Most of us have felt the sting of the economic downturn over the last year. Even folks who haven’t lost jobs or taken pay cuts have cut back on spending.
Now, imagine if a new law passed that froze family household spending to 2009 levels. The new law would limit all future spending increases to the pace of inflation and population growth, and no more. Any money earned above the limit could only be spent for food.
That might sound like a good idea, since it would force savings and thrift. But setting such strict limits might not be a great idea in rough economic times. Let’s think it through with an example:
Find this article interesting? Support more research like this with a year-end gift!
Take a household that has had an especially tough year financially. One breadwinner was laid off and another took a pay cut. This family gave up its health insurance, and held off on home repairs in order to scrimp and save to put food on the table and get by. But the economy starts looking rosier in 2010, and things start looking up for this family with the laid off member finding a good job and the other in line for a promotion. They find themselves with a bit more wiggle room in their budget. But remember the new law is a spending limit. It doesn’t matter how much household income the family earns, they can only spend up to the limit set during the biggest recession in at least 27 years.
And because the family held off on household repairs in 2008 and 2009 a backlog of important household improvements has developed. Similarly, the cost of some delayed medical procedures and dental visits for the kids are piling up. But the spending limit forces an awful choice. The family now has enough money but the new law doesn’t allow enough spending to pay for a new refrigerator, roof and insurance; they have to choose just one. And remember, the extra money the family earns above the limit can only be used for food—not the dentist.
Does this make sense? Not really, especially for a working family doing their best to save and economize.
Well under the proposed I-1033 authored by Tim Eyman in Washington State this is more or less what will happen to our state and local government budgets. The initiative might seem like a good way to control spending, but in the end it will only force agonizing choices between things we need like transportation infrastructure, schools and critical safety net services. Washingtonians would be forced to choose between fixing a bridge, keeping class sizes down, and funding mental health services—just like that make-believe family that had to live with a leaky roof in order to get a refrigerator that worked.
Similar legislation passed in Colorado was devastating. Analysis of what could happen in Washington with the passage of I-1033 indicates similar impacts making this year’s lean times permanent—not for one or two families, but for all the communities in our state.