The Moment of Truth for Our Legislators
On February 19, 2009, thirty Washington state economists sent a letter on the state budget deficit to Governor Gregoire, Speaker Chopp, and Senate Majority Leader Brown. Signing the letter were distinguished economists from the University of Washington, Washington State University, and other colleges. With the state budget deficit now estimated at $9 billion for the biennium, the moment of truth has arrived for our state legislators.
Will they act on the advice of our state's top economists and begin to repair the damage of a devastating local economy? Or will they make it worse by acting out of their usual political expedience?
The second paragraph of the letter states:
Drawing upon economic theory, we believe reducing government spending will have a more deleterious effect on Washington State's economy than would increasing revenue. There is no equivocation in this statement. Legislators will do more damage to our economy by reducing government spending than by increasing revenue. The decision to raise taxes will ultimately fall to the voters. However, the legislature does have the power to offer the voters a tax package in a referendum, and the Democratic caucus has the power to persuade the voters to adopt it. But do they have the courage and the will? The letter continues:
Although both cuts in government spending and tax increases have the potential to slow economic growth, cutting government spending would likely have the most immediate impact by directly reducing consumption. In other words, there are risks in both cutting government spending and raising taxes, but cutting spending is riskier. Will the legislature adopt the riskier strategy? The economists go on to suggest that tax increases are less problematic
because individual consumers, especially those with higher-incomes, are unlikely to reduce consumption by the full amount of the tax increase. As John Burbank, Executive Director of the Economic Opportunity Institute, has written, "We can pave the way for a more prosperous economy with a "high incomes" income tax. It would be offset with an across-the-board cut of the state property tax." Undoubtedly even a "high incomes" income tax will not be enough to close the budget deficit; the state must also examine ways to increase revenue through responsible borrowing. However, as the economists point out, the legislature's current plan to make deep cuts in government spending and to resist tax increases
is not an effective strategy to guide Washington State out of this recession. If our legislators now take the worst possible actions in Olympia, they deserve to face the anger of the voters when they return to their districts.
The Moment of Truth for Our Legislators | 18 comments (18 topical)
The Moment of Truth for Our Legislators | 18 comments (18 topical)
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