Washblog

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.

< Never Waste a Good Crisis | Brave New World >
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letter -- several copies -- and will be sending it to my legislators, legislative leadership, and the governor --

thanks for posting on this

by noemie maxwell on Sun Mar 22, 2009 at 12:06:46 PM PST

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Rep. Reuven Carlyle is soliciting specific questions on budget matters on the 36th district blog here.

by DWE on Sun Mar 22, 2009 at 02:47:53 PM PST

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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?

Is that it? (And picking on Latin teachers, sheesh.)

by m3047 on Mon Mar 23, 2009 at 02:10:55 AM PST

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I've just wondered, for a really long time: how can we expect budgetary discipline from people who run races where they end up in the hole? Is that leadership? Mr. Burbank, got anything to say about this?

Now if this was a dilemma, the alternative would be that the only people who could run for public office would be those who could bankroll their own campaigns or run Really Good bakesales.

It's not a dilemma, is it?

by m3047 on Mon Mar 23, 2009 at 02:14:35 AM PST

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"Unbelievable". I heard our junior legislator mumble that under his breath several times as the campaign wore on.

"Collection Of Evidence": so, what you're doing is teaching kids how to collect the evidence to prove that they've learned (and earned) the diploma?

Don't schools lose money when kids don't graduate?

Unbelievable! Even if Mr. Carlyle doesn't prevail on the legislature, don't the schools see their own bacon in the fire?

Soccer moms can't take it and won't stand for it, I guess. Is that it? Pay for remedial classes so your kid can pass the WASL (while you do whatever you do). If you can't... and don't.. you're not doing your part to help "public" education?

I.. I.. just... whew! Self-interest seems to have gone in a direction I don't comprehend, here.

by m3047 on Mon Mar 23, 2009 at 02:29:27 AM PST

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...but expect $10 billion.

As for the predictions of our state's economist - I've seen his work and I'm not sanguine. He was wildly off the mark in '07 and '08 in his private sector jobs.

Of course so were almost all economists, but I just don't think that the crisis has been in place long enough for the kinds of models most of these guys use to respond yet.

I'm not saying that the sky is falling. The crisis at America's large banks seems to be in hand for the first time in a year or so. We've just got to keep that first, big, deflationary wave from swamping the boats of the states and counties.

by dlaw on Tue Mar 24, 2009 at 02:03:35 AM PST

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It looks like you just took their carefully crafted press release at face value.

First, not everyone on that list is an economist. A bit of research would have shown you that.

Second, I don't really consider an adjunct professor at a community college to be a powerhous of economic thought. The Washington State Budget & Policy Center rounded up a bunch of peole on the state payroll to come out and say...drumroll please...they don't want state budget cuts. Who'd a thunk it?

Third, the appeal to "economic theory" is vacuous. What economic theory? They're trying to paint a picture of consensus where none exists.

This letter is an ideologically driven polemic, and nothing more. Lawmakers should give this no more weight than any other letter signed by 30 people randomly chosen from the phone book.

by bthornton on Tue Mar 24, 2009 at 11:43:16 AM PST

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...and in Olympia, apparently.

There are those who believe that the best way for the state to meet this wave of unemployment is create, admittedly, a bit more unemployment. They hope, however, that economic benefit from gains in government efficiency and lower taxes will offset these additional job losses and that the loss of services will not appreciably damage the economy.

Then there are those who believe that the wave of unemployment is sufficiently large to warrant structural changes to the state's finances. They know (I hope) that higher taxes have an economic cost and that improvements in government efficiency are, if anything, more important now than ever. But they feel that the economic danger from adding unemployment and reducing services is unacceptably large.

Then there are the people who don't want to pay.  

by dlaw on Tue Mar 24, 2009 at 01:54:12 PM PST

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