Wednesday, July 29, 2009

California's Budget: A No-Win Scenario

Well, after what seems like an eternity, the state of California has finally passed its budget for the coming year. Faced with record-setting shortfalls, this was a very long, bitter fight, with no clear winner.

Although those who fought to keep the income tax from going up (even for those who could most afford it) could argue to have "won," the sales tax is already more 1.5% higher now than it was a year ago (to be fair, we the people voted for 0.5% of that ourselves, hoping to get better public transportation out of the deal). Besides, most of the constituents most concerned about not letting taxes go up are angry about the fact that the state government will be raiding huge amounts of money from more local (i.e., county and city) funds, thereby forcing local leaders to decide whether or not to raise taxes or further cut programs. And there's the question of how much of the budget isn't actually "real" spending being reduced, but simply creating accounting that makes it look like we're more balanced than we are. And, of course, Gov. Schwarzenegger used the power of the line-item veto to cut an additional $500 million out of the budget beyond what the lawmakers had agreed to after their own endless battles, which naturally hasn't made much of anybody happy.

Now, I'm no economist, but I have a sense that some our lawmakers don't know what they've actually done. For example, the Governor, in an attempt to sound a sympathetic note, said "I know that college students will pay now higher tuitions." Well, yes, but how many students will now not even go to college at all? That's bound to have further negative repercussions on the economy, isn't it? Likewise, the number of criminals who will be released early from prisons, many of which will almost certainly commit crimes that will just cause them to be sent back, can't be "economy-neutral" even in the relatively short-run. Funds for aiding the poor have been slashed, but has any attention been given to the fact that, if more poor people are not given the tools they need to enter the ranks of production, that too will have a further negative impact on the economic status of the state as a whole?

But, let's be honest, even if these concerns were addressed, there was never going to be a way to close this monstrous budget gap without causing a lot of pain. This was a no-win scenario in just about every definition. I can only hope that we didn't cause ourselves even more difficulty in trying to do what needed to be done to fix the problems.

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