Arnold’s Budget To Increase Unemployment by 2 Percentage Points

We've been arguing for a while that budget cuts merely worsen the state's real problem, which is the economic downturn. Instead of addressing unemployment, budget cuts are increasing the ranks of the unemployed. That further delays economic recovery and worsens the state budget deficit.

Now we have some academic backup for that common sense explanation. The UC Berkeley Labor Center has produced a study on the impact of Arnold's budget that shows just how much economic damage the governor's plans would do to the state:

We estimate that the Governor's proposed budget would result in a loss of 331,000 full-time equivalent jobs, increasing the unemployment rate by 1.8 percentage points. More than half of the jobs lost would be in the private sector. Because many of the jobs lost are part time, the actual number of Californians affected would be much greater. The number of jobs estimated to be lost is much greater than the entire employment growth for the state projected by the Legislative Analyst's Office for 2011.

An alternative approach that mixed spending cuts with $5.4 billion in targeted revenue increases would save an estimated 244,000 jobs compared with the Governor's proposal.

The greatest part of the job loss due to the Governor's budget would result from cuts to major health and human service programs that bring in significant federal matching funds.

This evidence confirms what we know from history – that Hooverism merely worsens economic problems in a severe recession. Many in Sacramento, and especially in the media, are still stuck in an obsolete, outdated 1970s mentality that budget cuts are a necessary solution to any recession. It's debatable whether that was ever correct, even 30 years ago, but it is beyond question that budget cuts now are probably the worst possible solution to our state's budget and economic crisis.

The UCB Labor Center study is further evidence in support of the proposed budget solutions coming from both the Senate and the Assembly Democratic caucuses. We can and should discuss and debate whether the specific means employed in each of those budget proposals are the right ones, but both have the basic approach right – we cannot allow these cuts to happen.

California's economic prosperity and our future are on the line. These cuts will worsen the recession, causing damage to a far greater number of Californians than is assumed. The governor's budget may have been designed to wedge the middle-class and the poor, but as this study indicates, the middle-class has every incentive to oppose these cuts as well. Any increase in unemployment will reverberate around the rest of the economy, leading to middle-class job losses and further cuts to schools and other things the middle class cares about.

This study and its conclusions deserve a wide audience. Let's hope it gets it.



[This post originally appeared on Calitics]