Ann Pettifor in Debtonation examines Mr Schwarzenegger’s options and prescribes stimulus – without the cuts. This stimulus to be provided as follows..
Now Mr. Schwarzenegger is on the right path. (He has created money — and named it “IOUs.” ). But instead of going to the employees and suppliers of the state of California to ask for credit (or tax increases), he should go to the banks. Prompted by the Federal Reserve, the banks should be obliged to provide the state of California with credit — at a cost no higher than their own minimal administrative costs — say the cost of the computer into which the number is being entered, and the cost of paying staff for marking up the state of California’s account. These costs are minimal, so interest on the loan should be no higher than say, 1%.
While not being overly prescriptive about how this money should be spent, Ann suggest that it be directed mostly at productive activities anticipating global challenges…
This time, employment should be geared towards preparing California face the threat of climate change. In other words, the economy should be oriented away from mere consumption — shopping — and instead be geared towards cutting consumption, conserving nature’s assets and developing human resources. This would help save Californians from extreme weather events, while improving their sense of fulfillment and well-being. In other words, California should be embarking on a Green New Deal.
When Californians are put to work e.g. to de-carbonise the economy and grow California’s human resources (through education/the arts/health services etc.) then something extraordinary will happen. More Californians will a) pay state taxes b) pay off mortgages c) pour income into local businesses and c) stabilise the banking system. When that happens, Mr. Schwarzenegger will find — no doubt to his surprise — that the budget returns to balance.
But only then.
