Viewing blog posts written by Gino DiCaro


Legislature's budget frame of mind: 'Hope for the best and ignore the obvious'

Posted by Gino DiCaro, VP, Communications on Jan. 6, 2009

I wrote before Christmas that momentum was growing for real economic stimulus in California.  Even President-Elect Obama is pushing a $300 billion federal tax cut to stimulate crucial job growth.  Unfortunately, the annual return to the State Capitol seems to have dampened economic growth and stimulus appetites, so here's a few more items for California policymakers, media and citizenry to consider:
   
  • The genesis of this blog's title came from an excerpt in the report, An economic backdrop for fiscal reform in California, released in November 2008.  The authors cautioned that assumptions had become very unrealistic in Sacramento.  The report predicts an 11 percent decline in sales, income and corporate tax revenues in the state over the next two years as a result of precipitous corporate profit declines, labor market concerns, consumer trepidation and, of course, the housing crisis.  Given the state's reliance on these taxes for revenue, this prediction indicates that the edge of California's "fiscal cliff" is near and that temporary revenue increases and budget cuts dangerously assume an automatic economic recovery in the private sector.  You can raise taxes but the base is weakening.  The report specifically argues for California's fiscal reform but also makes a perfect case for growing and stabilizing our revenue sources (In other words the jobs and salaries that increase our three core tax revenues).   Make no mistake, the economic stimulus that creates high wage job growth and our tax base is the light, the beacon, the granddaddy, the engine, the start and the future of California. This can't be overstated.

  • Sacramento Bee columnist Dan Walters made the previous point very well in his New Year's Day piece, indicating that economic growth (and by default real stimulus for middle class jobs) must occur alongside of temporary quick fixes.  Otherwise, in two years, we'll find ourselves right back here at the cliff .... or over it.

  • To put perspective on the Walters argument, about two years back we here at CMTA created a chart to show the declining and growing sectors in California, and their respective wages.  We found a clear indication of the growing loss of wealth.  The average wage of growing sectors was $40,000 and the average wage of declining sectors was $66,000.  You can see it here.  That reality no doubt made a national downturn much worse here in California over the last two years.   We'll dive in and see how those numbers have changed in 2009 and provide in upcoming blog.

  • Governor Arnold Schwarzenegger released his letter to President-Elect Obama today outlining his economic stimulus wish list for Washington.  It shows his deepening interest for growing high wage jobs.  This is good, but overall the feds will not seek to make California more competitive than other states and reduce our costs to national averages.  That crucial component has to start here in California with the Legislature and Governor agreeing that any economic recovery assumptions must start with BIG signals (example) to high wage job creators and a full economic understanding of policy impacts -- which does not occur now.
Let's stop ignoring the obvious and hope for reality.



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