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Racing to Blame Public Workers for State Finances

Suffolk DownsAnd… they’re off, on a new round of attacks on public pension systems nationwide.

When you hear about this week’s Mercatus Center report on the financial condition of all 50 states… start by considering the source.  Mercatus is housed at George Mason University, so it has a veneer of academic credibility.  But here’s what SourceWatch has to say:

“The Mercatus Center was founded and is funded by the Koch Family Foundations. According to financial records, the Koch family has contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization.”

The last time George Mason University really hit the headlines was in 2012, when a faculty economist authored a doomsday report about how horribly Sequester cuts would affect… the Defense Industry.

(Meanwhile, military contractors seem to be doing just fine.  Back in November’s budget compromise, Congress gave the Pentagon more than $1.3 billion for programs it didn’t want.  And according to Reuters, there’s not much oversight of all that money.  “The Pentagon … has not complied with a law that requires annual audits of all government departments. That means that the $8.5 trillion in taxpayer money doled out by Congress to the Pentagon since 1996, the first year it was supposed to be audited, has never been accounted for.”)

But I digress.

The thing that strikes me, about this week’s Mercatus report, is that once again it tries to blame public workers for whatever is wrong with state finances.

  • It doesn’t say a thing about corporate giveaways, such as Washington state’s recent biggest-in-US-history giveaway of $8.7 billion to Boeing.

According to a New York Times analysis, these so-called “economic incentives” add up to big money: “Oklahoma and West Virginia give up amounts equal to about one-third of their budgets, and Maine allocates nearly a fifth.”   But do these incentives actually work?  The Times couldn’t find any evidence.

  • It doesn’t say a thing about revenues.  Just try Googling “state tax cuts”.  Out in Wisconsin, Scott Walker’s going to cut taxes (even more than he already has).  Chris Christie wants to cut taxes (even more).  Dave Heineman, out in Nebraska, is going to cut taxes.  Even Andrew Cuomo is pitching tax cuts.

But, let me digress again.  Out there in Nebraska, they actually studied the “economic stimulus” effect of tax cuts.  Here’s what they found:  even accounting for the “stimulus effect”, a $100 million reduction in regressive sales/use taxes would have a “net revenue impact” of (negative) $79.45 million… while a $100 million cut in income taxes would have an impact of (negative) $93.58 million. That’s right, neither of these types of tax cuts would be good for the state budget; but one of them is much worse than the other.  So, guess which type of taxes Governor Heineman wants to cut (rather than expanding Medicaid).

  • It doesn’t say a thing about how Wall Street’s “robust recovery” has affected public pension funds.  After losing a TRILLION dollars between October 2007 and October 2008, public pension trust funds are finally beginning to recover.  Here in New Hampshire, last year, investment returns added $818 million to our Retirement System Trust Fund.  How big is that number?  The NHRS Trust Fund started the year with less than $6 billion.  It paid benefits totaling about $630 million.  Do the math yourself: last year, investment returns paid for every single penny of benefits… and still increased the Trust Fund.

So yeah, maybe you should take all those Mercatus Center headlines with a grain of salt.

Or a bushel.

As Amy Traub says: your mailman didn’t make the economy collapse.

And public employees aren’t responsible for the damage that has been done to their state budgets.  (We’re just the workers, remember?  It’s the elected officials who decide how many billions to give away to private corporations.)

Only Two Months until the NEXT Congress-Created Crisis

Congress creates another crisisLate last night, one-third of House GOP members voted with the Democrats to pass legislation avoiding the “Fiscal Cliff”.  Congressman Bass voted in favor of the bill; Congressman Guinta voted against it.

Even though the Senate had passed the bill almost unanimously, until dinnertime, it looked like the bill would fail in the House.  What happened at dinnertime?  The House took up a brand-new bill bashing federal employees and attempting to rescind their 0.5% cost-of-living increase, which is scheduled to go into effect at the end of March.  [Federal employees have already supplied $108 billion in “budget savings” through a two-year pay freeze and increased retirement contributions.]

Sure, there were only a few hours left for Congressional action.  Sure, there was no chance whatsoever that a brand-new bill would become law.  The House still took 90 minutes to debate it and hold a roll call vote. [Both Guinta and Bass voted for the bill.  Please remember that, if either of them run again for Congress in 2014.]

And after that last symbolic attack on federal employees, GOP House leadership was finally able to get around to the business of avoiding the Fiscal Cliff.  Gotta wonder about their priorities.

When it finally passed at 11:00 last night, the Fiscal Cliff bill was a true compromise.  It included concessions that angered people on both sides.   (Read the bill here.)

But it also set up yet another Congress-created crisis, scheduled to hit in only two months.

  • The bill did not address the federal debt limit – and two months from now, the Treasury will have exhausted the debt limit “headroom” created by taking “extraordinary measures” with government and postal employee pension funds.
  • The bill did not resolve “sequestration” spending cuts – but rather postponed them for two months.

So, the nation is rolling straight from one Congress-created crisis into another Congress-created crisis.

Gotta wonder why Congress keeps creating crises.  (Journalist Naomi Klein has an interesting theory about how crises – real or perceived – are used to further corporate goals.  Read more here.)

——————–

One of many things the Fiscal Cliff bill didn’t address was restoring the state share of federal estate taxes.

In a “sponge tax” system dating back to 1924, estate tax revenues were historically shared between the states and the federal government.  Back in 2001, Congress federalized the states’ portion of these revenues to help pay for the “temporary” Bush tax cuts.

Restoring the “sponge tax” system could mean more than $3 billion in annual revenues for state governments.  New Hampshire could receive an estimated $27 million in annual revenues.  Read more here.

frigateThe estate tax has a long and patriotic history.  It was created to raise funds for the country’s first Navy, and was used to fund almost every war before Iraq.  Read more here.

But for the past few decades, “members of a handful of super-wealthy families have quietly helped finance and coordinate a massive campaign to repeal the estate tax.  …The families also have helped finance outside groups that have spent millions on fear-mongering ad campaigns intended to sway public opinion against the estate tax.”  Read more here.

Who knows?  Maybe restoring these state revenues will be a part of whatever bill resolves this next Congress-created crisis.

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