On Thursday a small group of Senate and Assembly members will hold the first of what's expected to be a slew of daily public sessions to wrangle over the details of the budget.
Schwarzenegger has called for cuts that would hit every corner of the state. He announced plans to lay off 5,000 of the state's 235,000 workers and has proposed slashing education by up to $5 billion, selling state properties, borrowing $2 billion from local governments and potentially reducing eligibility for healthcare programs.There is only one way to control spending: Cut taxes.
The latest number, which includes the Citigroup rescue, is $7.7 trillion. That’s roughly half of America’s GDP.Really? You think everything they've done so far is just hunky dory?
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[A]ny way you slice it, we are talking about really, really large amounts of money here. Barry Ritholtz, a financial blogger and Wall Street analyst, offers some perspective. Adjusting for inflation, the Marshall Plan cost $115.3 billion. The Louisiana Purchase: $217 billion. The race to the moon: $237 billion. The New Deal: $500 billion (estimated). The Korean War: $454 billion. The Iraq war: $597 billion.
You can add all of these things together and still not come close to what taxpayers are on the hook for already. You could even throw in the Savings and Loan bailout ($256 billion), the Vietnam War ($698 billion) and all of NASA ($851 billion) and still come up short.
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Obama says he doesn’t want spending as usual when it comes to formulating his impending mother of all stimulus packages. (Estimates vary from $500 billion to $700 billion, but who knows how high that number will go?)
So far, all we know for sure is that he wants massive increases in infrastructure “investment.” That’s fine with me, so long as it’s the infrastructure we need (though history shows such expenditures usually come on-line well after a recession is already over).
But rather than blow money on a lavish reenactment of the New Deal, or continue bailing out undeserving corporations, why not really think outside the box? Rep. Louie Gohmert (R., Texas) suggests an across-the-board reprieve on paying 2008 income taxes. This would leave an extra $1.2 trillion in the hands of Americans, who are the best stewards of their own money. Nobel Prize-winning economist Robert Mundell proposes a one-year moratorium on corporate income taxes in order to stimulate investment, job creation and the like. That wouldn’t be as popular, for understandable reasons.
The details can be negotiated, but this sort of approach would certainly create more jobs and spur more consumer demand than paying for a lot of asphalt. It would buy a lot more prosperity than any corporate bailout. Politically, it could buy Obama and Congress a year to formulate a serious tax-reform proposal. And — here’s the amazing part — it would be much cheaper than what we’ve spent already.
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Only a fool would say that there is no risk to the banking system here. But given the apparent lack of any idea at Treasury or the Fed of how the bail-out would actually work, the terrible track record of those same authorities whose bungling of the Fannie Mae, Freddie Mac and American International Group situations only accelerated the crisis, and the onerous capital-punishing provisions being forced into the plan by Congress, at this point we are tempted to think that the world might be a better place without this particular bail-out. . . . The climate of fear in Washington could easily still force a deal in very short order. No deal would be a shock to markets at first, and it would be a shame to lose what was good about the proposed program. But if it's loaded up with mortgage forbearance mandates and punitive equity grabs, then markets will be far worse with a deal than without one.(emphasis added)
