State deficits: What in the world happened?
What accounts for the revolutionary spending binge in Washington and state capitals?
by Ernest Dumas
Not long ago, governments were running such big surpluses that they were cutting taxes and paying down old debt. Suddenly, spending is so out of control that, to stave off bankruptcy, Congress and the states are slashing popular programs like nutrition for infants and pregnant women, home heating help for the aged and poor, environmental protection, medical research and school meals.
We all have to share in the sacrifice, explained Sen. Mark Pryor, who seems to support this form of economizing, though he might have further explained that people at the top will not be sacrificing but gaining.
People who haven't had time to pay attention to the fiscal rhythms must wonder, what in the world happened? What accounts for the revolutionary spending binge in Washington and state capitals? Our bustling neighbor, Texas, run for years by conservative Republicans, has to cut $27 billion, and it's going to take it out of schools, colleges and medical care for children and the poor. To get into the game, the emboldened Republican minority in the Arkansas legislature is scratching around for services to eliminate. Arkansas has no budget crisis, but with the help of a few Democrats they can create one like Texas's in a couple of years.
The revolution was not in spending but in propaganda. The people who loved Ronald Reagan's mantra about smothering government carried the day in the last election. They have their chance now to get the government's boot off the necks of the rich and big business.
Runaway government spending on social programs or even on banks and General Motors is not the cause of the federal or state deficits. Mainly, it is a dramatic decline in government revenues, owing to tax cuts and the deepest, longest recession in 70 years engendered by these conservatives.
The accompanying chart, prepared by the Center for Budget and Policy Priorities, provides the clearest depiction of the deficit I have seen. It is a little out of date because it does not reflect the tax deal by the Republicans and President Obama that makes the short-term deficit worse than it appears here. By extending tax cuts for the rich and lowering payroll taxes it deepens the hole in government revenues.
The deep orange and blue waves represent the revenue loss from the Bush tax cuts and from the slump in tax receipts in the recession. The light orange and light blue waves represent increased government spending on the wars and on unemployment benefits and stimulus to generate economic activity.
You will notice the black line along the bottom, which shows what the deficit would be without those factors—small to nonexistent. For the sake of simplicity, I suppose, the chart does not show the impact of the Republican Medicare drug law of 2004, which greatly increased the government payout to insurance and pharmaceutical companies. Without that and the other factors shown on the chart, surpluses would be piling up every year.
In short, runaway spending on business regulation and safety-net programs is not even a minor cause of the budget crisis.
Let's take Texas. It's in a jam not because the state has gone crazy helping the poor. Four years ago, the Republicans overhauled Texas taxes, sharply lowering property taxes and making up for it by massaging its old corporate franchise tax into something called a margins tax. It was supposed to produce a lot of money but, as you can imagine, it was filled with so many loopholes that it fell a few billion dollars a year short of Gov. Rick Perry's projections. So they're bringing the ax down on the schools, Texas's once-great university system, mental health services and medical care for the poor.
As in Washington, the Republican-inspired fiscal crisis gives Texas conservatives what they always wanted: an excuse to eliminate programs for the general welfare.
In Arkansas, we don't have Washington's or Texas's problems, thanks appreciably to Mike Huckabee. Yes, him. For 10 years, while others were cutting taxes, he raised them so often that the government was rolling in money. He ought to run for president on that record.
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