Saturday, January 08, 2011

Sacramento Bee misses the story

The Sacramento Bee on Saturday features an article by Dale Kasler on page 1 entititled “State’s economic levers limited.”  This piece and others promote a piece that is fundamentally wrong.  It is simply not accurate that the state can not respond to the economic crisis.  Here is a start.  I will return to the issue of why the press persistently gets this issue wrong.

It is clear that the California budget is in crisis,  but the argument that there is little that can be done is simply wrong. We can not simply cut our way out of the crisis, budget cuts and lay offs make the recession worse.California will need to raise taxes to fund the schools and to repair the social safety net.
Specific policy proposals:
Enforce the current California law taxing the sales of goods by out of state companies ( such as Amazon)  over the internet.  Gain. 1.2 billion $.
            Pass an oil extraction tax.  Require that the oil companies pay taxes when they take our oil out of the ground and then refine it and sell it back to us.  Gain.10 Billions.  Pass the 10.1 billion dollar jobs package as proposed in the Assembly last year.  This would pay off debts to local governments and keep teachers in classrooms to avoid massive layoffs. California is the only oil producing state in the country that imposes no taxes on the pumping of oil. The proposed tax was to be 6% of the sales price of oil.  Alaska and Louisiana both charge 12.5%.   

            Establish a  public state bank such as the Bank of North Dakota. Initially move 25% of all state revenue, receipts and reserves into this bank and 25% of all PERS and STRS funds. Manage the bank as a public service. Over time, finance state borrowing from our own bank.   Gain.  6% of the budget.
            Repeal the 2009 and 2008 tax cuts for corporations passed to gain the extra Republican votes for the budget.  Savings $1 billion.
            As a consequence of the just passed federal tax reductions, including the reduction of taxes to the wealthiest taxpayers,  Washington-based Citizens for Tax Justice estimate that  California’s richest taxpayers will be saving about $14 billion annually on their federal taxes. The next wealthiest 4 percent, with an average income of $310,000, will save another $6.5 billion.  State taxes should be increased on these two groups to secure this available 20.6 Billion dollars to fund the necessary jobs creation projects.  
            Sell state bonds to gain funds for investment. At present we pay bond holders a market rate.  Rates are so low at present we should borrow and invest.  To achieve a Keynesian stimulus we could sell many more bonds in particular to  the public employees retirement system PERS  and STRS.   Once started ( stimulated) debt financed building will stimulate more building bringing private  debt financing into productive investments.
            Many more sources of revenue need to be developed.  We have been thinking too small and looking in the wrong directions. 
The world wide economic crisis was created by  U.S. finance capital and banking, mostly on Wall Street ,ie. Chase Banks, Bank of America, AIG, and others.   Finance capital produced a $ 2 trillion bailout of the financial industry, the doubling of U.S. unemployment rate and the loss of 2 million manufacturing jobs.  More than 15   million people are out of work.  At the national level almost all of the projected deficit through 2020 will be the result of three factors: the Great recession, the tax cuts of the early 2000s under George W. Bush, and the hundreds of billions of dollars of war spending.
The economic stalemate in California has produced school funding cuts far beyond reasonable levels.  At present,  the state ranks 47th among all states in its per-pupil spending, spending $2,856 less per pupil than the national average.
  California government must protect and empower our citizens. To foster prosperity  it must prepare the young for civic participation. (BTW. This has been recognized since the first California Constitution of 1849).  Protection includes health care, social security, safe food, environmental protection, safe streets, job protection, etc.
Our economy needs roads, bridges, telephone lines, communications systems, energy and quality education.  These services make freedom and prosperity possible. Conservative opposition to these services ignore the economies need for infrastructure.

Well. If these things are available, why do the “experts” interviewed for news stories not consider them ?
Here are a couple of major economists explaining the problem;
Robert Samuelson in the Washington Post,  “Here we have the most spectacular and financial crisis in decades… and the one group that spends most of its waking hours analyzing the economy basically missed it…. The nation’s economists , “ seemed singularly disinclined to engage in ‘rigorous self-criticism to explain their lapses’.  Or, Nobel Prize winning economist Paul Krugman, “The economics profession went astray because economists, as a group, mistook beauty, clad in impressive looking mathematics, for truth.”
Or,  geographer David Harvey, author of The Enigma of Capital and the Crisis of Capitalism, 2010, in a speech to the World Social Forum, in 2010.
The current populations of academicians, intellectuals and experts in the social sciences and humanities are by and large ill-equipped to undertake the collective task of revolutionizing our knowledge structures. They have, in fact, been deeply implicated in the construction of the new systems of neoliberal governmentality that evade questions of legitimacy and democracy and foster a technocratic authoritarian politics.  Few seem predisposed to engage in self-critical reflection.  Universities continue to promote the same useless courses on neo classical economic or rational choice political theory as if nothing has happened and the vaunted business schools simply add a course or two on business ethics or how to make money out of other people’s bankruptcies. After all, the crisis arose out of human greed and there is nothing that can be done about that!

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