Fighting the Snake

Today’s one-way approach to public spending and taxation threatens to strangle critical infrastructure rehabilitation and public services generally

The boa constrictor is one of the world’s most feared predators. Once it wraps around its prey, that’s the end.

Contrary to myth, the boa doesn’t crush its captive to death. It simply waits until the animal exhales, then tightens down. Inhaling is then impossible, and the animal suffocates. It’s still not a nice way to expire.

Right now, it seems public budgets are in the grip of a giant boa constrictor. This recession represents a large exhalation. Once the recession ends, will governments — specifically state and local — ever be allowed to inhale? The federal economic stimulus will help in the short term. But what about after that?

Even now, almost across the board, state governments are responding to recession-induced deficits by promising to cut spending. My own state of Wisconsin faces a $5.4 billion shortfall, and our governor has asked department heads to cut their budgets. Talk about raising revenue consists mostly of whispers in the back corners — better keep it quiet lest the radio talk-show hosts hear.

Contrary views

A few courageous souls are arguing for sustained if not increased state spending. Paul Krugman, New York Times columnist and Nobel prize-winning economist, labeled the governors as “fifty Herbert Hoovers” for their fixation on spending cuts, which would inevitably fall hardest on disadvantaged people and would limit needed investments in public infrastructure.

Of course, continued state spending would mean raising taxes, which according to certain loud-mouthed constituencies is a mortal sin by definition at any time, and most of all in a slow economy. Raise taxes during a recession? And take more money from struggling people? Unthinkable!

But think about it anyway. About 30 years ago, a candidate here in Wisconsin ran for governor promising a one-year, 10 percent income tax surcharge to cure a projected budget deficit. He won, the surtax was enacted, it did what it was supposed to, and it was removed after one year.

True, where taxes are concerned, the water in the well was not nearly as poisoned then as it is today. But the lesson still applies. It is not only possible, it is potentially publicly acceptable to raise taxes for a clear and beneficial purpose.

Squeezing away

Let’s look at the likely effect of leaving taxes the same and making up the deficits just by cutting spending. First, employees’ salaries and wages are frozen or raised only marginally. Next, spending on infrastructure projects is postponed. Then, maintenance is cut back. And finally dollars are nibbled from around the edges of almost everything.

Now, when the recession ends after a couple of years, attempts to restore funding and services to earlier levels inevitably will be labeled by the talk-show crowd as “runaway spending.” Employees are unlikely to get catch-up raises to make up for what they sacrificed. Postponed projects may or may not be revisited. Infrastructure work is unlikely to be accelerated to recover for the lost years.

The government has learned to “do more with less.” Now is the time to keep spending and taxes low. Raise taxes when times are good? And derail the recovery? Unthinkable! And the big snake’s grip tightens down another notch.

But at what point does employee comp-ensation fall so far behind the private sector that the best people quit public jobs? What happens to services when pay for public jobs becomes so unattractive that only the mediocre find those jobs appealing?

At what point does deferred maintenance cause calamitous infrastructure failures? (Of course, little things like the I-35 bridge collapse in Minnesota and the Christmastime water main break in Maryland aren’t really relevant, are they?) Sooner or later, tax cutting and “spending restraint” begin to choke the life out of public services we value. A federal stimulus package with borrowed money may help for a while, but it won’t address the underlying issues.

Another view

Now, what happens if, for example, state taxes are raised at a time when the economy is down and people are out of work? Most states rely mainly on income taxes. So higher rates affect the unemployed marginally if at all because they have little income to tax. The result is that people who still have jobs end up kicking in some extra to help sustain services for everybody.

Of course, when needed projects are paid for instead of scuttled, and when maintenance work is continued instead of deferred, people are put to work and some of the bite is taken out of the recession. All this is part of what it means to live in a society instead of a place where the rule is “everyone for himself.”

All right, the question of raising taxes isn’t as simple as all that. For example, many if not most households today rely on two incomes, and if one person is out of work, both struggle, and higher taxes on the remaining income would hurt that household.

The point remains, though, that raising revenue (raising taxes) should seldom if ever be taken off the table in the discussion of how to pay for necessary services in good times and bad. The mere fact of having the discussion is a good start. To treat a potentially valid option as off-limits is to fall prey to that big, nasty snake.



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