Monday, April 4, 2011

Hot tub time machine?


Here's one PBM and Mr. L will like.

2 comments:

PBM said...

"The amendment would require a two-thirds majority to raise taxes, giving a right-wing minority veto power over any tax increases."

Isn't a similar constitutional amendment the reason behind California's huge debt?

Patrick_L said...

Proposition 13 (the famous California amendment) limits local property tax growth, so that really hurts local governments (who now struggle to maintain literally the basic local government services) which has pushed fiscal burdens on to the state government.

Proposition 98's requirement that nearly one-half of all new revenue be dedicated to support schools has been problematic for California by limiting flexibility.

California was also one of three states in the country that required a two-thirds legislative majority to approve the state budget, though that was suspended by an election initiative in 2010. Alas, at the same time voters approved a measure that would require a two-thirds majority for not only any tax increases
but fee increases as well- but that's a long-term problem which isn't contributing to California's problems.

California does suffer from the usual balanced-budget requirements found in all but one state's constitution- which basically ties the government to the business cycle (for no logical reason since nothing it does moves in-sync with the business cycle, except for that demand on some government services like Medicaid or TANF grow during a recession because shockingly there are more people who qualify for these programs in a recession!)

Now, for the sake of intellectual honesty- I'll point out that California's problems really are based on spending increases enacted during economic expansionary periods in the 90's and 00's with the government making no attempt to ensure that revenues could support those programs in the future (i.e. tax increases). It's a matter of perspective whether you think that's a spending or deficit problem- in this case neither is factually more correct than the other, it’s just a matter of labels.

More generally speaking, the BBA Republicans are pushing right now represents a radical form comparable (but not identical) to the balanced budget requirements that many states have. It’s interesting to note that the last two times the BBA came up for a vote in the Senate, it earned 66 of the 67 votes necessary for ratification. So this is a very serious threat if you think it might be disastrous for the economy and the country if the federal government had to contract to 16.7% of GDP by 2017 (aka, if you have a brain). (while trying to eliminate past deficits, deal with a demographic boom, a weak economy, increased national security commitments, health care expenditures nearly twice those found in other developed countries, rising inequality in the country, stagnant wage growth for tens of millions of American workers for years (low-skill male workers have actually seen their wages decline in recent decades), blah blah blah.