Beyond Stimulus: It's the Revenue, Stupid

Here in the sun-bedecked Golden State, a fiscal storm is roiling. We're about two weeks away from running out of money and handing out potentially unredeemable IOU's in lieu of tax refunds and, possibly, paychecks. California is almost flat broke.

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.