Even Goldman Sachs says that to cut federal domestic outlays by $61 billion right now would result in a "1.5% to 2% drag on GDP growth." Even the Los Angeles Chamber of Commerce supports California Governor Jerry Brown's plan to put a 5-year tax extension plan on the June ballot to take care of half of the state's $26 billion deficit problem. But Republican lawmakers in both cases continue with an ideological approach that considers only cuts as a response to current economic and fiscal challenges.
State governments across the country have laid off 426,000 workers in the past year. These people are no longer making house, rent or car payments, buying major appliances, going on trips or dining out. The contraction of their spending contributes to the slow recovery.
Although government spending is always a cause celebre for the GOP, it must be remembered that government spending did not cause the recession. Badly regulated housing and speculative markets did that. Budgets that used to balance do not now balance because government receipts are down, not because spending went up. And the reason they are down is because most people are not spending much. Robert Reich points out that high-end sales are booming as the upper class is doing quite well. But prosperity and spending among the top 5% is not enough to pull up the entire economy. "Americans bought 17 million new cars in 2005 but just 12 million last year." Yet compensation at the 25 biggest Wall Street players was $130 billion in 2007 and is now at $140 billion. And we all know that corporate America is sitting on $2 trillion in cash from increased profits over the past couple of years, profits they are not using to step up much hiring because sales haven't grown that much.
If the capital gains rate were 20%, or even the 40% it was at the peak of American prosperity in the 1950s and 1960s, and if the top income tax rate had even been restored to 39% from 1999 when we had a balanced budget rather than the 35% where it now is, the deficits and impetus to cut would scarcely exist. Yet rather than ask the wealthy to contribute as they once did, we see the spectacle of laying off thousands of teachers, bus drivers and police and a drag on the entire economy. It's the oldest play in the book: turn the have-nots against each other while the aristocrats wallow in luxurious indifference.
Sunday, February 27, 2011
Monday, February 21, 2011
Fixing California's 2010-2011 Budget
Here's your latest chance to solve California's state budget imbalance. A site called Next 10 has a clear and thorough program with plenty of good explanatory data to help you make up your mind. The site has been updated with new figures since I was on a panel last October that invited the public to try their hand. You can access my earlier blog on that here. I actually found it was easier for me to balance the budget this time than it was four months ago.
The Next 10 scenario takes you through options issue by issue, first for expenditures and then for revenues in your quest to balance a budget that starts out $19.4 billion out of kilter. (The $25 billion figure you may have read about is for a year and a half.) You typically have three or four choices on each issue, usually including a status quo, one that makes the deficit worse (either through raising spending or cutting a tax), and one or two others that offer spending cuts or tax increases.
Be sure to read the Overview, including the "Frequently Asked Budget Questions" at the beginning to get a good handle on how things in the Golden State stack up. You may be surprised at what you learn. The information is presented concisely and there are some illustrative graphs and pie charts to give you a visual picture too. The whole exercise took me only 10-15 minutes.
If you try your hand at it I look forward to your telling us how you did it and your reactions to the process. I do hope you will chime in with a comment. (You may need to be using Firefox rather than Explorer to comment on the blog. And I do have to moderate and OK the comments to appear after having some spamming trouble.) As Governor Jerry Brown says, California, with a $2 trillion economy and roughly a $20 billion state deficit, has a 1% problem. There are some tough choices to be made, and you can't reasonably do it with only program cuts or only tax hikes, but it is quite doable. Give it a try!
The Next 10 scenario takes you through options issue by issue, first for expenditures and then for revenues in your quest to balance a budget that starts out $19.4 billion out of kilter. (The $25 billion figure you may have read about is for a year and a half.) You typically have three or four choices on each issue, usually including a status quo, one that makes the deficit worse (either through raising spending or cutting a tax), and one or two others that offer spending cuts or tax increases.
Be sure to read the Overview, including the "Frequently Asked Budget Questions" at the beginning to get a good handle on how things in the Golden State stack up. You may be surprised at what you learn. The information is presented concisely and there are some illustrative graphs and pie charts to give you a visual picture too. The whole exercise took me only 10-15 minutes.
If you try your hand at it I look forward to your telling us how you did it and your reactions to the process. I do hope you will chime in with a comment. (You may need to be using Firefox rather than Explorer to comment on the blog. And I do have to moderate and OK the comments to appear after having some spamming trouble.) As Governor Jerry Brown says, California, with a $2 trillion economy and roughly a $20 billion state deficit, has a 1% problem. There are some tough choices to be made, and you can't reasonably do it with only program cuts or only tax hikes, but it is quite doable. Give it a try!
Wednesday, February 16, 2011
Wisconsin Smoke Screen is Cover for Union Busting
The state of Wisconsin faces a projected budget shortfall of $3.6 billion over two years. The new Republican governor of Wisconsin, Scott Walker, has proposed that the state's 175,000 state employees pay more into their retirement and health plans to solve the problem. The two-year savings for this proposal--$300,000,000--is only 8.3% of the savings needed. That is the smoke screen covering his real agenda. He has also introduced a bill into the newly Republican-majority legislature that would take away collective bargaining rights for all state workers except for police, firefighters and the state patrol. 10,000 state workers descended on the state capitol in Madison for protests today. Click here for more details.
