At the national level almost all of the projected deficit through 2020 will be the result of three factors: the Great recession, the tax cuts of the early 2000s under George W. Bush, and the hundreds of billions of dollars of war spending.
The just published report on Western State budgets () from the Brookings Institute shows that western states, where the housing bubble was the worst, also have the largest deficits now. The economic crisis produced at least half of the current crisis.
And, the national government will not be bailing us out. Almost all of the projected national deficit through 2020 will be the result of three factors: the Great recession, the tax cuts of the early 2000s under George W. Bush, and the hundreds of billions of dollars of war spending.
In California we need to spend more state money to improve schools, to develop roads and infrastructure, and to create jobs. Those who are well educated are more employed and paying taxes while those with less education, those who leave school, are in a prolonged economic crisis. It is well documented that our schools and our universities are in a finance crisis. We need to be preparing young people for new jobs and to create new industries. The success of students in higher education will significantly determine California’s future competitiveness and prosperity. Improving education, including both k-12 and higher education, makes California more likely to attract investment and the creation of new jobs and new industries.
California government must protect and empower our citizens. To foster prosperity it must prepare the young for civic participation. (BTW. This has been recognized since the first California Constitution of 1849). Protection includes health care, social security, safe food, environmental protection, safe streets, job protection, etc.
The finance capital collapse and theft on Wall Street produced this crisis, not immigration, not public workers. Now Wall Street has recovered, but the states and specifically California is left with the destruction. The best available response is for California to tax and spend to stimulate the economy- that is Keynesian stimulus. The anti tax radicals and the Republicans will oppose this approach. They must be defeated.
Specific proposals :
Pass an oil extraction tax. Require that the oil companies pay taxes when they take our oil out of the ground and then refine it and sell it back to us. Gain.10 Billions. Pass the 10.1 billion dollar jobs package as proposed in the Assembly last year. This would pay off debts to local governments and keep teachers in classrooms to avoid massive layoffs.
Pay for the Jobs package with a new oil severance tax. Imposition of an oil severance tax. California is the only oil producing state in the country that imposes no taxes on the pumping of oil. The proposed tax was to be 6% of the sales price of oil. Alaska and Louisiana both charge 12.5%.
Continue efforts to eliminate waste, fraud and abusive where it exists. There may be legitimate savings here. For example, clearly there are problems with the excessive pay of U.C. Administrators and the retirement of some police and fire captains. Repeal the 2009 and 2008 tax cuts for corporations passed to gain the extra Republican votes for the budget. Savings $1 billion.
As a consequence of the just passed federal tax reductions, including the reduction of taxes to the wealthiest taxpayers, Washington-based Citizens for Tax Justice estimate that California’s richest taxpayers will be saving about $14 billion annually on their federal taxes. The next wealthiest 4 percent, with an average income of $310,000, will save another $6.5 billion. State taxes should be increased on these two groups to secure this available 20.6 Billion dollars to fund the necessary jobs creation projects.
Sell state bonds to gain funds for investment. At present we pay bond holders a market rate. Rates are so low at present we should borrow and invest. To achieve a Keynesian stimulus we could sell many more bonds in particular to the public employees retirement system PERS and STRS. Once started ( stimulated) debt financed building will stimulate more building bringing private debt financing into productive investments.
Many more sources of revenue need to be developed. We have been thinking too small and looking in the wrong directions.