The State Fiscal Crisis: What Can the States Do?

Maybe Warren Buffet, Arnold Schwarzenegger's celebrity financial advisor, had it right when he suggested Prop 13 stood in the way of needed tax increases in California.

A new study, unrelated to the California crisis, from the nonpartisan Urban Institute, suggests, government spending cuts do more damage to local economies and state budgets than tax hikes. "Indeed, from a short-term macroeconomic perspective, tax increases geared to high-income households are the least harmful option," says the report.