in stone by the 1978 limitation on taxation, Prop. 13, this war on taxes has bled the state's coffers as dry as a southern California desert farm.
Now, Republicans here have signed a pact refusing to pass any budget that includes tax increases - a fiscal mugging that cripples compromise and critical state programs, while accomplishing the Reaganesque task of discrediting government by defunding it.
In this national moment of born-again Keynesianism, with President Obama and Congress poised to inject hundreds of billions into public works and other economic activity, California and other states are retrenching into fiscal austerity - which, along with runaway military spending, contributed to massive deficits and soaring debt in the Reagan years.
New York may raise taxes to close its $15.4 billion budget shortfall, but that budget has lopped off vast sums for education and Medicaid. In Nevada, Gov. Jim Gibbons has proposed actually reducing spending from current levels in the upcoming two-year budget. Some 43 states face a shortfall of $79 billion by the end of this fiscal year - "a fiscal crisis of historic proportions," according to the nonpartisan Center on Budget and Policy Priorities. The National Governors Association is calling for massive federal stimulus monies to states.
Regrettably, the stimulus push is hobbled by a larger anti-tax sentiment pervading the land. Peddlers of "free market" private sector stimulus promise job creation and threaten abandonment in the face of taxation. But taxpayers, and the growing millions of unemployed and underemployed, need more than theoretical job creation: California, New York, and America need guaranteed job creation that feeds the public infrastructure and public culture.
It's time to tax and spend - to raise taxes on wealth (individual and institutional), and spend those revenues in targeted ways that fuel economic activity and that rebuild America's tattered urban and rural infrastructures. Not just bridges and roads, but schools, hospitals, green industries like solar and wind farms, and new housing.
Austerity and laissez-faire economics have proved as capricious and perilous as the worst forms of communism - centralizing and privatizing economic power at the expense of the public. As depression clouds gather, we need a political shift to achieve an economic one: a revival of public investment for public economic gain, and an end to the anti-tax hegemony that has, like a fiscal parasite, sucked the life out of the public economy.
Even Paul Volker, that icon of early 1980s monetarist austerity, has embraced Keynesian stimulus as the medicine we need, stating recently, "There is a need for stimulus measures on the budgetary front."
Beyond stimulus, we need an economic policy that re-embraces the public sector, which circulates money far more productively and equitably than does the private sector, where profits are horded among executives and larger shareholders. We need an economic policy that recycles dollars into circuits of production and consumption rather than into production and investor speculation.
The ground has shifted, as President Obama said on inauguration day. America needs a rekindling of the public sector, our society's physical and social infrastructure. After all: roads don't pave themselves, bridges don't get built, potholes don't get filled, fires and crimes don't get stifled, prisoners don't get rehabilitated into productive and fulfilled citizens, and welfare recipients don't get jobs, without the visible hand of government - which, yes, requires taxes.
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41 Comments so far
Show AllThe federal government and all states must double taxes on investment income, which could be estimated at incomes over $100K per individual and $180K per family. The object of such taxation would be to compel by means of tax deductions investment income towards such uses as are of economic benefit, regardless of whatever meager profit incentives might exist in that area.
In California specifically, it will be necessary to institute the politically suicidal differentiation between residential and income properties, boosting taxes on the latter, while instigating a strict rent control. If rich people flee across state boundaries, the state should bar them from participation in the market and bid them all good riddance.
So taxes are the reason that California is in a hole? All by itself it was taxes? They didn't tax enough?
Perhaps this writer should have visited the spending side of California governance?
Republicans here in California will not compromise its "no new taxes" position. However, in the meantime bond measures are placed on all of our ballots. And of course, people vote for almost all of them with no thought about how we are going to pay for various projects. And when Republicans are asked how else are we going to deal with what will soon be a $42 billion deficit, they have no answer. The Republicans are not the majority, but there are enough of them to obstruct anyone else doing anything about the deficit. Why aren't they voted out of office? Despite the fact that generally California is more left of center than all other states, it has specific districts like Placer and Orange Counties that have older hard core Republican voters that will always vote for Republicans no matter how corrupt or stupid they are.
