The Sound of Falling Dominoes

From D.C. Down to City Hall, Hear the Rending of the Social Contract

Last week the U.S. Congress settled on a "compromise" tax-cut plan that supposedly rejected the more extreme proposals of the White House in order to accommodate "moderate" Senate Republicans and boll-weevil Democrats. The official cost of the plan, over the next 10 years, is $350 billion -- the magic number insisted upon by such "deficit hawks" as Ohio's George Voinovich and achieved by a host of short-term estimation gimmicks that make good headlines and better sound bites. In fact, according to the Center on Budget and Policy Priorities, the true cost of the plan -- in a time of deepening recession and massive military expenditures -- will be somewhere between $670 billion and more than $1 trillion, drifting upward. If you're still counting, the three rounds of Bush tax cuts rammed through a compliant Congress should run up the bill over 10 years to nearly $3 trillion.

The average annual deficit to be absorbed somehow by the economy will be more than $420 billion. Moderation, as the Greeks say, in all things.

Even more entertaining are the intended beneficiaries of all this federal largesse. According to an analysis by the Tax Policy Center of the Urban Institute-Brookings Institution, those who make more than $1 million per year will receive an average tax cut in 2003 of $93,500 under this plan (the White House proposed to give them only $89,500). Households with incomes in the middle 20%, on the other hand, will get an average of $217; 36% of all U.S. households (50 million) will get no tax cut at all; 53% of households (74 million) will get $100 or less.

The administration insists that giving gold to Midas will "stimulate the economy" and "create jobs." Investment tycoon Warren Buffett predicted the result more accurately last week in The Washington Post, pointing out that under the plan, his receptionist could well end up paying taxes on her income at a rate 10 times that of her boss. "Putting $1,000 in the pockets of 310,000 families with urgent needs," Buffett continued, "is going to provide far more stimulus to the economy than putting the same $310 million in my pockets.

"Supporters of making dividends tax-free like to paint critics as promoters of class warfare," Buffett concluded. "The fact is, however, that their proposal promotes class welfare. For my class."

Deep in the Heart

It is in this national context that one begins truly to understand the frenzy of reckless and ill-considered budget-slashing going on down at the state Capitol. More precisely, hardly considered at all -- huge numbers (positive and negative) are now flying around inside the dome like a cloud of heat-crazed June bugs. Despite the Memorial Day announcement by the leadership that the budget is now balanced, literally nobody knows this week what the actual numbers will look like next week, especially since so many of the calculations are based on "savings" or "fees" in bills that haven't quite passed yet.

It's always amusing to hear legislators declare they want to "run government like a business." What sort of $100 billion business assigns part-time amateurs to make hundreds of major decisions involving thousands of people and millions of dollars in a couple of months on no sleep and good intentions?

Here's some of what we think we know, as of Wednesday. With the one-time help of a couple of billion wrung from the feds as part of the tax-cut deal (see p.13) as well as the exhaustion of the risible rainy-day fund, the pols insist they've plugged a $10 billion deficit, spent less state (general-revenue) money, yet drawn down more in federal funds to bump up overall expenditures (all funds) from the last biennium's $114 billion to $118 billion. My favorite maneuver in this sleight of hand is the Medicaid shell game: To make the numbers work, the Lege is simultaneously informing the feds that Medicaid caseloads will rise over the next two years, while telling itself that the caseloads will decline. (I've occasionally tried a version of this fairy tale with our household budget, but my wife always sees right through it.)

Pounding their chests in press releases, the leadership declares it has managed this achievement with "no new taxes." Who then is taking the biggest hits for the home team? Well, there are the schoolteachers, whose pay will be docked at least $500 apiece for two years, and the retired schoolteachers, who will be required to pay more for health care and to double their current pension contribution -- while their already-strapped school districts (remember Robin Hood?) will also have to kick in additional funds. Property taxes, anyone?

Then there are the schoolchildren, many of whom will no longer have health insurance while they attend schools that have been told not to buy new textbooks. The exact numbers here are even more uncertain: The leadership is saying only 13,000 kids will be kicked off C.H.I.P., but other estimates are running anywhere from 130,000 to 160,000. (We no longer bother counting those thousands who never managed to get insurance in the first place.) The Medicaid numbers are even more mysterious, as provider reimbursement rates will be slashed (but that's not a "tax"), coverage will be more limited, and rationing-by-regulation will discourage as many people as possible from getting benefits to which they are entitled.

Or let's consider state employees, some 10,000 of whom have been designated for pink slips under "reorganization" plans that have been slapped together with all the careful study normally reserved for cleaning out a garage. Late Tuesday night, the House was attempting frantically to amend the latest incarnation of the "Death Star" reorg bill, which will continue to reverberate through Austin, our major cities, and countless small Texas towns over the next two years. Those employees are "taxpayers" all -- as they stand in line to apply for jobs at Target and Wal-Mart and Lowe's, may they pat themselves on the back for their heroic contribution to "stimulating the economy."

Home to Roost

In this week's cover story, City Editor Mike Clark-Madison describes the Hobson's choices facing Austin's city staff and the City Council as they attempt to respond to the worst budget crisis in 20 years. They should be so lucky. The federal government, now fully intent on dominating the world with military might while feeding the rich at home, has cavalierly turned its back on the states and cities. State officials, determined to roll back social services and decimate "government," have jettisoned state responsibilities and forced those costs down upon counties and municipalities.

All for "no new taxes" -- who do they think will be paying all these bills? end story

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U.S. Congress, Center for Budget and Policy Priorities, Tax Policy Center, Urban Institute-Brookings Institution, tax cuts, Warren Buffett, state budget, C.H.I.P., Medicaid

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