At a time in history when rights seem to be advancing elsewhere around the world, even in such places as Sudan, Egypt and Tunisia, they are under siege in the United States. First, the 5-4 "Citizens United" Supreme Court decision overturned a century of precedent banning corporate cash in the political process and even struck down transparency requirements that allowed the public to know where such contributions were coming from. Now the other shoe is dropping, and the campaign to disable the one institution somewhat capable of opposing the pro-corporate and anti-worker agenda, workers united with the right to bargain together, has begun.
Before the New Deal Wagner Act of 1935 most workers toiled 12-hour days six days a week without benefits for starvation wages. Once the right to organize and bargain was enshrined and federally protected, America developed the largest middle class in the world and became the most broadly prosperous nation on earth.
But corporate America has never been happy with having to share a reasonable portion of profits with the help. They and their Republican partners have always looked forward to the day when such rights could be rolled back and the plutocratic days of the Gilded Age restored. If Walker and his legislators are successful, more such efforts will rapidly get under way in other states. Ohio and Tennessee are two of the first likely targets. The conservative court has opened the floodgates to corporate cash inundating the election process, to the great advantage of the Republican Party. If that party were also able to destroy the union movement, they would thereby eliminate the main countervailing funding source that supports the Democrats.
These developments are profoundly threatening to the well-being of the American people. A great deal hangs in the balance in Wisconsin over the next few days and weeks. If rights can actually be taken away from people it bodes most ill for the future prosperity and liberty of America's hard-pressed middle class. We'll see what fight still resides in the hearts of the descendants of Fighting Bob La Follette in the Cheese State.
At a time in history when rights seem to be advancing elsewhere around the world, even in such places as Sudan, Egypt and Tunisia, they are under siege in the United States. First, the 5-4 "Citizens United" Supreme Court decision overturned a century of precedent banning corporate cash in the political process and even struck down transparency requirements that allowed the public to know where such contributions were coming from. Now the other shoe is dropping, and the campaign to disable the one institution somewhat capable of opposing the pro-corporate and anti-worker agenda, workers united with the right to bargain together, has begun.
Before the New Deal Wagner Act of 1935 most workers toiled 12-hour days six days a week without benefits for starvation wages. Once the right to organize and bargain was enshrined and federally protected, America developed the largest middle class in the world and became the most broadly prosperous nation on earth.
But corporate America has never been happy with having to share a reasonable portion of profits with the help. They and their Republican partners have always looked forward to the day when such rights could be rolled back and the plutocratic days of the Gilded Age restored. If Walker and his legislators are successful, more such efforts will rapidly get under way in other states. Ohio and Tennessee are two of the first likely targets. The conservative court has opened the floodgates to corporate cash inundating the election process, to the great advantage of the Republican Party. If that party were also able to destroy the union movement, they would thereby eliminate the main countervailing funding source that supports the Democrats.
These developments are profoundly threatening to the well-being of the American people. A great deal hangs in the balance in Wisconsin over the next few days and weeks. If rights can actually be taken away from people it bodes most ill for the future prosperity and liberty of America's hard-pressed middle class. We'll see what fight still resides in the hearts of the descendants of Fighting Bob La Follette in the Cheese State.
Friday, February 11, 2011
Egyptians Oust Mubarak
Today Egyptian dictator Hosni Mubarak stepped down after nearly 30 years in power. This marks a watershed in Middle Eastern history, for the movement that got rid of him was both broad based among the people and nonviolent.
I have said for some time that what the Arab world needs is a Gandhi, someone who could show them the way forward without extremism and bloodshed. It appears they have gone that one better, adopting methods of peaceful civil disobedience pioneered by the Indian Mahatma and used so effectively in the United States by Martin Luther King, Jr. without the presence of a single galvanizing leader. Instead, their organizing prowess seems to have come via a plethora of activists by electronic communications, web social networking and plain old word of mouth.
Remarkably, the only significant violence in the entire eighteen-day protest fest came from regime thugs beating many and killing a few in their futile attempt to intimidate peaceful demonstrators. Of great importance, the Egyptian Army stood as a bulwark against official repression and moved into position to protect the people. Now that it has been entrusted with control of a transition government, all eyes will be upon the generals to see what happens next. It cannot be forgotten that Egypt has been ruled successively by generals since 1956 under Nasser, Sadat and Mubarak.
Hopefully, their performance of the past weeks will serve as prologue for what happens next. The joyous throngs celebrating throughout Egypt are full of optimism, at least for the moment. Perhaps the people will have their way and a democratic wave will spread across the Middle East. If we're going to dream, why not dream big?
I have said for some time that what the Arab world needs is a Gandhi, someone who could show them the way forward without extremism and bloodshed. It appears they have gone that one better, adopting methods of peaceful civil disobedience pioneered by the Indian Mahatma and used so effectively in the United States by Martin Luther King, Jr. without the presence of a single galvanizing leader. Instead, their organizing prowess seems to have come via a plethora of activists by electronic communications, web social networking and plain old word of mouth.
Remarkably, the only significant violence in the entire eighteen-day protest fest came from regime thugs beating many and killing a few in their futile attempt to intimidate peaceful demonstrators. Of great importance, the Egyptian Army stood as a bulwark against official repression and moved into position to protect the people. Now that it has been entrusted with control of a transition government, all eyes will be upon the generals to see what happens next. It cannot be forgotten that Egypt has been ruled successively by generals since 1956 under Nasser, Sadat and Mubarak.
Hopefully, their performance of the past weeks will serve as prologue for what happens next. The joyous throngs celebrating throughout Egypt are full of optimism, at least for the moment. Perhaps the people will have their way and a democratic wave will spread across the Middle East. If we're going to dream, why not dream big?
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