Priorities, priorities, priorities

Posted: September 4, 2011 in Economy, Politics

I read a recent article by LA’s Mayor, Antonio Villaraigosa, on HuffingtonPost.com. In that article, Mayor Villaraigosa talks about how many Latino children make up the school-age population of California, and how their success is interlinked into California’s success. Because of this relationship, Mr. Villaraigosa argues that it is in California’s best interest to eliminate any and all roadblocks to educating these children, including the signing of California’s Dream Act legislation by Governor Brown.

I have two problems with this line of thought. First, these kids are still illegal immigrants. Regardless of whether they came over themselves, or whether their parents illegally entered this country and brought their young children with them, the fact of the matter is that they are in violation of Federal law (and many California laws) by being in the country. Despite this, California in particular affords these children many opportunities, including the ability to attend California public schools (on the legal residents’ dime). The Dream Act would further these opportunities, including the ability to qualify for financial aid and in-state tuition rates at California State University and University of California campuses. Second, and much more importantly, unless the California legislature (and the Federal government) come up with a legitimate plan to foster job creation and actually follow through on the implementation, there won’t be any revenue to fund these programs…not to mention Medi-Cal, State Disability, Unemployment Insurance, and who knows what other programs.

California is in a much more difficult spot than the Federal government as a whole. The Fed can actually print money, and the State of California (like all other states) relies to a large decree on Federal funds to manage its budget. Granted, some Federal policies place added costs on California (enforcement of the borders, or the lack thereof springs to mind), but California has a structural spending problem in that these programs are utterly dependent on funding sources outside of the State’s normal revenue stream. In the long run, if California is going to avoid or at least minimize the chances of this type of recession happening again, it will have to find a way to cut spending down to genuinely sustainable levels. But more importantly, the State needs to figure out how to remove the impediments to job creation. Because the State can’t print money and is more dependent on borrowing, the ability to deficit-spend their way into job programs is much less at the State level than it is at the Federal level. Even so, the costs to do business in California are much more extreme than in most other areas in the nation. Literal costs including taxes, fuel, housing, land, etc. and policy/regulatory costs (environmental regulations, labor policies, etc.) are things that businesses seriously look at when debating whether to open shop, expand, or even attempt to remain in California. It is no joke that many businesses have closed down in California and relocated to other States, and they’ve taken the jobs with them.

It’s really simple. Government programs require revenue. Revenue is generated by taxes…sales taxes, use taxes, payroll taxes, and income taxes, to name a few. Sales and use taxes are generated when people have money to buy things and engage in activities subject to use taxes. Payroll and income taxes are generated by businesses employing people and paying them money for work. So logically, if you can generate job creating activities, you will generate the revenue needed for your governmental programs. Therefore, minimizing the impediments or dis-incentives to operating businesses will lead to jobs, which will lead to payroll/income tax revenue, which will also lead to sales and use tax revenue. I know I’m coming off as talking down to people, but all you have to do is watch and read what is happening in Sacramento (and Washington, DC, for that matter) and realize that my tone is sadly justified.

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