‘We Are Not Taxing the Very Wealthy Enough’: Runaway Inequality About to Get Worse
The United States' astronomical levels of economic inequality are poised to become further entrenched in the coming years.
As California faces budget Armageddon, one of the programs on the endangered list is California’s Temporary Assistance for Needy Families (TANF) program, known as CalWORKs. Governor Brown proposes to cut $946 million from the CalWORKs program, most of it from benefit cuts. The headline change is a reduction in poor mothers’ eligibility for full CalWORKs participation from 48 months to 24 months.
What will this mean for California’s budget, and what will it mean for the mothers involved?
The eligibility reduction at a stroke will reduce the core CalWORKs participant rolls from 586,000 families to 260,000 families, according to figures from the Legislative Analyst’s Office (LAO).
This implies that 326,000 low-income adults with children living at home will be expected to find jobs by the end of 2012 or face a dramatic reduction in state support.
California currently has the second-highest unemployment rate in the country, after Nevada. California lost 1,146,000 jobs between January 2008 and November 2010, and its unemployment rate currently stands at 11.1 percent.
Since the bottom of the cycle in November 2010 the California economy has added 320,000 jobs. The best evidence is that the California economy is still adding about 300,000 jobs a year.
[pullquote]Current CalWORKs participants are expected to win every single new job created in California in 2012, and then some.[/pullquote]
In other words, current CalWORKs participants are expected to win every single new job created in California in 2012, and then some.
To do so, they will have to outcompete all of the highly experienced people laid off during the recession and all of this year’s new graduates. The idea that there are 326,000 jobs out there waiting for current CalWORKs participants is, simply put, preposterous.
The reduction in CalWORKs eligibility from 48 months to 24 months simply cannot be seen as an effort to promote individual responsibility. It is an out-and-out benefit cut for people who will almost certainly remain unemployed whether or not their benefits are cut.
The real question is: can California afford to keep paying current levels of benefits, or are cuts necessary?
The 2008-2009 recession hit California hard, but California is now growing again. According to the US Bureau of Economic Analysis, California’s current dollar gross domestic product (GDP) grew 2.9 percent in 2010.
Factoring in the estimated economic growth in 2011, California’s state GDP in current dollar terms is now higher than it was in 2008. In current dollar terms, California’s ability to pay for its state government is going up, not down.
California, however, spends very little of its vast wealth on state government. State government spending is currently well below the 30-year average of 5.04 percent of state GDP. It is a myth to think that state spending is out of control.
The real problem in California today is that state tax revenues are too low. This situation is mainly due to the recession, but was made worse by the 2011 state tax cuts.
Were state tax revenues to bounce back to 2008 levels, the state budget would be $15 billion in the black. For Californians to be focused on runaway spending as the problem behind the state’s fiscal crisis is short-termism taken to the extreme.
Placed alongside these kinds of figures, Gov. Brown’s proposed $946 million cuts to CalWORKs start to look small-ish, if not exactly small.
Last week’s Facebook IPO raised over $16 billion for the California company. California can and should find $1 billion to help needy families. California CalWORKs support has already been cut dramatically over the past few years. It should not be cut again.