Jim Douglas and others reflexively say that they will consider all the alternatives when dealing with the current budget crisis. Is that really true? Despite claims to the contrary and his insistence that "all options are on the table," Gov. Douglas continues to refuse consideration of revenue or exhaustion of resources (read: "rainy day funds") as part of the budget picture. Instead, he appears to mean that all budget cuts will be "on the table."Some are beginning to question the Governor's logic. Paul Cillo, a former legislator and currently the Executive Director of the Public Assets Institute (a public policy and budget think-tank) wrote a compelling op-ed that ran in the Free Press, Rutland Herald, and Times Argus recently.
An excerpt:
"Elected officials tend to talk about the current budget crisis as a spending problem: Spending is too high so we need to cut the budget.In fact, we have a revenue problem: too few dollars coming into state coffers...
...The state still has more than $100 million in rainy-day funds -- reserves that can help fill the revenue hole as longer-term solutions are put in place. While these funds should not be swallowed in one gulp, they exist for times like these. The state should not be afraid to use them strategically -- and plan to replace them as the economy improves.
Temporary tax rate increases for people in the upper-income brackets also should be part of the solution. Such increases are less of an economic drain in a recession than either general tax increases or budget cuts, according to economists like Barack Obama's new budget director, Peter Orszag.
Republican Gov. Richard Snelling used this approach during the 1991 recession, and those tax rate increases helped see the state through hard times. In fact, in the two major recessions that occurred during Snelling's tenure -- in 1983 and 1991 -- Vermont dealt with its budget problems with a package of cuts, tax rate increases and deficit spending."
You can find the complete essay here.
If our leaders truly want to find ways to help Vermonters weather this recession they need to be willing to make tough decisions and truly consider all the options available to them. That includes finding new sources of revenue, using our taxpayer funded reserves, and, yes, disciplined and responsible budget cuts.
Simply eviscerating public benefits and services is not the only solution, and certainly it is not the responsible solution. Cutting benefits and reducing spending will create a drag on the economy by taking money out of it.
I have yet to see the Douglas Administration provide any analysis of the actual economic impact, and potential negative economic consequences, of a potentially devastating "feedback loop" established by budget cuts to balance the budget and deal with the economic crisis, but which in turn leads to reduced consumer spending, which in turn drags down tax receipts requiring still further cuts.
For example, the Administration is silent with respect to what $65 million in cuts would actually do to our economy. What if $65 million in budget cuts to essential services leads to $80 million dollars in reduced economic activity? Is that still a strategy worth pursuing? For example, what happens when a beneficiary has a cash money benefit cut, or a service cut that they then need to pay for themselves, but cannot for lack of money? And, what happens when service providers who administer those benefits in turn lose their jobs? What about the landlord who fails to get revenue because the money that would have gone to a beneficiary to help pay back rent is no longer available, etc. therefore leading to an empty unit and/or decreased income revenue and depressed tax receipts?
This analysis may be hard to quantify, but current budget discussions underway in Montpelier have not even made the attempt. Essential services and public benefits are economic stimulus because it is money that is immediately turned around and paid out for goods and services in our local communities. That allows consumers to spend and therefore has a stimulative effect on the economy. Whether that stimulative effect is greater than the cost of the programs remains a question that should be examined. But, the fact remains this Administration is not doing the work to make its case.
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