I don't think the focus on property taxes only presents the whole problem. California was one of the hardest hit states in the mortgage meltdown. When families lose their homes the state loses their property taxes. This turned into an unexpected but huge shortfall in state government income.
Ronnie Ray-gun's "VOODOO ECONOMICS". The gift that keeps on giving, and giving, and giving. Goes longer and further than the Energizer Bunny.
The solution to the budget crisis here in Cali is so simple even a caveman can do it:
DON'T SPEND MORE MONEY THAN YOU EARN
This applies to:
The Federal Empire
States
Counties
Cities
Corporations
Individual people
The fact is, California throws more money at its social problems than any other state and the problems only get worse. Subsidizing a social problem exacerbates it.
The fact is, people are perfectly capable of providing for themselves. They can feed, clothe, and shelter themselves. They can educate their own children. It is when the government gets involved and dictates to people how do provide for themselves that the disaster comes.
Dammerung February 10th, 2009 11:56 am
"The solution to the budget crisis...even a caveman can do it....They can feed, clothe, and shelter themselves."
Get off the god damned machine and GET BACK TO WORK softening animal hide with your teeth in the slave cavern.
at least that was a sustainable economy which when millennia without collapsing, aside from multi-year droughts.
Libs always talk about a sustainable environment but NEVER about a sustainable economy. Don't you get the two are intertwined?
Dammerung
"DON'T SPEND MORE MONEY THAN YOU EARN
This applies to:
The Federal Empire
States
Counties
Cities
Corporations
Individual people"
While we can certainly agree on this......
"Libs always talk about a sustainable environment but NEVER about a sustainable economy. Don't you get the two are intertwined?"
I think this might be a bit harsh. There are many conversations here about how we sholuld address our economy and plenty of good ideas. While Government is not the answer, its certainly part of the solution.
Privitizing some government functions has certainly proved the lie that private business could do it better and cheaper.
I want to point out these functions were not, in fact, privatized.
The government took the money from tax payers for these functions and then provided that money to favored corporations often designed by cronies specifically to receive this money. They then did an appallingly terrible job after winning the no-bid contract.
In a free market economy, the government would not collect the taxes, distribute the money, or otherwise influence these functions.
In my opinion there is no problem so dire that the government cannot make it worse. I don't think the government is the solution to ANY of our current problems; indeed, it is the CAUSE of most of them.
In my opinion there is no problem so dire that a free market economy cannot make it worse. I don't think a free market economy is the solution to ANY of our current problems; indeed, it is the CAUSE of all of them.
When did we have a free market economy?
Not when the government was telling banks who to lend to. Not when the government was lending banks money below market rates. Not when the government was driving a policy of home ownership against market values. Not when the government gave the coining of currency to private entities. not when the government PUNISHES people for using an alternate currency - the government has been raiding gold coin manufacturers because it is ILLEGAL to use anything other than dollars to make a purchase.
Here's a free market solution to where we are.
1) Let the banks fail!
2) Let the auto manufacturers fail!
3) Let unprofitable business fail!
Because there are profitable banks. Profitable regional banks are being punished to bail out the crony kapitalists. Regional banks with a good business model COULD step up and fill the shoes of BoA and CitiFuck and all the rest of them, but the government is KEEPING THAT FROM OCCURRING.
GM should die. When it does, a profitable industry will arise and take its place. The reason there are no profitable auto companies is because the government rewards the failures of the unprofitable ones.
Every time the government bails out X failed Corporation, it prevents Y profitable corporation from stepping up and taking its place. The government is what stands in the way of profit, employment, and sustainable expansion and business.
Everytime strict controls are taken off of capitalism it self-destructs. That's why there has never been pure capitalism.
