Mike Zapler at the San Jose Mercury News makes an important observation about the contradictory conversations in Washington, DC, and Sacramento.
In Washington, DC, there is an emerging consensus for the need for increased government spending, to both stimulate the economy in the short term and make critical investments in the long term. In Sacramento, the state requirement for a balanced budget has forced over $16 billion in cuts, and threatens many more.
The contradictions are even starker than described.
In Washington, DC, the assumption is that government spending, rather than tax changes, gives the most “bang for the buck,” and that explains the where the focus is. (See Appendix 1 of the Administration’s top economists, showing the much more significant multiplier effect of government spending, versus tax changes)
In Sacramento, we’ve reduced government spending, and negotiations continue to cut more. Part of these negotiations are discussing a “spending cap,” which will handcuff the state in the future to make any of these needed investments for the economy. And both these cuts and caps impede our ability to claim our state’s maximum share of these federal stimulus dollars.
Many of these dollars–like the increased Medicaid matching funds–are tied to state spending. So every time we cut, we are leaving federal dollars behind–and with the increased match, we would leave even more behind.
Instead, we should be doing everything in our power–including raising taxes and revenues–to take advantage of that increased federal match, and cover more people, especially at a time when they need it. That’s the spirit of these funds, to address the increased needs in this economic recession.