One need look no further than Democratically controlled California to find a state where the opposite is true. The unemployment rate in the once Golden State remains at a staggering 12%. The State budget is hamstrung by the unsustainable pay and benefits packages lawmakers have given to its government workers as pay back for union support during past elections. California government employees are the highest paid in the nation, surpassed only by those in the District of Columbia (surprise, surprise).
For decades, California raised taxes on the “wealthy” to pay for its government employee benefits and its generous social services (one-third of the nation’s welfare recipients live in the state, though it has only 12% of the population) failing to see it was killing the goose that lays the golden egg. As a result, there has been a net outflow of over 1 million people during the last decade. The State faces a massive budget shortfall of $16 billion and has seen its credit rating drop to junk bond status.
To address its budget shortfall, Governor Jerry Brown has placed an initiative on this fall’s ballot to raise taxes on those earning over $250,000 (who already pay the second highest state income tax rate in the nation) and raise the sales tax still further above its’ current 11.8% average. Not surprisingly, California has been rated the worst state in which to do business. In the CNBC ranking, seven of the ten worst states to do business in are run by Democratic Governors.
The scary truth is the same policies that have brought California, which alone represents the eighth largest economy in the world, to its knees Barack Obama is committed to continuing to implement at the federal level. While the Republican Governors credo has been cut and balance; Obama remains tax and spend. The National Debt will surpass $16 trillion by the end of the year as the federal government spends $3.7 trillion in FY 2012, up from $2.9 trillion under Bush in FY 2008. For the first time in American history, our credit rating was downgraded, because of the massive spending and the accompanying lack of faith in Washington’s ability to address the matter.
President Obama’s plan of raising taxes on those earning over $250,000 (from a 35% to 40% top marginal rate) may add another $40 billion a year in revenues, but that barely makes a dent in the $1.5 trillion deficit. In other words, the President has no plan. Even if we took 100% of the wealthy’s income (since they didn’t really earn it anyway, according to the President), the federal government would still face annual deficits of over a half a trillion dollars. Of course such a policy would also cause some problems in creating wealth and jobs going forward.
There is hope. As at the state level, the Republicans have a viable plan with the Ryan Budget, which passed the House and Mitt Romney supports. It follows the basic principles being implemented by Republican Governors around the nation: cut spending and do not raise taxes.
The true way “FORWARD” could not be clearer.
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