State Budget Impasse Ends

What Gov. Wilson and President Bush seem not to understand is that most spending cuts are disguised tax increases. Consider the proposal to reduce a teacher’s salary from $30,000 a year to $25,000. This is roughly equivalent to keeping the teacher’s salary the same and increasing his/her taxes by $5,000 a year. Similarly, reducing welfare payments by $5 billion a year is a disguised $5-billion tax increase on welfare recipients.

When spending cuts are viewed correctly as tax increases, the question becomes not whether to cut spending or raise taxes, but whose taxes to raise.

A dollar given to a homeless person is almost immediately spent for something basic like food. As the dollar moves to progressively richer and richer people, it is transferred less and less frequently, until it finally ends up in the bank account of someone enormously wealthy who does nothing with it, other than perhaps lend it back to the government.

In other words, removing money from the needy removes stimulus along the whole economic chain from poor to rich, and is much more damaging to the economy than removing money from the rich who generally aren’t using it anyway.

NORMAN ZADEH

Beverly Hills