Monday :: Apr 21, 2003

How States’ Fiscal Problems Can Be a Democratic Campaign Issue

by Steve

One campaign issue that George W. Bush hopes will not surface next year is the deteriorating fiscal condition of states since he has been president. As this New York Times story in today’s edition points out, many states are implementing serious tax/fee increases and program cutbacks in the face of mammoth state budget deficits. And they are doing so with no help of any nature from a federal government headed by a man who led a weak-governor state in robust economic times delivered to him by a Democratic president who himself was a successful governor in a strong-governor state.

Bush told the governors at the National Governors Association meeting in February that help from the Feds wasn’t possible because we are at war and coming out of a recession. He did try to defend himself by saying he was actually providing more money to states, a claim that was quickly exposed as a lie. And what help he is providing to the states, whether it be in housing or Medicaid has significant strings attached that make it just as bad as similar moves by Democratic administrations that were decried by the GOP.

He skirts two issues that he hopes voters won’t pay attention to. First, part of the problem states face are unfunded federal mandates in education and homeland security, mandates that have been created and shirked by the Bush Administration. Second, any of the purported tax benefits for working class families contained in the Bush “stimulus” package, such as the acceleration of future marginal rate cuts will be obliterated by the steep increases in state taxes and fees that these same families will face as a result of closing their own budget deficits. And in total, any stimulative effect from Bush’s plan will be offset by the measures states are taking to balance their budgets. Which of course exposes the obvious: If the stimulus won’t work, then the only remaining effect of the Bush tax cuts will be to put money in the pockets of people who don’t need it.

And it is a fallacy for conservatives to suggest that the states are in this problem due to overspending. Most of the state spending increases in the 90’s went for schools, health care, and law enforcement. The Center on Budget and Policy Priorities study shows that the Cato Institute study referenced in the Times article was flawed.

It is also true that states can take steps themselves to close loopholes in their corporate income tax programs that lead to lost revenue, steps that have already been taken by other states, as this Center on Budget and Policy Priorities study shows.

Yet with Iraq over except for the reconstruction, and with Bush himself trying to convince voters that war is over so that he can convince them its OK to push tax cuts again, is there now a political opening for the Democrats to take up the cause of the states and paint our choices as between a dividend tax cut for wealthy seniors or assistance for states? Several studies indicate that assisting states now to preclude deep cuts in services and prevent sharp tax/fee increases can add to our GDP. Yet Bush is totally silent on this growing problem, even to GOP governors, save his hidden-cost (Medicaid) and strings-attached (housing vouchers) policies that do nothing to help states now.

Why shouldn’t the Democratic candidates start hammering Bush now on the issue of states’ fiscal plight? Why shouldn’t the candidates start painting Bush’s priorities as those favoring the wealthy dividend-earners to the disadvantage of school children, cops and firefighters, teachers, and low-income families needing health care? Why not push for a new round of temporary revenue sharing, like Nixon did in the 70’s?

Given the push by Bush now for his package, which is obviously tilted towards those who don’t need the help and which has little, if any stimulative benefits, and given the months of miserable debates and choices ahead at the state level, now is the time to take Bush on in this area. It would be hard for even GOP governors to openly oppose the Democrats’ pitch here, especially if it included either a 1 or 2 year federal pickup of state Medicaid burdens and other relief measures with no strings attached. These simple moves, coupled with temporary revenue sharing, would change the choices facing the states overnight, and brighten the country’s economic outlook immediately.

Some of the candidates are well placed to make these arguments, given their prior positions. As ex-governors or Lieutenant Governors, Howard Dean, Bob Graham, and John Kerry are well versed in the challenges faced by the states here, and could be forceful advocates for state assistance. John Edwards has already pitched the idea of a state assistance package. And the political logic of this argument of choices is potentially lethal to Bush, who would have to defend why it is better to give the wealthy seniors a dividend tax cut than to implement temporary revenue sharing or federal subsidization of state Medicaid matching funds.

Quite simply, how would Bush be able to defend against this?

Ladies and gentlemen, we have a president who offers a stimulus package that offers no benefits to the vast majority of you. His package would drain monies from the treasury for the benefit of the few. For the same amount of money the president would waste on those who don’t need it, he could provide assistance to your state to prevent cuts or elimination of health insurance for low-income families, class-size reduction and school modernization and books for school children, and homeland security funding for those we rely on to keep us safe: our police and firefighters. Yet this president has told the states that they can expect no help from his government. Why? Because he has committed those monies to tax cuts for those who need it the least. Isn’t it time to put a government back in charge that places the needs of the states and your family ahead of wealthy campaign contributors? Let’s return to the days when schoolkids, families, and public safety professionals were at the head of the list, instead of being misled by broken campaign promises so that the well-off can get another tax break they don’t need.

If any of the above candidates started pounding that paragraph over and over again, it would be the end of ballgame for Bush.

Steve :: 12:22 PM :: Comments (16) :: Digg It!