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- A2: States CP-California DA
A2: States CP-Keynes DAAnd the states can’t solve Klein, columnist at the Washington Post, 2010 (Ezra, “The Federal Government Has to Step in With Aid For States”, June 18, 2010, http://www.thedailybeast.com/newsweek/2010/06/18/the-anti-stimulus.html, accessed 7/17/12) Some 46 states are facing budget gaps that will require them to cut spending or raise taxes (Vermont is the only state in the union that can run a deficit). The Center for Budget and Policy Priorities estimates that in 2011, the states will have to make up a total of $180 billion. This fiscal massacre at the state level is only just starting to attract notice at the federal level. But it’s a huge deal, the equivalent of a massive anti-stimulus being conducted by the states and which some experts believe has overwhelmed the $787 billion stimulus passed by the federal government in 2009. Bruce Bartlett is a conservative economist who worked for Ronald Reagan, George H. W. Bush, and Jack Kemp, among others. So he’s not normally a fan of more government spending. But then, these are not normal times. “When the history of the current crisis is written, much of the blame will be placed on the sharp fiscal contraction of state and local governments,” he says. “I think economists will view this as a preventable error equivalent to the Fed’s passive shrinkage of the money supply in the early 1930s.”His argument goes to the very role of stimulus in the economy. People understand perfectly well that boom times feature economies that seem to be better than they really are. But the reverse is true for busts: They’re worse than they actually need to be. In a recession like the one we’re in, there’s a lot of labor and productive capacity (machines, shopfloors, etc.) that could be working, but aren’t. That’s because the economic scare of 2007 has left businesses and families cowering. They don’t know what to expect in the future, so they spend less now. The role of the government is to take their place and keep the economy moving until they feel comfortable consuming again.That’s what the federal stimulus was supposed to do. It might have been too small, and there’s plenty to argue over in its composition, but most private analysts think it did essentially what it promised: IHS Global Insight, Macroeconomic Advisers, and Moody’s Economy.com all estimate it created around 2.5 million jobs. The problem is that it wasn’t alone.Unlike the federal government, most states can’t deficit spend. So when the economy crashed in 2007, they went down with it. First, their tax revenue dried up because their residents got a lot poorer. Second, some of their expenses went up because there were more unemployed people who needed help. The states with the most responsible budget practices had reserve funds and tricks that could hold them over for one year, and maybe even two. But three years in, they’re all up against the wall. And because they can’t deficit spend, they’re cutting services and raising taxes. Using the data we have from 2009 and 2010, and then projecting for 2011 and 2012, the Center for Budget and Policy Priorities expects the total state shortfall will amount to $610 billion.That’s almost as big as the stimulus, and because every dollar of it has to be offset, while not every dollar of the stimulus got spent, it might, in the end, wipe out the federal stimulus completely. Or you can think about it in reverse: Nick Johnson, who directs the State Fiscal Project at CBPP, says that “the effect of the federal stimulus was to wipe out the negative effect of the state contraction.”Either way, the net stimulus from government spending has been a lot less than most of us think it was. Worse, the federal stimulus money is going to thin dramatically this year, but the state budget problems are sticking around. And with unemployment sitting stubbornly at 9.7 percent, we’re not in any shape to let the federal stimulus peter out and the state anti-stimulus drag us down. A2: States CP-California DACA budget stabilizing now San Francisco Public Press 7/17 (“Krugman: California Represents the Worst of Current U.S. Economic Crises” http://newamericamedia.org/2012/07/krugman-california-represents-the-worst-of-current-us-economic-crisis.php ) The budget pain facing California this year is not California’s fault, said Paul Krugman, the Nobel Prize-winning economist who has been among the most outspoken writers critiquing the government’s response to what he calls an economic “depression.” The state budget Gov. Jerry Brown signed Wednesday at least on the surface bridges a $15.7 billion potential deficit — by far the highest shortfall faced by any state this year. As tax revenues continued to fall below expectations in a suffering economy, California state and municipal governments continue to slash spending. The state's $91.3 billion budget represents the lowest state spending level since 1999. “Gov. Brown faces political constraints that, if anything, are even worse than those faced by President Obama, because of the craziness of California’s constitutional setup,” Krugman said at a recent appearance at the Commonwealth Club of California. He said Proposition 13, the state’s requirement of a legislative supermajority to pass tax increases, was the main culprit. More than tax hikes are needed to help ailing states, he said. Federal aid to state and municipal governments to rehire workers is paramount to ending the crisis. New spending is paid for by taxes that collapse the economy Norman 7/17 (Jan Norman, staff writer for the Orange County Register, “Tax hikes would cut Calif. economy by $26.3 billion, study says” http://www.ocregister.com/articles/billion-364095-report-tax.html ) Higher tax rates on top of U.S. wage earners would reduce U.S. output by $200 billion and the workforce by 710,000 jobs over a decade, according to a report released Tuesday by the National Federation of Independent Business. California's economy would be $26.3 billion less and statewide employment would be reduced by 76,400, according to the report, authored by Robert Carroll, a principal at the Ernst & Young accounting firm. The report addresses: Raising the top two federal income tax brackets from 33% to 36% and from 35% to 39.6%; Reinstating the limitation on itemized deductions for high-income taxpayers; Taxing dividends as ordinary income from 15% to as high as 39.6%; Raising capital gai.s tax rate from 15% to 20%; Increasing the Medicare tax on high-income taxpayers from 2.9% to 3.8%; Adding a new 3.8% tax on investment income including business income, interest, dividends and capital gains The Congressional Budget Office recently reported that the short-term effect of these tax increases plus scheduled cuts in federal spending would be a 1.3% reduction in the U.S. economy in the first half of 2013. The NFIB report focuses on the long-term macroeconomic impact.
Yet the rest of the country cannot afford to stand by idly as the Golden State drowns in red ink. In the same way that the federal government has deemed Chrysler, General Motors and the nation's largest banks and financial corporations too big to fail, California – the world's eighth largest economy – is too big and too important to the nation for failure to be an option. Since World War II, the state has been an economic driver of the country. A fiscal meltdown in California would have reverberations throughout the country and the world. Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 0.77 Mb. Share with your friends:
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