if you look at the darke states, those are mostly democratic states that overspend, not the conservative south. i'm from illinois. i'm a black man. it has nothing to do with race. it has to do with your philosophy. that's all i have to say. host: we will continue this discussion after a short break with our guest. we will be right back. fink'>> these places the money f

modern cathedrals with wings hoping they would go to heaven. >> princeton class of '83, he would like to see changes to the higher education system. >> princeton philosophy should be on the web. these wonderfully concentrated on the talent and wealth and erudition should be opened up to the larger society, not kept separate, which they still are. >> "lost in americtocracy"sunday night at 8:00. you can also download the c-span podcast. >> "washington journal" continues. host: the deputy director of the

state fiscal project of the center on budget and policy priorities. thank you for being here. >> thank you. >host: what is at the heart of most of this? guest: the heart of it is the national recession. unlike the federal government, states can not print money or run deficits. if the programs they provide for people are funded by tax revenues. in a recession, people purchase less and sales tax revenues go down. people make less money or lose their jobs, income tax revenue goes down. if states are seeing the largest declines in tax revenues since they can remember. you have to go back to the great depression to see this. it's happening in republican and democrat states. the resources they need have dried up. the irony of that is it is happening just as the recession is driving up people's needs. they need government services more than ever. >> when a state make a decision to increase its sales tax by

1.5% or more, do they work against themselves, because people who are strapped for cash to start factoring that into their buying position? guest: the thing is what the states are doing -- over half the states are raising taxes, history tells us that is the right thing to do in a recession and it is important to point out that none of the states that are raising taxes are doing it instead of cutting spending. there also dramatically cutting spending and raising taxes because they're finding indeed a balanced approach to fight a downturn revenue. host: the states are not out of the the financial woods.

why is that? guest: we estimate 12 states have budgets out of balance because revenue declines on going. you say how much money you think need to spend over the course of a year to meet the public's needs. and the revenues continue to go down. several of the states have just started their new budget year and are already out of ballots. others will be before long. part of the problem is they depend on tax revenues. unemployment eases slowly. as the national recovery begins, the states will have another couple of years of declining revenues. they're in for a couple of tough years. host: what about the federal stimulus money? guest: it is helping. a bad situation could have been catastrophic without that. the money is helping the states to close 40% of the gap they had between public needs and

available resources. it's doing the job that it was never intended to the whole job, but good thing is there. host: two national organizations have similar headlines. usa today and another one in the wall street journal. have you had a chance, organization, to study where these dollars are going? guest: there are going everywhere. and they are needed everywhere. you can say in some cases states with the highest unemployment are not getting the highest stimulus per capita. it was not designed entirely on the basis of unemployment. it takes into account spending on important programs. in nevada it's maybe not getting per capita with a high share per capita, but it is last in the country with medicaid. we cannot let this obscure the major issue on the stimulus, which is it helping every state

close a budget gap. guest: states had to make a lot of decision on where to use the money. a lot of it went to healthcare, medicare eligibility, education spending. we can get any state and say this other program should have gotten it. if states are making tough decisions about what to cut and what the fund. nobody's going to be happy. the bottom line on the budget cuts on states is that they are broad and deep and devastating. guest: interesting conundrum. some people complained that the rules of the federal government, taxes are too did.

now there are complaints it is too flexible. the most important thing about the stimulus is it's helping states still about 40% of the gap in the budget. host: a front-page headline, another aspect is the health care. guest: that is the irony. if you're working and getting health benefits, that's great. if you lose your job, the government needs to provide health insurance. now the government revenues are going down while there's a greater demand for aid. host: where do you and your colleagues see this going? guest: the budgets that the state put together for this new fiscal year were excruciating to put together. they will be again for the next couple of years. states will be helped to the extent that they find ways to

increase revenues. the last couple of recessions, the majority of states did that and that helped them. there will be no easy answer. there is no single answer. you cannot solve this problem by budget cuts alone. you have to have a balanced approach of cuts, tax increases, and a stimulus money. host: would like to hear your comments by e-mail, baidu.com or by phone. your perspective on what's happening in your state. the legislatures and governors debating your state budget. a caller earlier said one of the real problems is that their state has pension obligations that are not practical in today's society. guest: the states had pension obligations they did not fund is one of the problems. some states cut taxes in the 90's and boller against pensions and placed a bet on wall street, which they lost. governments should set an example.