John F. Butterfield
You sir, are exactly correct. Pure capitalism is simply another word for anarchy. The regulated capitalism with oversight we had before is what works for everyone.
Dammerung
I believe your point was that any time government was involved it was a bad thing. I may have misuderstood.
Providing social services is in fact one area that has been privitized in quite a number of states and has been an abject failure. Worse than that.
Electricity has been deregulated in my state much to the detriment of our citizens and even our business community.
Without government to regulate and provide a framework for a capitalist economy you get the train wreck we have now. It was caused by exactly that. A lack of government involvement.
Dammerung February 10th, 2009 12:30 pm
"at least that was a sustainable economy..."
Thogslave, evil spirit make hunt bad. You have honor to sacrifice your childslave for clan! Bring chewed animal hide too.
Interesting. The world had a sustainable economy for thousands of years. I guess, if you factor in that 99% of the people were fuel for the machine- and easily denied food, shelter, medicine, life etc etc. Or are we going back further- before you know, economies.
The idea that we can all provide for ourselves, well no we can't. I can't give myself healthcare, much less pay for it all. I need people when it comes to healthcare, education, food, housing, communications etc etc. Goverment can be a tool that helps us come together and get those things done. (and doesn't work when we don't do that but let the privledged few decide everything). Maybe we think that we can do it all alone? I'm sure others have asked us- we are able to take care of ourself because (aside from having the will bless our heart) we can get a job because we got an education (how much of that was subsidized, even private school?) and we can get there because you have you know roads, in our car (if we can afford one) paid in part by tax breaks etc etc (this list could go on for a while)
We need each other. We are very interconnected (at least economically). Period.
Yes, a sustainable economy is not talked about, and it should. But first principles- a sustainable economy is based not on profit but on growth... which, unless we have some sort of new economic theory, means PUBLIC not PRIVATE.
Everyone is running out of money- is it that we function in a Production economy and produce less and less? Is it because we use fractional banking and our money is worth less and less? Is it because Private is winning it's war on Public, so outsourcing (to Private, which adds costs/profit and reduces benefits) happens more and more? Is it that, as a tool of that war, Public is defunded and therefore obviously functions less and less, that there is no tax and spend but only a transfer of wealth? Is it that the rich are paying less and less taxes? Is it because a rich man will always have leverage over a poor man- but maybe not a whole bunch of poor men? Aren't we actually in the same battle for freedom that started when economies started? Do we understand the path to and from Economic Slavery? Do we even actually READ the articles on this site?
>>I can't give myself healthcare, much less pay for it all.
Of course not. The government has created incentives to deny you healthcare. Medical insurance companies are allowed to exist, driving up health care costs. Incredibly expensive treatments are designed to save a dozen people with Type 65 diabetes and supercancer of the temporal lobe, while basic preventative medicine for all but the upper middle class is unaffordable.
But the solution is not the government, God save us. The solution can be found in MY town at least - the clinic. $25 or so, you see a doctor in an hour or less, same day. No appointments, no HMOs, no nothing. A lot of doctors are starting to eschew the corrupt health care system, and what does the government do? It attacks these private practices that actually provide affordable service! Insane!
>>I guess, if you factor in that 99% of the people were fuel for the machine- and easily denied food, shelter, medicine, life etc etc
What changed?
>>Goverment can be a tool that helps us come together and get those things done
See, this is the key point. I think the government is a tool that does exactly the opposite. The government attacks organizations of people providing for themselves wherever they are found. People coming together and creating their own community with every need met is an existential threat to the government, because it shows that government is irrelevant at best. Government is organized crime, an extortion scheme and a protection racket. In this country today, the biggest obstacle to "coming together and getting things done" is the government itself!
>>Is it because we use fractional banking and our money is worth less and less?
BINGO! All of our problems stem from the unsound monetary policy that rewards failure and punishes hard work and success. Sound money is the foundation of a sound economy.
