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State Spending Is Already Lower Than 2008
The 2012 budget proposals are out and according to the Center of Budget and Policy Priorities, and 35 States are spending lower than 2008 pre-recession levels. 6 states are not proposing budgets due to their two year budget cycles and 9 are spending 4% or higher than 2008 levels. Those spending more are Vermont, New York, Connecticut, West Virginia, Arkansas, North Dakota, Alaska, Minnesota and Hawaii.
The problem is some of these budget shortfalls have been exaggerated by decreased corporate tax rates. This further reduction in revenue increases the need for deeper cuts. Unfortunately for those of us who are community business owners or working class employees, these cuts directly effect us.
The biggest issue that could result from these cuts is reduced economic activity. When we reduce spending, governments lay-off workers, cancel contract with private vendors and cut benefit payments to individuals. All of this sucks money out of circulation in the economy, and reduces economic demand.
I could understand if reducing government spending lowered tax bills, like property tax or income tax on workers. That would transfer money into people’s hands and keep the money circulating in the economy. Instead we see those savings go to cover the cost of reduced taxes on corporations or increase a state’s rainy day fund.
The conservative plan of cutting spending doesn’t seem to be doing too well in other areas of the world. According to Business Insider, The economic situation in the United Kingdom is going from bad to worse since the conservatives took over with David Cameron. Not only is the economy back in recession, inflation is heating up.
Yahoo’s economics editor, Daniel Gross, believes that by taking the austerity approach that the conservatives in the UK and United States have suggested, they took the foot of the economic gas pedal and slammed the vehicle into park. Is this what may happen in the coming months here in the United States? Let’s hope not.
There are ways to reduce costs and streamline services and in times like these I don’t blame them for digging deep. But when you are laying off teachers to cover for corporate tax breaks that seems a little absurd. When states are reducing help for poor children and reducing corporate taxes that is borderline psychotic.
With corporate profits at an all time high, it seems the only people hurting in this recession are the very people who didn’t cause it and that is a shame.