Dispatches, on the Bush budget, is up.
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Tag: budget
Bush’s legacy budget
President George W. Bush’s final federal budget can be viewed as a parting gift from an administration that has inflicted more damage on the nation than just about any other in the history of the republic.
The $3.1 trillion budget proposal calls for a $400 billion deficits in each of the next two budget years, created primarily by the tax rebates proposed as a tepid $146 billion economic stimulus and a plan and a boost in funding for defense (about $38.4 billion). The budget also calls for spending freezes and cuts in domestic programs, many of which are incredibly popular, especially among traditionally Democratic constituencies.
The budget also “calls for making permanent Bush’s 2001 and 2003 tax cuts, which have been widely criticized as skewed to the rich and which would begin expiring next year,” the LA Times said.
Doing so would cost Washington more than a half-trillion dollars in forgone revenue over the next five years and more than $2 trillion over the next decade, but the president has argued that they play an important role in stimulating economic growth.
USA Today put it this way:
Winners in the budget include the Pentagon, which would get nearly 8% more, and border security, up nearly 20%. Losers: Medicare and Medicaid, and domestic programs not related to national security.
And, as The Washington Post notes, the
plan omits several costly features, including tens of billions of dollars of the cost of the wars in Iraq and Afghanistan, that could drive the deficit even higher than the president’s estimates. That would effectively delay until 2009 decisions on how to cope with short- and long-term financial problems, lawmakers and others said.
The Washington Post quotes one economist, an adviser to Democratic presidential candidate Barack Obama:
“A whole bunch of things they were putting off and hiding under the rug all these years are starting to pop back up,” said Austan Goolsbee, an economist at the University of Chicago and chief economic adviser to Sen. Barack Obama (D-Ill.). “It’s clear they’re trying to shove as much of this as possible on to the next guy.”
President Bush is projecting a surplus, but as the Post points out in today’s editorial, but that projection is based on creative accounting.
Yesterday’s promise of a small surplus by 2012 is once again premised on omitting likely costs (zero is budgeted for operations in Iraq and Afghanistan) and by assuming cuts to domestic spending that are unachievable politically and, in large part, unwise as a matter of policy.
Budgets are itemized lists of priorities. The Bush budget — like all of his previous budgets — demonstrates the president’s antipathy toward the people who actually live in this country. His fealty is to the corporate order and the markets that that he and his cronies view with a religious ardor.
President Bush, as The New York Times points out in today’s editorial, has crafted a budget that is “a grim guided tour through his misplaced priorities, failed fiscal policies and the disastrous legacy that he will leave for the next president.”
Much of the budget plan is likely to be excised — the various dailies are reporting that even Republicans are a bit gunshy about moving ahead with a plan that exempts high earners from the kind of sacrifices the rest of us are being asked to make.
But the budget, as the Times points out, will have a lasting legacy:
What will definitely outlast Mr. Bush for years to come are big deficits, a military so battered by the Iraq war that it will take hundreds of billions of dollars to repair it and stunted social programs that have been squeezed to pay for Mr. Bush’s misguided military adventure and his misguided tax cuts for the wealthy.
This brings me back to the USA Today description of this budget as one of winners and lowers. The winners, to put it bluntly, are the people with the cash, the people who control the corporations, who have seen their portfolios increase in value and their peronal bottom lines grow.
The loser? Just about everyone else.
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Toll plan redux redux
Interesting piece by Linda Stamato, who teaches at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. She asks some basic questions about the governor’s toll-hike and debt plan that need to be answered before anyone should offer any support.
She writes:
I don’t buy the governor’s “either/or” framework for fiscal salvation. We don’t either need to increase the income tax by 20 percent or the sales tax by 30, or the gas tax by 12 cents or live with the governor’s plan. A combination of approaches makes more sense to me. And, certainly we ought to be putting more on the table for inclusion than has been placed there so far. We need a combination of taxes, a freeze on spending and reductions in costs, to accompany reasonable increases in tolls. An income tax increase should not be summarily dismissed by any means, certainly if equity is a consideration, and, it must be. An increase in the gas tax also makes sense if the intention is to replenish the Transportation Trust Fund, address ransportation-related needs, including public transit, and, not least, encourage fuel efficiencies and reduce carbon emissions. (To be sure, Governor Corzine’s own ambitious goals for reducing greenhouse gas emissions ought to figure in this picture as well.)
My own issues with the plan are as follows:
- It is not broad-based. The plan asks a narrow class of people to pay the costs of fixing a mess created by the state Legislature and previous governors and that provided a host of benefits to people across the state.
- It hits workers pretty hard, increasing the cost of people who must use the toll roads to get back and forth to work and those who drive for a living.
- It is likely to force cars off the toll roads and onto local roads — for those of us in Central Jersey, that means an increase in cars and trucks on Routes 1 and 130.
- It cuts debt, but does nothing to address the myriad problems that created the problem in the first place. Yes, the governor wants to force the state to go to voters when it wants to borrow money; that would be a positive step. But it leaves in place the 1,400 or so taxing entities — municipalities, school districts, fire districts, county governments, etc. — that craft their own budgets and have their own staffs. That’s a lot of overlapping jobs that could be eliminated if some of these entities were to be merged.
- And the likely use of the toll money for pork projects, as Charles Stile points out in today’s column.
My sense is that a broader-based approach is necessary and must include steps to reduce spending and alter the tax structure — in addition to consolidation, we need to reconsider nearly everything we ask the government to do, what should be a state responsibility, a local responsibility and how much of the cost of government in New Jersey we expect the state to cover.
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Plan could take its toll
The governor is preparing to hit the road to sell his plan to use the state’s toll roads to restructure New Jersey’s debt, and from all accounts it looks as though he will not be facing a willing buyer.