i understand the frustration people are facing cuts, state workers seem to be doing so great, but they are facing problems as well. there are furloughs and layoffs and pay cuts. it is not as though state workers are coming through this unscathed. host: peter is on the democrat line in little rock, arkansas. caller: good morning. one of the biggest problems that the other states are having that my state is not having is that they permit themselves to borrow money. when they can borrow money, then they feel like they can't find ever more generous programs. my state has to -- can only spend that which it is projected to take in. it prioritizes its spending into categories. if the revenues don't meet

expectations, then those things in the lower categories just do not get funded. yet arkansas, which is not a red state, does not have the same kind of deficits. we were concerned we might get left out of some of the stimulus money because we are a little bit more fiscally responsible. i would like to hear a comment about that. host: thank you. guest: it is more like this. over the course of the year you project tom hasman you need to spend. but then as revenues go down you find out you don't have the money. so it's like the analogy of a family. you work hard and pay your bills and then you lose your job, you cannot pay your bills. it's not because you overspent, it is because you lost your source of revenue. that is the dominant theme

happening in states. host:aaron has a question from twitter. guest: the stimulus money they did not take was not for balancing their budgets as much as it was providing unemployment benefits. they have their own problems, though. louisiana had a tough time balancing its budget. it made serious cuts to higher education and other areas. there was a call for some tax increases that the governor would not accept. they had their problems. they should have taken the stimulus money because that would help people in need. it was not so much a factor of balancing the budget. host: now tony is calling from the republican line in indiana. caller: good morning. the blood is pouring out of my ears listening to the knuckleheads in saying about how the stimulus is going to help and projects and the stimulus. that's absurd. the government has not created an actual job in the history of

the world. that's ridiculous. it is a progressive movement that says tax, takeaway, control. i need the government to give me clean water, protect my orders, and give me a couple of police on the streets. and get out of my way. the question is, when i sit here and listen to nancy pelosi talk about protecting turtles and warning about the smell of pigs, you all have to go get a real job. but your books down, brought out and grows and tomatoes, work on a farm, durio de is living and then you'll say i cannot afford to give money to these new wonderful programs -- go out and make a real living. host: is this an opportunity to right size government? caller: absolutely. it's going to be the great roman empire that will fall apart. all the social programs will

fall apart. we will bankrupt america. i'm a conservative right-wing person. i hope that day happens as soon as possible. keep spending and taxing and disenfranchising the regular average american. one day we will never revolution in this country. we will throw out the knuckleheads and go back to the founding fathers. how about just saying no, just saying you don't have it. if your checking accounts as you have $110. how can you look at the american people and say we're going to print money and now you have five $100? host: let me ask you, he talked about printing money. states don't have that option. what is your comment about what he said? guest: i respectfully disagree in that i think very little wealth has ever been created in this country, very little jobs created without help from the government. who build the highways, provides public healsafety, and so on?

the history of this country is great amounts of activity by the government, a great investment by the government in areas where the private sector could not or would not, is what made the country grow. let's not hope for the fact the government will run out of money and we won't be able to do anything. we would be in terrible shape. host: now brian is on the independent line from indiana. caller: thank you for c-span. in indiana, if the state budget did not pass, the governor mitch daniels was going to start shutting down things like the lottery and casinos that make money for the state, make money for people. i just don't understand that. i was raised in kokomo, indiana,

which is an auto town. it employed chrysler, which is still there. and gm when it was delco, which is delphi now. we had delco all over the city. delco started taking jobs away from kokomo in the late 70's, so the auto industry has started taking our jobs away a long time ago. manufacturing has made this country the power that we had, starting in the 1950's. it employed thousands of people at the big companies. we started losing taxes ever since these companies started going out of the country with our jobs. we have a plant in logansport,

