Fiscal Mess, Drive to War Put Social Services on the Block. (News Analysis)

By Feuerherd, Joe | National Catholic Reporter, February 14, 2003 | Go to article overview

Fiscal Mess, Drive to War Put Social Services on the Block. (News Analysis)


Feuerherd, Joe, National Catholic Reporter


As politicians scramble to cast blame and propose solutions to the budgetary crisis facing every level of government, there is one point of bipartisan agreement: The nation is a fiscal mess.

There's additional agreement, at least at the state level, that those most dependent on government assistance--the poor and the infirm--will see the programs they rely on slashed as governors and legislators push to makes ends meet.

Not only does the president's proposed 2004 federal budget anticipate the largest deficit in the country's history ($307 billion) and flat-lined or reduced social spending in most areas, but state governments are experiencing what budget analysts call their worst fiscal crisis since World War II. Unemployment, meanwhile, is nearing a decade-long high and the specter of war dampens both business investment and the consumer spending that drives the 21st century U.S. economy.

Not a pretty picture.

Disagreements arise quickly over the causes of the crisis--and how to solve it. Republicans point to Clintonian excesses of the `90s--a boom that went bust--combined with the unanticipated economic sluggishness attributable to Sept. 11. Additional tax cuts and restrained social spending will fuel economic recovery, the Bush administration argues.

Democrats contend, by contrast, that the $1.35 trillion tax cut Bush pushed through in 2001, combined with an additional $1.5 trillion in tax cuts proposed over the next 10 years, will sap the treasury of needed dollars and put too much money in the hands of those, the wealthy, least likely to generate the economic activity needed to fill government coffers. Less costly targeted tax cuts aimed at "working Americans" combined with relatively modest spending on jobs-producing transportation programs are the best means to jump-start the sluggish economy, according to plans unveiled last month by House and Senate Democrats.

Meanwhile, as state legislatures around the country begin their sessions in earnest, policymakers and advocates are coming to grips with an environment of growing needs and declining resources.

The state of the states

Unlike their federal counterpart, the vast majority of state governments must, by law, balance their budgets; they can't just print money. The projected combined state budget gaps for 2004 are approaching $85 billion--nearly 20 percent of total state expenditures. This bad news comes on top of already lean 2003 budgets, where states had to achieve $50 billion in budget savings to balance their books.

"The combination of long-run deterioration in state tax systems coupled with an explosion of health care costs are creating an imbalance between revenue and spending," according to National Governors Association Executive Director Raymond C. Scheppach. "To make matters worse, we've had a collapse of capital gains tax revenues added to the overall loss of revenue attributable to slow economic growth."

Willy Sutton reportedly robbed banks because that's where the money is; at the state level most of the money is in education, where aid typically helps equalize disparities between affluent and poor school districts, and in health care, specifically Medicaid, the joint federal-state health care program for the poor.

In New York, says state Catholic Conference spokesperson Dennis Poust, a projected $10 billion deficit led Republican Gov. George Pataki to propose cuts of $1.2 billion in Medicaid; in addition, Pataki proposed to tighten eligibility for the state's "Family Health Plus" program, which provides medical insurance to the working poor. Similar size cuts planned in education, said Poust, will disproportionately affect poor school districts.

In Minnesota, Republican Gov. Tim Pawlenty has, like Pataki in New York, pledged not to raise taxes to close that state's two-year $4.5 billion projected deficit. "When you're looking at a deficit the size we have, and you're not willing to raise taxes, all the balancing measures have to come through program cuts," explained Tony Pucci of the Minnesota Catholic Conference. …

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