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REPORT: Whitman?s Economic Plan Blows A Hole In California?s Budget, Reduces Jobs And Services

Posted in Main Blog (All Posts) on August 11th, 2010 4:38 am by HL

REPORT: Whitman?s Economic Plan Blows A Hole In California?s Budget, Reduces Jobs And Services

In an interview yesterday, California gubernatorial candidate Meg Whitman (R) said “what I want to convince voters of is I am the very best person to fix the economy in California.” “I am not actually a politician. I am a businessperson. I have created jobs, I have met budgets, I have done, figured out how to do more with less, and that is actually a really important thing for the state right now,” she said.

However, according to a new Center for American Progress Action Fund analysis by Michael Reich, an Economics Professor at The University of California at Berkeley, Whitman’s economic plan — outlined in Meg 2010, Building a New California — is “likely to have negative effects on jobs and economic growth and to deepen the state’s budget crisis.”

“She claims to have a plan that’s very detailed and based on careful research. But it really isn’t careful at all, and it’s misguided,” Reich said. “It has a lot of incorrect assumptions. A lot of studies she draws on are useless or kind of misleading and don’t agree with well-accepted economic research.” Whitman’s plan consists of:

– Tax cuts for wealthy people and businesses — including eliminating the state’s capital gains tax — which would “reduce the state’s economic growth while exacerbating the state’s budget deficit problem.”

– Eliminating climate change regulations, which “could bring positive harm to the environment, would sharply reduce clean-tech venture capital spending in the state, and would reduce employment.”

– Spending cuts that “would have negative consequences on employment.”

Whitman likes to make a big show of her determination to cut spending, stating that “I have identified $15 billion worth of spending cuts that we can go after over a couple of years.” However, the California budget deficit for the coming fiscal year alone stands at $20 billion, and it’s only going to grow if her tax cut plan is implemented.

According to Reich, the state will lose $6-$10 billion in revenue depending on how Whitman implements her tax plan. And her spending plan “does not specify” where most of her proposed budget cuts will fall. But since most of California’s general fund spending is in education, health and human services, and prisons, it stands to reason that those areas would see the most severe budget cutbacks.

A group of 20 California economists signed a letter today stating that “the evidence and theory that Whitman uses to diagnose California’s problems are unscientific and an unsound basis for policy. As a result, her diagnosis and her proposed economic policies are both deeply flawed…If implemented, Whitman’s program would worsen California’s budget malaise and its economic performance.”

Cross-posted on The Wonk Room.

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