Dammerung,
While I agree with many of your sentiments that we can support ourselves, our society has turned its back on that way of life hundreds of years ago. We are not going back to self-sustaining, horse and buggy lifestyle with community fire protection and the like. It just isn't happening, although we can move to more sustainable economies and standards of living.
So we agree then to dissolve the biggest source of government spending - the pentagon! We can accomplish everything else we need with that $600 billion + the money saved from ending the Iraq and Afghanistan occupations.
In all seriousness, we need government to build public transportation, to regulate and enforce environmental standards, provide law enforcement, fire protection, and to protect the minority from the tyranny of the majority as just a few examples. Government is not the problem, it is the people in the government positions.
But you are exactly right, there has been nowhere close to a free market economy. In my opinion, it is because our current generation of robber barons figured the way to game the system was to "serve" in the government and write laws that benefit the transfer of our money to them. Just as they strung chains across European rivers to collect fees to pass, they have figured a way to do that and cloak it in the category of public benefit.
No, government is not the problem, people and their greed are the problem. In my opinion, a properly functioning government (which we obviously do not have now) protects the majority from the greed of the minority.
Rastaman vibrations are positive!
Rastaman
And you were doing so beautifully before suggesting we dissolve our military and depend on other countries basic goodness and love for us........or was that not a serious comment as possibly hinted at in your next paragraph?
OK - 90% serious - maybe not dissolve it but reduce the spending by 90% and still be as safe as we are with a $600 billion budget. In fact, safer in my opinion because we would be focusing on defense instead of invading and occuping countries and killing civilians.
Kinda thought so! We could easily bring it down by 40% without trying hard and should. Closing about 80% of our bases worldwide would save a bit more, but we run into strong protests from the host countries when we have tried.
Most of our military should be stationed here in the US. Saves a lot more.
Thanks!
Rastaman - A return to horse and buggy, local economies is about all we CAN hope to return too.
We are running out of the resources needed to maintain the Western lifestyle. The banking system is based on a tissue of lies so thin it can't stand the light of day.
On Sept. 18, 2008, the US economy came within a whisker of total collapse. Only the Fed pumping 2.2 TRILLION dollars of fiat currency into the system stopped the losses. The same kind of bank collapse almost happened in the UK on Oct. 10, 2008. They came within THREE HOURS of having the Bank of England collase completely.
Did you even hear about Iceland?
Shipping companies in Asia have cut their rates to zero, offering to carry freight for free just to keep their ships in operation. Air frieght in the UK has dropped 30% in two months. The Baltic Dry Index (BDI), which tracks shipping rates and use has dropped 94%!
The Western, 'American Dream' lifestyle that Obama declared non-negotiable, and said Americans have nothing to appologise for, is dead. What we are watching is the last few twitches as rigor sets in.
It's well past time to turn to small scale, sustainable nature based communities with cottage industry. There are several good books that detail exactly how to do it. I suggest you find them. Look up Kuntsler and Hienberg.
Walk in peace.
DON'T SPEND MORE MONEY THAN YOU EARN?
It all depends on what you are spending the money on. It's one thing to go into debt by building schools and hospitals and community centers. And quite another thing to go into debt over tax cuts for the rich and militarism. Schools and hospitals are immediately useful and improve human well-being. Dammerung, did you buy your new car or your house with all the money down? I bet you didn't. I bet you went into debt. See, it isn't that simple in a capitalist society...
I'm surprised New York where living there is just as expensive hasn't collapsed. I would welcome plenty more Californians out here in Sooner so that they can help dissolve the rightwing lunacy in this state and even turn it blue for a change. Besides, in the central column of the country, the rural areas have been depopulating big time. Why not move to our states and help us lonely liberals out here dissolve the deep seas of red?
Peter Pike
I don't think its the Left or liberals that are moving out of California if what we are getting here in Texas is anything to judge by. Be careful what you wish for!!