that when it reopened, it started buzzing in people, a lot of illegals. my last comment is there is no bigger organized crime unit in this country than our own government. thank you. hoguest: if the state has to shut down because they don't have a budget, all kinds of things will close. hopefully that would be short and they would get a budget passed. otherwise, we have lost manufacturing jobs. they're not coming back. we have to figure how to build a new economy in this country. it's encouraging that there is talk in washington about focusing on it after years of not focusing on it. it's not an easy situation. host: in california there's a headline as getting global coverage. the first iou will be sent to people awaiting income tax

rebates. and thousands more iou's will be printed in the next weeks cents -- if a deal cannot be reached. the state is prepared to issue ious equivalent to a month's spending or five the hundred 91 million. we received a tweet from howard. california iou money is not real. guest: i hope it will get back up soon by real money. california is a special case in a lot of ways. it has the same economic problems of every state, only magnified by the size of their economy. and there was a house in bubble. some of their wounds are self- inflicted. 30 years ago that state limited

property taxes and shifted expenses to the state. now the state revenue has declined, they cannot afford it. it requires a two-thirds vote in the legislature to raise taxes or even to pass a budget. a small minority in california can bring gridlock if th. california is a combination of a big problem in the economy and specific political rules that hurt them to reach solutions. host: clyde is on the democrat'' line from new jersey. good morning. caller: good morning. in new jersey we have a sales tax, income tax, real-estate taxes, the highest in the country of real estate taxes. we have casinos, lotteries, poll boats. we still have problems. the real problem is pensions. it is unsustainable at the rate they're going.

neither candidate has even mentioned it this time because it is political suicide. thank you. guest: in new jersey one of the problems is in the 1990 posing an income-tax was cut, the state would lose a billion dollars a year. they simply did not fund the pension. they did not put the money in as they were supposed to do year after year. now they have a big hole. state employees are getting big pensions, some say, but for years the government did not put the money into the fund that it was supposed to. it was saying to people, were saving money, but here we are. host: new jersey has a $9 billion budget deficit. 32% of the state's operating funds. now dave is on the republicans line from virginia. caller: you guys have been in washington d.c. too long. host: you're not far away from

washington. caller: but i'm here where people work for a living. your talking about the stimulus money. all you're doing is transferring debt from one pocket to another. government is not the end all the all of the baht is a distance. people in washington are not the taxpayers. we are the ones out here carrying the burdens. this massive stimulus package that the government passed, somebody will have to pay for it. it is the rest of the people out in the real world, not washington. you guys are government-focused. think about us out here that have carried this burden. host: the idea is what happens to you if your taxes get raised? caller: but you are still talking about the stimulus money. you're talking a stimulus that's going to save the state. but the stimulus package still has to be paid by the people out in the country.

all you are doing is transferring debt to one -- from one pocket to the next. guest: everything has to be paid for. that's true. but without that money would be a lot worse shape than we are now. people work hard and pay taxes, but they also get the benefit of it. they get programs the government provides. they get public safety, health care, education. it is a little simplistic to say, we would be fine if you did not give us the money. without the stimulus, we would be in much worse shape than we are. i would not want to contemplate that. host: tell people about your organization. guest: founded in 1981 in washington. we do research on federal and state issues. with an eye on how they affect low and middle-income people. r boyce and source of research -- our voice and source of research is how to make

government responsible and provide people with their needs. host: you are described as a left-of-center organizations. >> progress of, left-of-center, people use all types of terms. our goal is to help people that needed the most. host: now to the independent line. good morning. caller: good morning. how are you? >> michigan has had its share of troubles. what is your perspective? caller: we should get a petition going and have our senators, governors, representatives, mayors taking a cut in pay, taking a cut in their medical benefits as well. by the way, we don't have a pension plan at the end of their term anymore. that is all i would like to say about that. guest: i'm not here to defend any party or politician. i understand the frustration. but in this current crisis.

