The economic crisis comes home

The economic downturn has caused fiscal crises in almost every state and city. State revenues came up $50 billion short last year, according to the National Governors Association, which adds, Ó… 2003 will be much worse than 2002 and states will be forced to make huge spending cuts, particularly in Medicaid.” The threatened new cuts will be on top of last year’s, and if they are not stopped, they will include:

* Layoffs of government workers, demands for concessions and attacks on their unions.

* Less availability of child care, housing, health care, public transit; declining public education, public health and all public services.

* New tax increases on working people.

Corporate-minded politicians plan the deepest cuts to programs affecting the poor. At least a million people, mainly in low-income working families, have lost or are in danger of losing Medicaid and SCHIP health insurance. But not only poor people are affected. In my home state of Connecticut, the Christmas snowstorm saw many unplowed streets and highways due to city and state cutbacks – and the layoffs are just starting.

How we got here

Since the Reagan administration in 1980, the federal government has been shifting responsibilities onto states. The need for services has been increasing (e.g., education) and the costs have been escalating (e.g., health care).

The increased mobility of capital has reduced states’ taxing power and destroyed city and town tax bases. Most states have followed disastrous pro-corporate tax policies. They raised taxes on the working class during the last recession (1990-91). And they cut taxes on corporations and the wealthy during the late 1990s.

What’s not the answer

In Connecticut, Republican Governor John Rowland offers a “choice.” Either we cut jobs, wages and benefits for state workers, or we cut education, health care for children and aid to the cities. This is no choice at all – if we fall for his divide-and-conquer tactics, he will be back for more cuts, more concessions. Around the country, too many governors and state legislatures are following the same tactics as Connecticut’s Rowland.

What is the answer?

Community, labor and advocacy groups in Connecticut are vowing they will not be divided. They call for closing corporate tax loopholes and increasing taxes on the rich to solve the crisis. Already, they have forced the governor to agree to a modest “millionaire’s tax.” He said it was the hardest thing he had done – harder, apparently, than cutting services to children, the blind and working families.

We are facing a national economic crisis, calling for national solutions. But winning pro-worker policies at the state level is an important part of the fight to change national priorities.

In most states, the budget could be balanced with a “tax the rich” budget. Instead of dividing workers against unemployed, taxpayers against government workers, cities against suburbs, “tax the rich” focuses on the struggle of the overwhelming majority against the handful of corporations and wealthy individuals who have created this mess.

Details will vary in each state, but typical programs would include:

* No layoffs of state workers. Preserve essential services (and expand them where necessary).

* Close state corporate tax loopholes and giveaways.

* In most states, the rich pay a smaller part of their income in state and local taxes, and the poor pay the highest rate. Raise the state income tax on the rich so they pay at least as much as everyone else.

* Use statewide taxes, particularly taxes on high incomes, to equalize and reduce regressive property taxes, and to equalize school funding.

* Impose an additional emergency tax on the top 2 percent of incomes to meet the immediate crisis.

* Work with other states for a uniform tax structure.

Our governors and legislators must confront Bush and the Congress, demanding at least $100 billion in revenue sharing funds to cities and states, linked to the economic emergency.

Future columns will discuss necessary changes in federal policies, including shifting funds from the war buildup to meet people’s needs.

The author can be reached at arthur.perlo@pobox.com