But 8.2 million voted for Obama in CA compared to 5.0 million for Mccain. Are you saying that most of those 5 million who voted for Mccain are gonna soak my state into further red if they move here? No thanks. The state's already 66% Republican. As for TX, but Obama went from Kerry's 2.8 million to 3.5 million while Mccain didn't gain from Bush. Isn't TX reversing from red back to blue or is it just the big cities in the state?
We are getting more purple, our vote was split very closely in fact. Yep, I'm afraid most of the Californians you will get were McCain voters. Sorry about that!
New York's time is coming...
Walk in peace.
Yep.
So glad others have pointed out the spending side of the equation. Californians have really low property taxes but they have a 10% state income tax, at least at the highest bracket. Don't know how many brackets. Californians got rid of a governor, replaced him with a governator who immediately "solved" the budget problem by borrowing $15 billion. Then, Californians voted to spend $3 billion on stem cell research. They had a chance to vote against the electricity deregulation (thanks to Ralph Nader) and they bought Enron's lies. And too bad about the housing meltdown. A few years ago I was reading about people selling 2 bedroom houses for $700,000 and up. Anyone who thought that was sustainable is inhaling way too much. They just voted to keep marijuana illegal when they could have saved many millions in law enforcement costs. And now they want flyover country to bail them out.
Marijuana is not really illegal in CA. All you need is the 215 card, which is basically bought by a doctor visit. Then you go to the pot store and get your pot. 'Course the Feds raid the stores when they feel like it.
I understand marijuana is easy to get in California. But they still arrest and incarcerate thousands for "manufacture" and "distribution". What a complete waste of (scarce) resources! Still waiting to see what the Obama administration does with the latest raid. He's on record as saying they would stop.
If "flyover country" kicks states like California, or NY, out of the union, and states like California, or NY, no longer have to pay taxes to the Federal union, it isn't the states like California, or NY, who are going to suffer.
It is "flyover country" that is going to suffer.
You need to study tax policies more. NY and California are net beneficiaries....flyover would get a raise.
You need to stop fabricating obvious fictions. California and New York are net contributors to federal spending and have been for quite some time.
According to Federal Taxes Paid vs. Federal Spending Received by State, 1981-2005, California has been paying more to the federal government than it gets back since 1986. New York has been paying more to the federal government than it gets back since at least 1981.
Oh, Please!! flyover country---KICK OUT CALIFORNIA!!! I would so love to live in the Republic of California---that's what it says on our flag. Yes, set us free, let us go!! I see lots of bumper stickers that say "PROUD TO BE AN AMERICAN", and I wonder, proud about what? We are number one is Weapons of Mass Destruction and we send lot of those to Israel to kill citizens in Gaza. Our nation does not honor international law, and though lots of us hope Obama will bring 'hope' and 'change', but I don't see much of it. The new boss is a lot like the old boss.
The Republic of California could join the United Nations and be a member of the General Assembly. There we could work to try and end the Security Council with their power to veto what the assembly of nations voted.
The Republic of California would not be a 'super power' and terrorise other nations. Wow!! and we could spend out tax funds to serve the people and protect the environment of California.
Please!! Kick us out!!
I don't think the Republic of California would be durable. I think there would be a civil war between northern and southern California over the issue of water. JMHO.
How about closing the A Canal? No sense for Oregon to send its water to 'another country'...
Sorry, but my 'fly-over' state sends more money to DC than it ever gets back...
The problem with the road-bridge-school building push is that the money will go to politically connected (read: entrenched) contractors who will lower wages and pocket the largest government dollar giveaway since the Iraq debacle.
It won't work.
I live in Illinois and I will tell you first hand that getting one of those "shovel-ready" jobs is damn near impossible due to the culture of nepotism and cronyism that pervades all levels of government.
Good luck.
Meanwhile, I'll still "Hope" for a job....
The other problem is once you have built the road/bridge/school, the jobs are over, and you are back to massive unemployment, and back to square one.
Walk in peace.