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Old 01-15-2010, 08:36 PM
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ilbegone ilbegone is offline
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Default Jobs bust

Jobs bust

Press Enterprise editorial opinion

Quote:
January 12, 2010

The Press-Enterprise

Reviving California's economy requires more than a job-creation plan heavy on political rhetoric and light on practicality. Dubious financing and unrealistic projections do not make sensible state policy, and the Legislature should reject the governor's latest proposal to buy jobs with public money.

California has better ways to improve the state's economy -- such as by stabilizing the state government's perpetually shaky finances.

Gov. Arnold Schwarzenegger last week proposed a $500 million program to create or retain 100,000 new jobs and train 140,000 workers. The state would give businesses up to $3,000 in tax credits for each newly trained and hired worker.

Of course, the state's general fund faces a $20 billion budget shortfall over the next 18 months, and has no money to spend on a jobs program. So the governor would borrow the money for the jobs program from the state's disability insurance fund, and repay the loan by scrapping subsidies for some businesses.

Borrowing from special funds to pay for a program the state cannot otherwise afford is always a sign of trouble. And why does the state have expendable business subsidies after a year when the budget gap stretched to $60 billion?

The disability fund has money available for the state to raid only because workers are ceding a larger share of their paychecks. The program sends payments to people who cannot work because of non-job related illnesses or injuries, financed by a payroll tax on workers. A state formula sets the tax rate to ensure sufficient money in the fund to cover disability benefits. The fund has a surplus -- about $1.3 billion currently -- because the payroll tax rate increased in 2009.

Nor is it obvious that the governor's proposal would provide anywhere near the number of jobs he proposes. A $3,000 tax credit is unlikely to make additional hiring possible if businesses cannot already afford new workers. And with few jobs available, retraining would do little short-term good. Even if the program did somehow save or create 100,000 jobs, that number still represents only a fraction of the 1 million jobs the state has lost since July 2007.

Besides, the state's track record on such programs is poor. California's enterprise zone program is a good example. The scheme's tax breaks aim to spur economic growth and jobs. But both the legislative analyst and the nonpartisan Public Policy Institute of California say the program has had little effect on employment. In 2008, the legislative analyst recommended phasing out the program to save about $220 million through mid-2010.

Putting the state's finances on a sustainable footing would do far more to boost the state's economic outlook. State budget turmoil, with its constant threat of shrinking public services and rising taxes, hardly invites businesses to expand in California.

The governor's desire for job growth in California is understandable. But -- as this poorly conceived jobs plan underscores -- a state government that mishandles its own finances is an improbable economic savior.
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