Budget Cuts: Legislative Leadership; Like a Deer in the Headlights?

First thing, please sign the petition.

Tuesday, April 22nd, more than 33 advocacy groups, including the Vermont State Employees Association, Vermont-National Education Association, Vermont AFL-CIO, and High Road Vermont, representing tens of thousands of hard-working Vermonters called on Governor Douglas and the General Assembly to resist the urge to slash programs, and instead invest in Vermont and its people.

Governor Douglas and the Legislature jointly proposed budget cuts that threaten vital services for many Vermonters, including our most vulnerable residents. That was before the Governor sucker punched the Legislature with his “stimulus package.” (Need some comic relief - see the governor explain (?) his stimulus package at the Vermont State Employees website.

The legislative leadership is reeling in the face of an April 15th economic forecast that says, in part, that:

A gathering economic storm has begun to roil the Vermont and U.S. economies, with global credit markets in flux, the real estate sector unhinged, oil prices at record highs, consumer spending now in retreat and job losses mounting… virtually every key economic indicator has deteriorated, leading to a further downgrade in revenue projections for the State in FY09 and FY10 and raising the specter of further downgrades in July if conditions do not stabilize soon.

Duh! Apparently, legislative leadership hadn’t been paying attention – or maybe they just don’t read our blog. And their answer to a revenue shortfall? Do exactly the wrong thing: budget cuts and layoffs. Not to be outdone by the Governor, the legislative leadership has proposed their own budget cuts that threaten vital services and jobs.

When the state cuts spending, lays off employees, reduces payments to nonprofits that provide services, and cuts benefit payments to individuals, all of these steps remove demand from the economy, which only worsens a downturn at the very time that the need for public programs increases, as residents lose jobs, income, and health insurance. Our state’s economic future depends on making necessary investments in all of Vermont’s people – not just businesses and developers. Why not eliminate the state’s wasteful business subsidy programs? We need to invest in education, job training, infrastructure, and other areas of state spending that have been shown to increase long-term economic growth.

The truth is our economy was failing working families long before there was news of a housing crisis, a mortgage crisis, or a stock market crisis. These crises are the result of decades of economic policy that prioritized Wall Street over Main Street. Stagnant or declining real wages and vast wealth inequities form the house of cards upon which our current economy was built.

The bubble in housing and other real estate, spurred on by easy access to mortgage lending, home equity loans and other forms of consumer credit, substituted for the wage increases that workers were not getting. Workers were told they couldn’t get wage increases, but “have we got a loan for you.”

Corporate and government policymakers have been running our economy into the ground - with an increasingly low-wage workforce instead of a growing middle class. The downward shift in wages is moving higher up the career ladder. The inflation-adjusted earnings of college-educated workers have fallen since 2000. More and more jobs are keeping people in poverty instead of out of poverty. Middle-class households are a medical crisis, outsourced job, or busted pension away from bankruptcy. Rising food, fuel/transportation, and healthcare costs are pushing more and more working Vermonters to the brink. Working Vermonters reaped none of the benefits of the economic expansion that preceded the current downturn. The American Dream is the American Pipe Dream for more and more people.

At the same time, the share of national income going to after-tax corporate profits is at the highest level since 1929. Fueled by obscene wage inequality and tax cuts, income and wealth are piling up at the very top. The income for top tax filers (those with more than $1 million - only 492 of them) increased by $338 million from 2005 to 2006!

Vermont could reap an estimated $20 million annually by closing a capital gains loophole that allows wages to be taxed at a higher rate than investment income. Slashing funding in human-service programs (for example, in prescription drug and health care programs), would have more severe financial impacts than raising the taxes on the most prosperous taxpayers.

Government’s role is not to cut back as families often must do when the economy falters. When people are struggling, government should do more, not less. Unlike many families, government can raise additional revenue or dip into reserves – rainy day funds – to get through the rough periods.

The Governor and the Legislature have been having the wrong conversation. We need to talk not just about how they’re going to cut the budget. We need leadership that talks about how we’re going to put people to work, how we’re going to stimulate the economy by strengthening working families, and how we can best organize ourselves to force these changes on the powers that be.