In the question-and-answer portion of the “joint convention” today, legislators appropriately discussed the economic impact of both taxes and cuts.
The panel of experts suggestly that generally, taxes and cuts of similar magnitude have a similar economic impact: the economic spending still happens in the state, it just a question if it is spent in the public sector (employing a nurse or teacher, or providing a benefit to a senior), versus in the private sector (consumer spending by individuals). As Director of Finance Genest stated, there is some differential depending on who the benefit or tax is applied: a lower-income person is more inclined to spend it, providing a multiplier effect on the economy, as opposed to a higher-income person, who has the option of saving a portion.
Again, as much as some legislators say that it is unwise to raise taxes in a down economy, they neglect to mention the other side of the equation, that it is as–if not more–unwise to cut services.
For health care, the choice is clear: cuts to health care would have two or three times the negative economic impact as raising taxes. Most of state health care spending brings in federal matching dollars, bringing new meaning to a “multiplier effect.”
For every dollar California cuts in health care, we lose a federal matching dollar in the Medi-Cal program, or two federal matching dollars in the Healthy Families program. Beyond the cut to the health care system on which we all rely, these cuts ripple through the local economy, with regard to lose jobs, wages, and individual spending.
If legislators are so sensitive about the economic impact of our budget decisions, California would raise the revenues to prevent these cuts, so we don’t leave hundreds of millions of dollars in Washington, DC.
Earlier this year, Health Access California released a study that further explored the economic impact of health care cuts (and a comparison with an increase in the upper tax bracket). It gets more relevant every day.