Misleading Budget Reporting from the Los Angeles Times

The LA Times had a ‘news analysis’ piece today on the impact of the budget deal on the middle class. While it got the gist right – Californians are getting screwed – it repeats a great many of the myths about state finances. I was going to discuss it in detail, but instead I’ll point to Robert at Calitics.

I do want to mention three things. On the question of the tax burden in California as opposed to other states. According to this CNN Money graph from 2005, California ranks 20th on taxes as a percent of income. In a February 2009, the Public Policy Institute of California [PDF] showed that on the same metric, California ranked 18th. We are firmly in the middle of the pack. For some reason, the mindset in California is that our tax burden is still well over the national average. This hasn’t been true since the last 1970s, but reporting like this helps to perpetuate the belief.

The second issue pertains to paying for our freeways. I’ve discussed a mileage tax before, and how it should replace the gas tax as the means for paying for transportation infrastructure, with the gas tax being retained for climate change mitigation until a carbon tax is instituted. The article hints at a mileage tax around the edges, but mostly suggests that new construction will take the form of toll roads rather than freeways. This need not and shouldn’t be the case. The debacle of the TCA in Orange County should be evidence enough. There is a good coverage of this issue over at OC Progressive.

Finally, there is the question of the article’s focus on the middle class.

But at a time when taxes are about to rise substantially, the services that have long set this state apart are deteriorating. The latest budget cuts hit public programs prized by California’s middle class particularly hard — in some cases at the expense of preserving a tattered safety net for the poor — following years of what analysts characterize as under-investment.

The entire tenor of the article paints the picture that the middle class is being targeted specifically for both tax increases and budget cuts, in favor of the “tattered safety net”. However, this is misleading in three ways. First, public programs are prized by and benefit all residents of California, not just in the specific (everyone wants afforable higher education for their kids), but also in the abstract (quality education benefits businesses in the state and helps combat crime). Second, see this post at Calitics on the intensely regressive nature of the tax hikes in this budget – it is the poor who are being unfairly targeted, while corporations get a tax cut. Finally, the Democratic proposal for this budget always involved restoring high income tax brackets abolished in the 1990s. It is the governor, and ultimately the Republican obstructionists, who deserve the credit for shifting the burden to the middle and lower classes, both in the form of the income tax increase and in the sales tax increases, which are inherently regressive. Of course, this is seen as a bonus by the Yacht Party. Shame on the Los Angeles Times for getting the isolated facts right, but missing the larger story.

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The Party of No Solutions

State Assembly Speaker Karen Bass was on the Rachel Maddow Show tonight. The video can be found here (I cannot figure out how to make the MSNBC embed code work on wordpress – advice would be welcome).

Key, Speaker Bass referred to the Republican Party as “The Party of No Votes. The Party of No Solutions.” This should become the Democratic motto in California for the next two years. Assuming that some sort of compromise is finally reached, the inclination will be to let the horror of this budget crisis pass into history. Progressives are going to need to keep Republican obstructionism front-and-center both for the fight against the 2/3rds rule and for the gubernatorial race.

(On the 2/3rds rule, see Robert in Monterrey at Calitics on the history of the rule, and the approach to changing it.)

Overall, I thought that Speaker Bass hit the key points, especially on the recent history of Democratic concessions to spending cuts. However, I found fault  with her on two issues. The first, she made a point that this crisis is a product of the Republican party – referring to recall threats and KFI’s John & Ken specifically. Okay, that is accurate. But in doing so, she appeared to give a kind of clemency to the individual legislators. This is dangerous, especially given Abel Maldonado’s narcissistic attempt to rewrite the constitution to protect his own seat.

Rachel also asked her about the liberal response to those threats, a question that Speaker Bass had to evade, because there has been relatively little liberal or progressive response. I think some of this is structural – liberal outrage is unlikely to sway recalcitrant Republicans, and threatening Democratic legislators for more tax increases and fewer spending cuts is counterproductive in the face of total disaster. However, I also suspect that the problem, among both Democrats and the populace at large, is familiarity. We’re used to budget crises in California. They aren’t news – they’re olds. As such, I believe that most of the state ignored the crisis in the summer of last year, even though in retrospect is was an obvious prelude to the current disaster. We’re so used to storms that we didn’t recognize the hurricane for what it was.

Speaking of progressive response, Calitics has been urging people to call Abel Maldonado for days.

If you haven’t called him, please call Maldo,916-651-4015, and tell him to end the hostage situation. If you have, call him again, or you can also call his local offices. And if you are in the district, why not call both offices and send him an email too?

This is especially important given this from the LA Times:

But for others, including Sen. Sam Aanestad (R-Grass Valley), it is a matter of listening to the “hard-working middle-class people” he represents.