it was caused by the fact that the recession has dramatically and historical driven down the tax revenues the states used to provide public services. it is always tempting to find a villain or someone to place the blame. that is the crisis in and that we have to get through. host: of your that calls himself american bureau is asking a question on twitter. how do some states manage to provide essential services without the state sales tax or income tax? guest: most states have one or the other. the majority have both. some states don't have these taxes and you could argue don't do such a great job of providing public services. experts will say states are in better shape if it has a balance of revenue such as income tax and sales tax so that if one fails, the other is there. there are very few models of state and have neither. we cannot necessarily say that because they don't have them, they are somehow functioning

better or meeting public needs. host: the next question is to davis on the democrat line. caller: good morning. in north carolina nobody knows what's going on. we are at war with the rebel flag. they're doing it on paper work and nobody understands it. it's just like medicare. medicare is paying bills for insurance companies. hospitals and doctors saying we did this and did that and took the money. this like what they did with the stimulus tech. -- stimulus checks. if the money doesn't come back, the economy is not going anywhere.

guest: i'm not sure where to go with that call. i think it speaks to the frustration people have in addition nation where there working hard, paying taxes, and the economy is in deep trouble. i hope we can get out of that. host: the next call is from michigan. this is geraldine on the republican line. go ahead. caller: i was going to stay there was speaking about california. california was one of the first states to start sending their movie industry business overseas and making money there. in michigan i worked for chrysler corp. for 20 years. when we initially had a blue cross-blue shield hospital policy that was affordable for the company. when they turned it into an hmo where they paid for the private physicians and everything, that is when it became too cost-heavy for everybody. they should go back to that.

when people become sick or they need hospitalization, they really needed. so you don't mind paying into a fund and you think, you're not the one who has to have it. guest: most of the money states spend, that goes to health care and education. if we can do something to contain health-care costs, that helps. sounds like the folks in washington are finally getting serious. california is sending a movie business overseas, that the private sector decision. some places offer tincentives to those movie companies. the amount of money spent on tax breaks is much more than the amount they actually get back sometimes in business and jobs from it. states are examining that. host: baltimore on the independent line. caller: i have a question

relative to the guest's position. it seems his big answer is budget cuts, budget cuts, budget cuts have caused the problem. how liberal is california? you are liberal, i realize, but you don't talk about how california overspent on things they should not have. that is a big part of the problem. in california, how much of the problem out there could you contribute to the california position on illegal immigration? how much of that costing both how much for higher education being almost free for so long? i remember years ago people from california saying we don't have to pay for this or that, relatives of mine. there were living above their budget. budget cuts are something that should have happened a long time ago.

do you believe it is better to be -- if you have to choose between a capitalistic system, a conservative system c compared with socialism, which one would you choose? guest: if i could only choose between capitalism and socialism, i would choose capitalism. but we have to point out that in this country we have a modified source of capitalism where the government does have some involvement in the economy because it runs better that way. i did not say budget cuts were the problem. i said the decline in tax revenue was the problem. one of the responses to budget cuts was that budget cuts alone are not a good response because they actually hurt the economy. because you take money out of circulation and make the recession worse. government spending is a great stimulus. they don't put the tax money into a cayman island bank account, they spend close to home. so that's a good thing. california did not have free

higher education. to the taxpayers pay for it so kids could go to college without having to pay for it. that is not a bad idea, but now we're putting more of the burden on individual students. so some students cannot go to college. others go and then have big amounts of debt. you have to pay for the thing you're getting. to some extent, states would cut taxes and not pay for the things they were obligated to. that helped cause the problems. >host: in stalemates in new york and california they've had stalemate. what will these debates be like as we look at 2010 and the elections? guest: you cannot take the politics out of the political system. new jersey has a gubernatorial election this year. the incumbent was a democrat, being criticized for with happening with the economy and the budget and taxes. that will be magnified in august 8 when they have elections in 2010.