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Krugman: California The Worst of Current Economic crisis

Posted: Jul 18, 2012


The budget pain facing California this year is not California’s fault, said Paul Krugman, the Nobel Prize-winning economist who has been among the most outspoken writers critiquing the government’s response to what he calls an economic “depression.”

The state budget Gov. Jerry Brown signed Wednesday at least on the surface bridges a $15.7 billion potential deficit — by far the highest shortfall faced by any state this year. As tax revenues continued to fall below expectations in a suffering economy, California state and municipal governments continue to slash spending. The state's $91.3 billion budget represents the lowest state spending level since 1999.

“Gov. Brown faces political constraints that, if anything, are even worse than those faced by President Obama, because of the craziness of California’s constitutional setup,” Krugman said at a recent appearance at the Commonwealth Club of California. He said Proposition 13, the state’s requirement of a legislative supermajority to pass tax increases, was the main culprit.

More than tax hikes are needed to help ailing states, he said. Federal aid to state and municipal governments to rehire workers is paramount to ending the crisis.

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