Making the Economy Flow
CT@Work
By Leo Canty
June 11, 2009

We work, get paid, and spread our earnings in the communities where we live and labor. The earnings of working people infused in our local economy make up the life-blood that keeps the system flowing, just as our bodies need blood and oxygen infusion to keep us alive. Economists describe this flow of cash to be the hallmark of the virtuous economy. A fair share of the profits and productivity the workforce creates goes in the paychecks, and then circulates locally buying goods and services that keep the healthy system circulating in virtuous fashion.
Economists, accountants, politicians, and armchair quarterback pundits all have their views and econometric models describing what is good and bad for the economy, and what will ramp up or deflate oxygenation and the circulating cash flow. Some of us are looking at a common sense model.
The workforce, private and public, need to keep earning and spending to prevent any more loss of circulation and anything that can be done to dampen negative effects and improve the cash flow will help ramp up the cycle – more people earning, spending, building momentum to expand the workforce and grow.
State employees gave $700M in wage and benefit concessions in exchange for job security. It took some cash out of the system but kept people in jobs and helped keep the service delivery system intact to care for those most in need. All of that helps economic flow. Government plays a key role in Connecticut’s economy and if ratcheted down in these times would impact the state negatively. Layoffs, severe cuts, elimination of services, reduction of dollars into the system all stem the flow and must be prevented. The Obama Administration suggest this to be a difficult but necessary move now to prevent the nation and the state from reeling into depression.
In 1929 – the last big depletion of the circulatory system – support for a huge population in dire need did not exist. No unemployment, no social security, no Medicare or Medicaid just poor houses and misery. Better social and human services are in place now that must be maintained to support those in need. The 1920’s also grew a similar wage gap to 2008, where wealth was protected and hoarded drawing cash away from the economic circulatory system contributing to the failure at the time.
Right now it makes sense to find ways to get the cash flowing into the system from new, more viable sources to get a jump-start on the slowed flow. Middle and lower-income wage earners are already spending most of their paychecks locally buying food, rent, utilities, insurance, health care, paying debts and, once in a while, McD’s for dinner with little leftover. They are at work oxygenating Connecticut’s economy. Conversely, high wage earners have leftovers after all the bills are paid and aren’t adding to the circulation in the most helpful way, yet.
State employees were asked to help and they did. The governor has not asked anyone else. The rationale for not asking the wealthy and business because they have suffered enough can only be described as Machiavelli in lambs clothing.
Many of Connecticut’s current problems can be solved with a better more reliable, fair and equitable tax structure. The regressive property tax, a business deterrent, can be reduced and brought into balance with the rest of the system by substitution of a more progressive income tax and a business tax program that makes sense with fewer loopholes that gets everyone contributing in a fair way. At this time it would mean an increase in taxes at the high end – not where the middle and lower incomes are already putting their cash into the flow. It’s time for that.
This state is a tax haven for the wealthy and business- has been for a number of years. When the governor claims lower taxes makes the state more competitive for after the recession the question needs to be asked - competitive for what contest? The race for lower living standards than Arkansas?
Oxygenating the flow, bringing cash that is moving away from Connecticut into the state now so we can ramp up circulation and build a more stable base for 2012 and beyond works better. We need fresh blood and fresh air to turn things around.