The public in a series of polls last year expressed opposition, though admittedly it was being asked to comment well before a plan was on the table. At the time, there was still some fear that the state would sell or lease its roadways to a private company, which would have a direct impact on the roads’ management and maintenance. The plan unveiled this week does not do that. But it still is not going to be an easy sell — nor should it be.
Consider this comment in The New York Times today from a regular driver on the N.J. Turnpike:
With a sense of resignation in his voice, Ed Daly, who had stopped for a snack at the Joyce Kilmer rest area, just north of Exit 8A, said, “Tolls fall heaviest on the working man.”
Mr. Daly, the paper points out, is “a sales manager for a communications company in Clifton, who said that he traveled the turnpike every day, spending $50 a month in tolls.”
Once the first increases take effect in 2010, that would jump to $75, and he would have to absorb the difference by himself.
“Talk about a regressive tax,” he complained.
The Times story offers several other complaints from drivers that, when combined with this story in The Star-Ledger on state E-ZPass data, make it clear that Gov. Jon Corzine is getting ready to head into the belly of the beast.
Dismissing the toll plan out of hand is difficult, however, because of the severe fiscal crunch facing the state, a financial catastrophe that should be common knowledge but that appears not to be fully understood by the state’s residents. Everyone wants — and deserves — real property tax reform (the property tax is regressive), but few seem willing to pay the cost in higher state income taxes, drastic changes in the organization of local government or the kind of severe spending cuts that would be required to make it happen.
Add this to the fact that we still pay among the lost tolls and gas taxes in the country and it is clear that toll hikes should not be taboo.
That said, the governor’s plan is rather extreme — the numbers he outlined were staggering, boosting the cost of a trip from the Delaware Memorial Bridge to the Lincoln Tunnel from $5.85 to $48 over the next 14 years — and regressive, especially coming from a staunch liberal Democrat.
The governor was right to demand that critics place a better alternative on the table, rather than just stating their opposition. Republicans, in particular, have been very good at offering complaints and vague suggestions — cut the budget, they say, but rarely offer suggestions as to what could be cut, knowing that once they do that they will have to deal with the wrath of those who will lose out.
That said, I think we are destined to accept at least a scaled-down version of the governor’s plan, combined with other changes. Personally, I’d propose an significant increase in the income tax, municipal consolidation, broader school-funding reform and universal health care coverage (expanding coverage to everyone in New Jersey, possibly using the model in place in Massachusetts, could lessen the costs to the state of covering not only current employees but retirees; the Massachusetts approach is not perfect, but might be our best bet until the federal government addresses health care on a national level).
At the very least, I am hoping that the drastic nature of the governor’s plan will shock taxpayers into understanding how dire the state’s fiscal condition is, making it more likely that something can be accomplished.
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Borrowing to pay down the debt
This is a lot to take in. The governor is proposing borrowing enough money to cover paying down a large portion of the state’s debt, but also to replenish the state’s Transportation Trust fund and maintain the state’s toll roads for years to come.
Gov. Jon Corzine is billing his toll road proposal as a way to bail out a state awash in debt, a state with a political class that has relied on a host of gimmicks and accounting tricks to spend like drunken sailors while pushing off the consequences for another time.
That time is now. Debt payments are consuming a greater portion of the state’s budget every year. In addition, the state’s pension and healthcare funds are woefully underfunded. Together, these obligations are crowding out other priorities — including real property tax and educational funding reform.
Yes, the Legislature did provide some nominal tax relief this past fall. And yes, it approved on Monday a new school funding formula that calls for a $500 million boost in overall state spending on schools.
The reality, however, is that both of these accomplishments were nothing more than nibbling — a much larger infusion of state cash into local school is needed both to ensure equality of educational opportunity and to reduce the amount spent locally in property taxes. And this does not take into account the cash needed to build the affordable housing units needed both to provide housing and to desegregate this horribly segregated state.
Will the toll-road plan address these issues? Perhaps. The governor certainly seems to think so.
In a speech that may be the most important of his political career, Corzine described his plan as “comprehensive and sober,” adding that is bound to be “controversial.” He ticked off its four elements, some of which Republicans have been demanding for years.
“One: Freeze spending now,” Corzine said. “Two: Limit future spending to revenue growth. Three: Capture the enterprise value of our tollways to pay down debt and make capital investments. Four: Limit borrowing by requiring voter authorization.”
“If there is a better plan, I am open to its consideration,” he said. “Put it on the table.”
According to The New York Times, the governor wants to boost highway tolls over the next 15 years (by 50 percent in 2010, 2014, 2018 and 2022), while borrowing between $30 billion and $38 billion “to help the state pay off half of its debt and pay for transportation improvements.” The plan also calls for the state to “establish two new agencies, one to operate and maintain the roads, and the other to provide some oversight.”
It is an ambitious plan, that’s not in question; there is no way to address years of political timidity without being bold and ambitious.
What is questionable is whether this plan is the right plan to address the state’s woes. That’s a question I can’t answer at the moment.
My initial sense, however, is that this is just another in a long line of gimmicks foisted on taxpayers — though there is a twist: Taxpayers will not be the ones on the hook for the plan; drivers, the majority of whom the governor says come from out of state, will be. That, in the end, is his chief selling point.
At least the governor is being honest. Unlike his predecessors, who revalued the state’s pension plan so that they could avoid making payments into the fund (I’m talking to you, Christie Whitman and Jim McGreevey), Gov. Corzine is being honest about this plan and the pain, about its risky nature and about the pain it will cause for drivers.
I’m skeptical, but will keep an open mind. It’s now up to the governor, in his upcoming statewide dog-and-pony show, to convince voters and state legislators that his plan offers far more good than ill.
South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
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Hank Kalet 