Deep in the Heart of Taxes

Conservatives tell us that taxes dissuade businesses from hiring, crunch growth and impair an economic recovery. Liberals tell us that the government must increase taxes to pay for necessary social programs, stabilize the national debt load (and hence the dollar), allocate the cost of society to those most able to pay and stimulate jobs through government intervention. Who’s right? Would you believe both? Fact of the matter is that we bailed out those at the top of the economic food chain – the big financial institutions – and stopped there. Words followed, and stimulus money was passed by Congress, but unemployment stayed at staggering levels, well beyond the official rate as folks literally were unemployed so long that the fell off the unemployment rolls. The guys who caused the problem, literally created the “live through borrowing” economy, got our money, paid not a dime for the trillions of damage they caused, and then thumbed their noses at America by paying themselves record bonuses.

Now here come the states and the cities. They’ve got archaic pension plans created in an entirely different era with not the slightest hope of making good on those fixed benefit retirement plans. They are statutorily and contractually locked into those absurd structures that most of private industry abandoned a long time ago. They’re forced to pay for welfare, and federal programs, like Medicaid (unless the new healthcare legislation changes that anomaly), and operate the daily cost of the government that touches you most. And what do they have to pay for it with? Property taxes in a sea of plunging values and massive foreclosures, sales taxes on profoundly reduced levels of consumption and income taxes on salaries pared to the bone with lots of new unemployed wandering aimlessly about. When they lay folks off, they do it in such volume that the cut backfires by creating more crashing home values, foreclosures, vendor lay-offs, etc. Which reduces taxes, etc.

So they raise taxes and tell their police departments that it’s not about crime anymore; it’s about generating revenues. Here in Los Angeles, where traffic fines have just been multiplied, I watched as two motorcycle officers stopped all the vehicles on a major Los Angeles boulevard (Olympic, if you really want to know) and gave every single driver a speeding ticket without asking for proof of insurance or even a copy of the registration! I was one of the revenue-generating-miscreants.

We get it; you don’t want us to live here anymore. Northrop Grumman joined a host of companies relocating out of California as the state’s failures have placed the required new fees and taxes at a level where corporations are leaving in droves. That only makes the longer term prognosis infinitely worse.

Yup, California is becoming the post-state for fiscal stupidity. Take State Senator Alan Lowenthal, a Long Beach Democrat, who is pushing legislation to require local communities to reexamine any free parking that they might be giving away. The February 24^th AolNews: “‘This bill encourages cities to take a second look at their parking policies and incorporate free-market principles where it makes sense,’ says Lowenthal, who is chairman of the [California State] Senate Transportation and Housing Committee. ‘I see this bill as a way to stimulate economic development.’” Like stimulate the few remaining shoppers to avoid the few markets where neighborhood parking is free so that a few more retailer can go bankrupt. Sure it’s good for the environment, except large sections of Los Angeles, for example, that have really shoddy public transportation alternatives… so there is more perception of environmental benefits than… well… er… benefits.

Make your local employers and workers miserable enough to generate money you should never have committed to in the first place, forcing the ones with the most to lose to leave (taking jobs with them). The vast majority of states have deficits, and California, Illinois, Michigan… it’s a long list… are really in deep negative numbers. There is absolutely no near term prospect that there will be new sources of money for these states. All the projections on job recovery are couched over many years into the future. Home values are not likely to come back to pre-crash values for well over a decade. Housing starts are actually falling. We need government to spend money to address the solutions to long term economic growth, particularly in teaching and training the next generations to earn enough to pay back the massive debt. We government to create a solid base for new jobs… now!

We need to rescue our middle class before we don’t have one anymore, and we need to be sensitive to those at the bottom of the economic ladder who have been hit the hardest by this meltdown. Fat pensions are a luxury we cannot afford. Smart regulations are essential to prevent a repeat of the past unregulated financial excess, but layers of procedures and jacking up fees for everyday activities create a sure recipe for disaster. If states need money, take a long hard look at the denizens on Wall Street who have yet to pay for their sins, for the destroyed lives that they have left in their greedy wake. Hey, at least California has the Pacific Ocean and great weather… Michigan, on the on the other hand… well, they have a couple of pretty lakes.

I’m Peter Dekom, and we really have to adjust state and federal governments onto a path of sustainability… a goal that appears to be nowhere on the horizon.