“Just yesterday alone, we had 400 telephone calls,” he said. “Overwhelmingly, more than 40 to 1, they were saying, ‘Please do not raise our taxes.’ “

Take the time; make a call.

The Combined Wisdom of the Republican Party

http://gopproblemsolver.com/

Published in: on February 13, 2009 at 4:35 pm  Leave a Comment  
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How to Vote on the Stimulus?

From the point of view of most economists, it appears the stimulus package is both too small and misspent. The question is, then, should Congressional Democrats vote for it?

From The Hill (via Firedoglake):

Liberals in the House are already making noise that they might vote against the conference bill if it mirrors the Senate legislation.

Rep. Ed Pastor (D-Ariz.), a member of the Congressional Progressive Caucus, said last week, “Many of us may not support it in the House” if the Senate makes “so many changes,” such as adding more tax breaks and cutting spending provisions, which is what the Senate did.

I certainly understand their position – I’m furious with the spending cuts that were made and tax cuts that were added in the Senate, although I think the House bill was also too small. However, on the otherside you have economists.

Here is Paul Krugman:

Today Sen. McCaskill asks whether the Senate stimulus, as negotiated, is better than nothing.

Yes, it is — and if it comes down to that choices, a yes vote is the right thing to do.

But let’s not have any illusions about what just happened. The centrists went to work on a bill that, perhaps inevitably, was a mixture of economic muscle and useless fat; as the price of their support, they cut deeply into the muscle while leaving all the fat in place.

And Brad DeLong has a roundup of others, many who argued for more tax cuts, but say the bill needs to be passed regardless.

Personally, I don’t think a liberal revolt in the House would be productive, as much as I’d personally like to see it. I’d rather see a strong effort in the conference committee. The stimulus is so necessary that I don’t believe this is the time for this fight. Instead, I’d like to see the House add more stimulus spending at points further down the line, and fight the Senate, or the President, over those.

Published in: on February 10, 2009 at 12:52 pm  Leave a Comment  
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More Good Sense from Paul Krugman

On stimulus bipartisanship:

You see, this isn’t a brainstorming session — it’s a collision of fundamentally incompatible world views. If one thing is clear from the stimulus debate, it’s that the two parties have utterly different economic doctrines. Democrats believe in something more or less like standard textbook macroeconomics; Republicans believe in a doctrine under which tax cuts are the universal elixir, and government spending is almost always bad.

Obama may be able to get a few Republican Senators to go along with his plan; or he can get a lot of Republican votes by, in effect, becoming a Republican. There is no middle ground.

We should stand our ground and pass the best stimulus package possible. Republican ideals have run the economy, more or less, for the past eight thirty years. Why should we still be listening to them?

Published in: on February 3, 2009 at 1:04 pm  Comments (2)  
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Stimulus: Mass Transit Slashed for Tax Cuts

This news has been making its way around the blogosphere, but I thought I’d throw in my two cents. Congressman Oberstar (D-MN), Chairman of the House Committee on Transportation and Infrastructure is indicating that spending for mass transit in the stimulus plan was slashed to make room for tax cuts.

But he also said his proposals to distribute billions of dollars for infrastructure through the Army Corps of Engineers, the national passenger rail network Amtrak and other programs, were sliced during negotiations within his party over spending and tax measures.

‘The reason for the reduction in overall funding … was the tax cut initiative had to be paid for in some say,’ [sic] he said.

This is a bad idea. On the purely economic implications of tax cuts instead of spending, I’ll point to this post by Paul Krugman and this one by Brad DeLong. Instead, let’s place this another context. In November, Los Angeles residents, some of the most car-friendly people in the world, voted to increase the sales tax to fund an expansion of the county’s subway and light rail lines. A similar measure passed in Santa Clara County. Californians also approved $10 billion in bonds for the construction of a high-speed rail line. Indeed, according to the Wall Street Journal, such ballot propositions passed all over the country.

Americans want more mass transit. And yet, even today, when the Los Angeles MTA board finally approved a study for the subway that would connect downtown with Santa Monica, they also discussed cutting 160,000 hours of bus service in the face of budget cuts.

We should be investing more in mass transit – local, regional, and multistate. This stimulus package is the ideal opportunity to do so, revitalizing urban life and combating climate change, while generating jobs. However, even if concerns about the ‘shovel readiness’ of mass transit projects prevents a massive investment, we should use the money to fill shortfalls in transit authority budgets, so that existing service can be expanded rather than cut.

There is a clear disconnect here between the American people, who less than three months ago were willing to pay higher taxes in order to build more mass transit and Congress. It is depressing that even Democrats apparently have their priorities wrong.