Emily Hays Photo
New Haven’s downtown remains quiet as neighbors practice social distancing.
Spend now. Tax the wealthy later.
Connecticut Voices for Children delivered that straightforward message Thursday during a virtual press conference at which the advocacy group released details from its latest report.
The report put forward several recommendations on how the state and federal government should respond to a coronavirus-linked recession and how to recover from it. (Read the full report here.)
“We are about to face an economic downturn the likes of which we have never seen. What’s unclear is whether a depression will follow. That’s why the next steps the state takes may be the most important for several years,” said CT Voices Executive Director Emily Byrne.
Report author Patrick O’Brien filled out this statement with some of the latest stats. Goldman Sachs is predicting a steep and sudden recession; the number of people who filed for employment last week set records.
Zoom
CT Voices researcher Patrick O’Brien.
O’Brien found that government spending during a recession provides a greater boost to the economy than during normal times. He argued that both the state and federal governments should spend now, rather than tightening their belts. At the state level, that means tapping into its budget reserves.
Both the state and federal government should manage the recovery from the recession by raising taxes on the wealthy, he argued. That would help decrease the U.S. budget deficit.
O’Brien said that a high level of debt decreases support for the spending that helps recessions and recoveries. Meanwhile, raising taxes on the wealthy does far less to affect the economy than raising taxes on lower-income families, he said.
“The wealthy spend a smaller proportion of their income and save more,” he explained.
“The main point is government spending should be happening right now — not in a week or two weeks,” Byrne said.
CT Voices plans to release two more reports in April about how to prevent Covid-19 from widening income and wealth gaps in the state. One would be about the early childcare system, the other about housing and employment.
Like all those who agitate for larger PILOT or ECS payments, these folks are detached from reality. The rainy day fund will be consumed this year and next, as (1) sales tax revenue collapses, (2) unemployed workers pay no income tax, and (3) the wealthy have no net capitals gains, this year or next. This state is tremendously reliant on a few hundred high-earners for a large share of revenue, people with very volatile income. Meanwhile, we have contracted raises for state employees, and no layoffs, thanks to Malloy. Plus, of course, SERS, OPEB and TRB payments.