New Revenue is Needed to Invest in Economic Recovery

[Dan Moadus]

It's so sad that someone who is running for Governor is so lacking in economic understanding.  There is so much proof available today that allows us to know that taxing people more does nothing to help in a recession. Printing, and borrowing is even worse. Credit expansion is what got us here, and the best thing government could do is butt out. People should understand that the recession IS the recovery. Our politicians would like us to believe that we can get out of the recession without any pain.  That's not going to happen. All they can do is forestall the correction. But it can not be held off forever. When it comes it will be worse.

The only people embracing added spending are the so called progressives.  Peter Orzsag, mentioned in the article as supporting higher taxes, just this week admitted that it would be wrong to do so. Now that he's out of the Obama administration he advises keeping the Bush tax cuts that are do to expire.

People like Dennis always couch it as a choice between paying more or accepting less (in services). What about instead of reducing services by laying off people, we just cut their wages and benefits. That's never mentioned. We know public employees are paid more than their private sector counterparts, so shouldn't we look there first?

[irishbobcat]

New Revenue is Needed to Invest in Economic Recovery


In a Progressive States Network report :

As 48 states confront monetary shortfalls this fiscal year, the budget will undoubtedly be the predominant focus of lawmakers.  In fact, the Center on Budget and Policy Priorities (CBPP) estimates that states will face cumulative deficits of approximately $350 billion in 2010 and 2011.  The downturn has also taken an enormous toll on tax revenue.  Mark Zandi, Chief Economist at Moody's Economy.com, reports that state and local tax revenues have dropped 9 percent from last year, "the largest decline on record going back to just after World War II." 

During an economic downturn, progressive revenue generation is far preferable to deep cuts, as it allows states to provide funding for essential programs, pump money into the economy, and protect working families in this time of hardship.  A budget that relies too heavily on cuts will not only force layoffs of state employees, but will also cut off funding in the state for crucial services, thereby reducing spending pumping dollars in the private sector.

Peter Orszag, Director of the Office of Management and Budget, and Nobel prize winning economist, Joseph Stiglitz confirm:

[T]ax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.  Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.

As a recent report by the Economic Opportunity Institute denotes, "every dollar of state spending generates $1.41 of economic activity.  Much of that spending - 62%, or 88 cents - boosts the private sector.  Cutting state spending means fewer purchases from suppliers, reduced contracts with service providers, less money from public and private employee paychecks circulating through local businesses - and of course, fewer public services."

Also, spending on programs that assist low and middle-income families is smart economic policy.  By assisting working families, who will more readily spend their funds on basic necessities, the government is boosting short-run demand and fostering market activity.  For instance, Zandi finds that increasing food stamps spending creates $1.73 in demand for each dollar spent by the federal government.

Cuts Hurt the Economy:  Unfortunately, several states have responded to the fiscal crisis with deep service cuts:
•28 states instituted cuts that will limit low-income children's access to health care
•24 states have slashed services for the elderly and disabled
•36 states have reduced funding for higher education
•42 states implemented cuts that affect state employees, including 26 that have hiring freezes, 14 that have announced layoffs and 26 that have decreased wages
If new revenues are not generated, further cuts will continue a cycle of job layoffs by states, lower spending on crucial programs, diminished economic growth, and deep budget cuts.  The Economic Policy Institute (EPI) provides the following chart illustrating the danger of state budget cuts as they ripple through the economy; teachers, nurses and police are laid off, state funds supporting private sector activity are reduced, and individuals receiving state support stop spending in their local communities.

Working and Middle Class Families Have the Highest Tax Burdens On Average:  A common misconception about state and local taxes is the idea that the wealthy have incredibly high tax burdens.  The reality is the richest taxpayers have not been contributing their fair share for years.  When you factor in sales and excise, property, and income taxes, states tax working families far more heavily than richer individuals, according to Who Pays?, a report from ITEP.  As the graph below highlights, the lowest 20 percent of earners pay about 11 percent of their income in state and local taxes while the top 1 percent pay a little over 6 percent of their income to state and local governments. 

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We need to raise revenues in ohio to avoid loss of services. Somebody tell

Ted Strickland that. He cuts programs as bad as a Republican!

Dennis Spisak-Green Party candidate for Governor