The consequences of our tax cowardice

If we permit public-sector workers to be scapegoated for state and city budget crises, we all stand to lose

A national campaign is now fully launched to make local public-sector employees pick up a major share of the costs of economic crisis. Years of rising spending and falling revenue have carved a path of destruction through federal, state and local budgets. Deficits and debts have mounted eroding taxpayer support for government spending in general, and for public employees particularly. In response to deep economic pains in middle-class communities, major efforts are under way, from California to Maine, to balance budgets through major cuts in services, wages, benefits and employment.

Federal, state and local governments are staggering from reduced tax revenues because of unemployment, reduced production, lower investment and the housing collapse. Washington borrowed huge sums from foreign investors, domestic big business and the rich. These funds went to bailout select businesses and to help (partially and temporarily) broken state and local government budgets. Because Democrats and Republicans agreed last December not to increase income, estate and capital gains taxes, broken state and local budgets face declining federal support. This is driving governors, mayors and state legislatures to raise taxes and/or to slash payrolls and programmes.

Of course, some cutting and tax increases are required. The real social decisions involve what to cut, how much, for whom, and whose taxes to increase.

The pressure is on to shift the heavy costs of economic crisis onto the middle- and low-income communities already stung by unemployment, foreclosures, reduced job benefits and rising job insecurity. The campaign to make the middle- and lower-income Americans pay now focuses on public employees – especially their numbers, incomes and benefits. Battles loom over which state and local job holders get fired, whose pensions/benefits will be reduced, and which public services will stop being available.

more . . . http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/28/usdomesticpolicy-public-finance

It's like giving them a raise and then taking it back. And Public servants do work at the pleasure of the people after all.

In terms of pure budget realities the tradeoff for keeping benefits is layoffs and privatization so it's a matter of picking your poison. I doubt the status quo will survive.

instead of destroying the middle class.

that same argument works for government spending as well. The problem is two pronged and while rare the right is correct on this one the solution has to start with cutting, although I am not sure they understand why they are correct. However, they also need to be willing to commit to revenue increases when those cuts are made. With the caveat that both sides are up front and publicly agree that additional revenue from those steps is committed entirely to paying down the debt, and we change the culture of continual debt in Washington. Both sides are going to have to swallow the horse pill on this one if the country is to get the medication it needs.

I realize that some here on DU won't like the idea of requiring spending cuts first, but there is a trust issue here between the people and politicians. The politicians have proven over the years that they are willing to rise and lower the tax burden when there was popular will to do so. What they have never proven, regardless of which side is in control, is a willingness to significantly cut spending. Yes, this is going to mean entitlements as well as military. Again, no one likes the horse pill but we all have to swallow it.

Cut the military down to a quarter of what it gets. That would immediately fix the deficit and would solve the problem of American arrogance abroad at the same time. I can get behind that.

There is some government spending that spurs the economy, and some that drags it down.

We should do more of the good spending and less of the bad type. Doncha think?

--imm

other than physical infrastructure projects of course. So that logic works for roads and power supply for example but remember there is a diminishing return of reinvestment vs investment. Putting a road where there isn't one but one is needed is very useful for economic growth. Fixing a road that already exists while a good idea is a lot less financially beneficial. As such, I am not sure there is a good answer there. This worked for FDR for example by putting in place TVA because they were going from nothing to something allowing them to take advantage of what was effectively untapped resources in both labor and material.

Military spending is money down the drain. No return on investment. No benefit to society or commerce. Destructive of infrastructure, and wasteful of resources.

Money spent on education and infrastructure is an investment, with significant returns. Money put into the hands of people who must spend it, like welfare and unemployment, is an immediate shot into commerce.

Assuming we won't get into the problems of what automation has done to eliminate work, and it subsequent paucity, for which I propose a 20 hour work week, what is so difficult? Consider that even diminishing returns are returns and not losses.

--imm

Are you daft?

Your claim assumes that the military spending in question is military operations, on that I think you will find universal agreement here that we gain very little to justify those expenditures. However, investment in military technology has lead to more technological advancement over the years than any other source by far even when factor in the obnoxious cost. We owe a lot of our lifestyle to the military trying to figure out how to better kill people. Not that this means we should be more focused there just that it is important to keep the reality in mind, we still have to be able to live with ourselves.

As for money going to people who must spend it, while a good idea and noble gesture that is no more a direct shot in the arm of commerce than any other use of those funds purely because we are no longer in a society where money sits under anyone's mattress. Even the rich keep their money in play, it is how they keep it growing. The numbers might differ a bit short term vs long term but the end result goes to the roughly the same place on a purely numbers basis without the humanist perspective. So, providing for welfare should be done because it is the right thing to do, not because of its short term economic impact.

The 20 hour work week simply results in more people working overtime without time and a half pay likely by each person holding two jobs to work 40 hours and there being twice as many jobs available but each with half the expected workload due to the reduced time. End result, status quo.

Your right diminishing returns are still returns, but the question isn't necessary reduced returns vs losses. The question is also what degree of returns are we looking for. As such, not all projects are created equal. Some will have more bang for the buck.

It employs people, and requires equipment and supplies, which employs more people.

not the result of employing the people. The reason for that is that the assumption that people would be employed from the development of a project applies regardless of which project is selected. For example if we are comparing repairing a busy road vs putting in place a new road, both require workers. However the new road that might be less used after the fact when compared to the current road the initial response seems to be always go for the busy road. However, from cost/benefit perspective you have to look at what is generated by the development of the new road such as new access to labor and materials vs what is lost by not repairing the more heavily used road. Until the point that people stop using the road that is in need of repair then the cost/benefit for that project is difficult to justify. On the other hand, a bridge to no where brings in little additional benefit, so likewise in that situation that project is also difficult to justify.

So the devil is in the details. But there is always some diminished returns with established infrastructure the only question is how diminished compared to the alternatives, or more appropriate to the current conversation are they so diminished as to not justify the expenditure at all. In that case, you would factor in the jobs effect though because then you aren't comparing against another project. However, in cost/benefit there is always something else that can be done with that money even if is leaving it were it is at the moment or paying down debt which reduces additional expenditure elsewhere. For example if you pay $1 million dollars for a project that has little appreciable benefit but provides jobs for two people then you have to determine if the benefit of economic activity of those two people and the subsequent advancement of skills and experience compared to what they would have likely obtained otherwise out-weight that million dollar price tag. Sometimes the answer is yes sometimes it is no. Neither is always the right answer.

The jackasses that like to scream about how they are all unnecessary tend to forget that.

"Federal, state and local governments are staggering from reduced tax revenues because of unemployment, reduced production, lower investment and the housing collapse."

I would add one more reason for reduced tax revenues:

Lower-paying jobs. Workers in low-paid service jobs don't make as much, therefore don't pay as much taxes, as workers in well-paid industrial jobs.

and too often forgotten.

plan. It was expected that each generation would do a little better than the last, at least in real dollars.

It won't work with declining wages in real dollars. Those pushing the current trends are more evil than stupid.