Aug 092010
Example of state employee furloughs in 2009 be...
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Like all good Republicans, in order for Meg Whitman to execute her tax-reduction-for-the-rich strategy, she must reduce spending. According to Whitman’s campaign, this has to be done regardless. Citing recent spending increases, they claim that in the decade preceding the recession, “State spending had increased by nearly 80 percent.” This is true, but it’s also disingenuous. What Whitman fails to mention is that while spending did increase, so did the GDP. The whole truth is that spending rose a much more modest 30 percent when viewed as a portion of the GDP.

Of course, citing the gross increase in spending isn’t, in and of itself, a big issue. But, when it’s used to substantiate their indictment of what they term, a “spending binge,” and then they turn around and offer a GDP-based cap as the solution — well . . . the smell of burnt rubber flowing from the spin is stifling.

But, spin aside, nobody can deny that the State budget needs serious work. Pushing forward the deficit has become standard procedure, and Whitman has a plan to address it. She will “defend the two-thirds budget requirement,” her logic being that to require only a simple majority would be “nothing more than a license for Sacramento to raise our taxes.” The potential for tax increases being Whitman’s number one concern, she’ll fight to keep it from happening, even if it means perpetuating the State Legislature’s inability to develop a budget in a timely fashion.

Judging from her plan, Meg Whitman seems to be oblivious to the detrimental effects of running a state without a budget. Most people would like to avoid the State paying its bills with IOUs or cutting 200,000 worker’s salaries to minimum wage. Does Ms. Whitman understand the situation? Does she care? Maybe it’s just the fact that she had no interest in state politics prior to deciding to run for governor that leaves her so naïve. Perhaps she just didn’t notice that the state had missed its constitutional deadline for a budget 19 times in the past 25 years. It is possible, since she’s rarely even bothered to register to vote for that entire period of time, and more.

Whitman’s prior disregard to fulfill her duty as a voter might also help explain her naïveté concerning California’s budget woes. The state really had no trouble developing budgets prior to 1978 and the passage of Prop-13, which has reduced local tax revenues by an estimated $200 billion over time. These cuts hit education hard and eventually brought about Prop-98, which requires a complex calculation that typically commits 40% of the budget to education. But even though California has the 13th lowest property tax rate in the country, Whitman, and conservatives in general, adamantly oppose any increase in taxes, even one that often results in one neighbor paying 20 times more for identical property.

No, Whitman insists that the only path to a balanced budget is through the unholy pair of both spending and tax cuts. If this seems a bit contrary, especially amidst a recession, it’s because it is. Nobel Prize-winning economist, Joseph Stiglitz, provided his analysis on the matter in 2008. According to Stiglitz, when the economy is weak, “Economic theory and evidence gives a clear and unambiguous answer: It is economically preferable to raise taxes on those with high incomes than to cut state expenditures.”

Stiglitz is very clear about state spending: “Every dollar of state and local government spending enters the local economy right away, generating a greater economic impact. The impact is especially large when the money goes for salaries of teachers, policemen and firemen, doctors and nurses and others that provide vital services to our communities.” Yet Whitman’s plan is 180 degrees off from the sage advice of this renowned economist, and most others.

Whitman will lower taxes on the rich instead of raising them, and will trump that action with deep spending cuts. Little detail is available regarding the cuts she will target, but when employee compensation and retirement forms the largest single piece of the budget pie, there’s no doubt where her axe will have to cut. One such cut that may not break the hearts of many Californians is her planned initiative for a constitutional amendment to make the State Legislature part-time. Such a move is obviously more political than practical, as the savings would be minimal.

But never fear, Queen Meg will get that budget balanced no matter what sacrifice has to be made by average Californians. She has yet to tell anyone which programs will suffer, but the Red Queen has at least given us some notice — she will be ordering “off with their heads” for more than 40,000 state employees.

So, Whitman will create jobs and balance the budget by lowering taxes on the rich and cutting workers from the state payroll. Then, with lower revenues and fewer people, she will move on to her third priority — to “fix education.” More about that in the next part of the Whitman story.

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