State and local treasuries are hemorrhaging as retail sales and real estate tax revenues sink to record lows. Democrats and Republicans alike have implemented year after year cuts to staff and services, eviscerating the meager safety net they once provided. Like applying leeches to the sick, every pink slip they issue further undermines their tax base, but the logic of capitalism in crisis leaves them few other options.
The numbers are huge. The states’ combined budget gap for the fiscal years 2009-2011 totaled $425 billion. Illinois’ gap of $13.5 billion in 2011 amounted to 41.5% of its annual budget for that year. Only California’s $17.9 billion shortfall was larger. Nevada, hard hit by the real estate bust, had a 54% gap to close.
Federal stimulus monies partially offset these deficits, preserving some jobs and services, particularly in public education. Stimulus funding will wind down over the next six months, leaving states to manage their projected $140 billion shortfall largely alone for fiscal 2012.
Politicians and the corporate media are trying to scapegoat “greedy” public sector workers, blaming their union wages and benefits for the budget deficits. Having virtually eliminated unions from vast swaths of the private workforce, the employers are now on the warpath against public sector unions. The New York Times stated: “Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions.”
Unions are our best defense against corporate domination, whether you work for a Fortune 500 company, the public library or a home care contractor to the county. The unions need to fight to defend every service, job and benefit. We all deserve a good standard of living, and we shouldn’t be tricked into thinking that workers with good jobs who provide necessary services are our enemies.
State and local governments have eliminated 407,000 jobs since August of 2008. Job losses lead to losses in our quality of life. Forty-six states and the District of Columbia have scaled back funding to K-12 and higher education, services for the disabled and elderly, and public health programs including subsidized health insurance. Though wide-ranging, the cuts disproportionally affect the poor, the young, the old, the sick, the disabled and minority communities. Washington State plans to eliminate the medical services it provided to 21,000 poor adults with disabilities. Ohio virtually wiped out mental health spending for residents who don’t qualify for Medicaid (Center on Budget and Policy Priorities).
Who Should Pay?
Thirty states have increased taxes since the recession began. California’s former governor, Republican Arnold Schwarzenegger, increased the state’s sales tax by one cent and income tax by one percent to raise $13 billion. New York State raised its cigarette tax 58% from $4.25 to $5.85 in New York City. The city imposes its own cigarette tax, bringing the cost of a pack of cigarettes to almost $11. Working people already pay too much in taxes.
Like the rest of us, states and cities are deeply in debt. Unlike us, states and cities can’t rack up big credit card balances. Instead they post bonds to finance projects they don’t have the cash for, like bridge repair and school construction. The interest rates they pay are set by the bond market and reflect how much, or how little, risk the creditor is assuming when purchasing the bond. Any hint that interest payments will not be first on the list of funding priorities and the cost to acquire credit will soar.
Unable to print money and unwilling to take on the bond market, states often enter into a shell game, hiding debt by moving money, deferring payments to state workers’ pensions or health and welfare funds. Off-the-book debt, like these unfunded pension obligations, may run as high as $3.5 trillion (NYTimes, 12/4/10).
Is there no way out for state and local governments? The crisis they are fumbling to manage is a result of the broader economic crisis facing nations worldwide. It is the federal government that needs to step in and bail out states and cities with money to stop foreclosures, maintain and expand education spending levels, fund health care and repair the crumbling infrastructure of roads and bridges we all rely upon.
Though deficit reduction and smaller government are once again the catch phrases in Washington, big business’s priorities are fully funded: $2 billion a week in Afghanistan (Huffington Post, 11/30/2010), a total of $1 trillion on the wars in Afghanistan and Iraq since 2000, $4.7 trillion squandered to bail out Wall Street. Obama’s deal with Republicans to extend the Bush tax cuts to even the wealthiest will cost almost $4 trillion over the next decade.
Taxes on the wealthiest 1% must increase significantly. The most successful hedge fund managers made, on average, a billion dollars each in 2009. Despite their rhetoric about how important their continued wealth is to the economy and the rest of us, research on previous tax cuts has shown that the rich save their windfall. Hoarded cash creates no jobs, funds no-shovel ready projects and educates no children.
Obama’s collaboration with Republicans on tax cuts signals his intent to work with the incoming Congress to continue to make working people pay for a crisis created by the big banks, big corporations, rich politicians and the system they represent.
To fund our priorities, to maintain the services important to us, we must build a powerful movement of workers, youth and the unemployed. We must cut across the lies they use to divide us. Boldly lay the blame for the economic crisis where it belongs, at the feet of the rich speculators and their enablers in the Republican and Democratic parties. Make the argument that all workers need health care and pensions. Call on those without them to join the broader fight to improve benefits for all, rather than attacking public sector workers who have preserved their benefits. We need to build organizations that can take up these demands and organize an effective fight back.
Unions can and should play a key role in the struggle because they have the resources and the national structures in place to provide a foundation for this movement. We also need to reach out to unorganized workers, unemployed workers and students. An army of the unemployed should be regularly marching on every state capitol, making so much noise that employers beg them to come back to work. Fighting coalitions should be created, focused on mass actions, independence from the two parties and democratic decision-making.
We need to learn the lessons from the recent battles in Greece, France, Ireland, Britain, and Portugal: huge demonstrations are an important step in building the movement, but they will not be enough to decisively stop the cuts. Protests must be part of an escalating campaign to educate and organize as many people as possible around broader demands for living wage jobs, guaranteed pensions, quality free education and an end to all wars and corporate bailouts. Crucially, this movement would need a political voice for workers and youth that can challenge the capitalist system as a whole.