In California, “The Laffer Curve is Alive and Well”

I went to a speech this past Friday in Washington DC hosted by the Competitive Enterprise Institute and Pacific Research Institute in which Congressman Tom McClintock (R- Northeast CA) outlined California’s budgetary meltdown. In the last two decades, state spending has tripled. Currently, the budget deficit for 2009 is expected to be $24 billion. McClintock placed the blame squarely on Sacramento politics. Excessive bureaucracy, “green jobs,” and “cash for clunkers” programs have put the state on the verge of complete collapse. Among other programs he attacked was the prison system, which spends $43,000 per inmate annually. He predicted that California’s only way out of this fiscal mess would be a federal bailout – one that he said should not be granted if the Sacramento legislature does not show serious signs of reform.

To combat some of the deficit spending, the 2009 California budget includes a 1% sales tax increase. McClintock was quick to point out that in the two months after the tax increase took effect in April, state revenue has fallen 33%. Unemployment is now approaching 12% in the state. In the last year, more than 600,000 people left California than moved into the not-so Golden State. McClintock pointed out that California’s reckless spending should serve as a morality play for the rest of the nation, but that sadly, Speaker Pelosi’s (D-CA) progressive agenda seems to be bringing a national sequel to the California tragedy.

McClintock’s speech largely built on his May 21 commentary in the Washington Times.

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