REVENUE SHARING, ANYONE?
Author(s): ROBERT KUTTNER Date: November
19, 2001 Page: A15 Boston Globe Section: Op-Ed
HOUSE
AND SENATE LEADERS ARE NOW DEADLOCKED BETWEEN A REPUBLICAN HOUSE STIMULUS BILL
THAT IS A SHAMELESS TAX GIVEAWAY TO LARGE CORPORATIONS AND A SENATE DEMOCRATIC
SPENDING BILL THAT IS WELL INTENDED BUT TOO PALTRY.
The country is facing a serious recession as well as
increased national security needs. The safety net is frayed. Joblessness is
rising, but unemployment insurance now covers fewer workers with stingier
benefits.
Welfare
is no longer an entitlement, and many mothers who have played by the new rules
and taken jobs are being laid off with no prospect of public assistance. Since
health insurance is tied to employment for most Americans, loss of job means
loss of health coverage. State budgets face alarming shortfalls, which could
exceed $100 billion. Forty-nine of the 50 states are not allowed to run annual
deficits (the exception is Vermont). So when recession strikes, states must lay
off workers and cut program benefits just when more people depend on them. The
alternative is to raise state taxes, which is not a good idea in a recession
either.
California
is facing a budget shortfall of $12.4 billion, and Governor Gray Davis is
scrambling to cut state programs, many of them in human services. Florida faces
a shortfall estimated at 15 percent. In Massachusetts, the gap is more than a
billion dollars.
There
is an obvious solution to this problem - emergency federal revenue sharing - but hardly anyone is talking about it. (An
exception is Senator Edward Kennedy, whose proposed antirecession package of
targeted aid goes beyond what the Senate Democratic leadership has proposed.)
Revenue sharing was a Richard Nixon
innovation, part of his so-called New Federalism. The idea was to replace
narrow federal programs with broad areas of federal assistance to states and to
leave the details to governors.
Liberals
did not especially like block grants. In general, the result was less targeted
spending to the needy. But governors of both parties loved them. The only
problem was that under the Reagan spending cuts, followed by additional
Clinton-era cuts made in the name of budget balance, the available federal
money dwindled.
This
trend was masked to some extent by the boom years of the 1990s, which fattened
state coffers. Now, however, states find themselves with additional demands and
depleted funds.
You
would think that emergency revenue sharing would be a political slam dunk. There are more Republican
governors than Democrats, and incumbents facing election next year will be
unpopular in a recession. And George W. Bush, a former governor with a brother
who is governor of a large state, might seem sympathetic to an essentially
conservative idea.
But
the idea of emergency aid to states, which was first proposed by the liberal
Economic Policy Institute, has barely gotten notice. The White House and
congressional Republicans would rather share revenue with their corporate
brethren, who would get the lion's share of the proposed House tax cut bill.
Liberals
have also been unenthusiastic. Most Democrats would rather target money to
specific needs such as increased funds for unemployment insurance and health
benefits.
This
is fine as far as it goes, but it doesn't go very far. Even the Democrats'
stimulus bill proposes only about $40 billion, which could be dwarfed by the
total state shortfall, not to mention the needs of newly jobless people.
The
50 governors, representing both parties, should be camped out on Congress's
doorstep. But the National Governors' Association, a fairly toothless
organization constrained by the need to operate by consensus, is lying low.
Ordinarily
a war provides a measure of economic stimulus. But this war is costing just a
billion dollars a month - a relative pittance in a $10 trillion economy.
After
a lot of posturing, the Republican House and Democratic Senate will split their
differences. They will cobble together a bill with tens of billions in tax cuts
mostly for the wealthy and a similar amount of public spending, most of it
devoted to the war effort, related outlays for intelligence, airport security
and civil defense, relief for New York, and a grudging sum for human services
and state budgets.
This
approach is unbelievably shortsighted. The administration and its Republican
allies will take the political blame when the recession deepens, and we will
almost certainly need larger antirecession outlays next year.
George W. Bush may yet succeed at avenging his father's failure to vanquish America's enemies in the Middle East. But he might also recall that what undid the first President Bush was not stalemate with Iraq but a lingering recession at home.