The New Great Depression

On December 17, Gov Kaine announced his plan to bring Virginia through the current economic downturn (Governor Kaine Announces Revenue Reforecast, Plan to Address Shortfall (http://www.governor.virginia.gov/MediaRelations/NewsReleases/viewRelease.cfm?id=838). Despite all the evidence, he still doesn’t call it a depression. Budget cuts, layoffs and targeted tax increases are standard stuff for dealing with slowing tax collections. The problem, though, is that his plan is short sighted and ignores the real cause of this problem.

We all need to ask ourselves, “what happened to the taxes that were collected during the good times?’ When the economy was expanding and revenues were flowing in, what did our leaders do with the money?

Expansions and recessions are normal in a capitalist system. However, we don’t have a true capitalist system. In a true capitalist system, there would be no government bailouts for poorly managed industries. Well-run companies would survive, and the others would die.

Virginia’s problem, as well as America’s, is that our economic system is based entirely on greed. The 1980’s movie, “Wall Street” perfectly epitomized it. Investment bankers make millions for doing nothing but moving around money on paper.

The only reason why Wall Street exists is because companies are too greedy to operate on the revenues from their operations. When a car company sells a car, all of the expenses for making that car are paid by the buyer. Although thousands of people are involved in getting that car from the iron in the ground to the dealer’s show room, the actual building cost is so low that the price still covers the expense.

The problem, however, is that the car company wants more. They invest those proceeds on Wall Street to make more money. More often than not, the money from these investments is needed to pay for huge executive salaries and bonuses and company perks.

Our political leaders are no different. Douglas Wilder was elected governor during another economic downturn. He instituted a plan that also included spending cuts and brought VA through it stronger than it was before. He even managed to add to VA’s “rainy day” fund.
George Allen came along after Wilder, and had to prove that, as a Republican, he was even more fiscally conservative. He started his own round of spending cuts which included decimating the Dept of Transportation. He offered early retirements to the experienced leadership and privatized many of their operations. To this day, VDOT has not recovered and most of our transportation problems can be traced back to Allen. Additionally, one of the main reasons our real estate taxes are so high is because of Jim Gilmore’s “no car tax” stunt.

So-called fiscal conservatives lie to voters to get elected. They scare us into thinking that taxes are the problem when the real problem is spending. The reality; however, is that it takes money to run the state and provide all the services that we need. There probably is a lot of waste, but until we completely change Virginia’s political process and the process across the US as a whole, pork barrel projects will remain a way of life. Until we change our economic system, recessions and depression will also be a way of life.