When he announced his opposition to Proposition 92, Governor Schwarzenegger asserted that the central problem with the initiative was that it would “lock in a billion dollars in new mandated spending without any way to pay for it.” This, of course, is only true if the Governor continues to zealously stick to his “no new taxes” pledge and imposes cuts rather than raising revenue. But, in the face of an oncoming recession, do budget cuts make sound economic sense? The answer is clearly no.
As Columbia economics professor and winner of the 2001 Nobel in economic science, Joseph Stiglitz recently put it, in times of recession the opposite is true: “The federal government should provide some assistance to states and localities, which are already beginning to feel the pinch, as property values have fallen. Typically, they respond by cutting spending, and this acts as an automatic destabilizer.” Stiglitz also points out that “more federal support for state education would also strengthen the economy in the short run and promote growth in the long run.” The reason this has not happened at the federal level is, he argues, that the Bush Administration has “taken the view that tax cuts are the solution to every problem. This is wrong.” As evidence, Stiglitz points out that median family income is lower today than it was in 2000 despite the Bush tax cuts. Thus, tax cuts don’t just fail as an economic panacea, they also hurt education and delay vital spending on infrastructure, two areas where more spending rather than less would most likely help the economy in the long run.
Sadly, in California, we are stuck with a wicked one-two punch of bad Bush/Schwarzenegger economics that holds to a brain dead anti-tax dogma at the expense of the good of the state and the country. A vote for Proposition 92 would signal that the people of California know a sound investment when they see one, even if their Governor lacks the same good sense.