PSN 2011 Tax and Budget Roundup: Middle Class Reels From Extreme Cuts, Damaging Right-Wing Fiscal Priorities

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PSN 2011 Tax and Budget Roundup: Middle Class Reels From Extreme Cuts, Damaging Right-Wing Fiscal Priorities

Tax and Budget Reform   *   Altaf Rahamatulla

(Note: With legislative sessions largely adjourned in statehouses across the nation, this week’s Dispatch is the second in a series of issue-specific session roundups from Progressive States Network highlighting trends in different critical policy areas across the fifty states.)

Lawmakers confronted massive budget shortfalls, persistently high unemployment, and myriad fiscal and economic obstacles during 2011 state legislative sessions. With states still reeling from effects of the economic downturn and with federal investment in state economies receding, lawmakers considered drastic measures to confront budgetary constraints. Though many state revenue outlooks improved slightly in the past few months, partly as a result of tax increases passed in recent years, it was little comfort as states faced collective shortfalls of $103 billion in fiscal year 2012. As sessions progressed, it became painfully apparent that conservative lawmakers were not interested in job creation, economic growth, or support for those who have been hit hardest by the recession, but rather ideologically-driven platforms that sacrificed fiscal sustainability and the economic security of millions of families for the benefit of the affluent and huge corporations.

Massive Cuts to Education and Health Care Contribute to Job Losses

Utilizing precarious economic and fiscal circumstances, newly-empowered conservatives pursued a damaging agenda in state legislatures this year.  The brunt of the cuts fell on the backs of nurses, teachers, firefighters, and vulnerable populations. Conservatives proved they were willing to compromise economic recovery, job growth, public safety, and the needs of children and the elderly all with an eye toward enriching the already affluent and reducing government support for an ailing economy.

States Pursuing Massive Reductions to Important Public Structures, Contributing to Job Loss

Even as some states cut programs that benefit the middle class and working families this year, many of the same states increased support for corporations and the rich. To compound the largely regressive policies enacted this session, lawmakers have looked further toward privatization.

Economic Research Indicates the Detrimental Impact of Cuts

Contrary to flawed right-wing fiscal ideology, research has shown that cuts to major programs are socially and fiscally detrimental, especially in a time of economic pressures. A recent Center for American Progress (CAP) study indicates that states that have made the largest reductions to spending have also lost the most jobs.

Targeted Revenue Generation to Invest in Public Structures and Respond to Shortfalls

Despite the overwhelming cuts that many legislatures enacted, there were a number of states that pursued some form of revenue generation to alleviate fiscal pressures. Further, many states saw significant victories that advanced the economic security of middle class.

Progressives Championing Accountability to Protect Taxpayers

Progressive lawmakers also championed efforts in 2011 to augment accountability and transparency of state spending. In May, Oregon state lawmakers unanimously approved a bill to provide increased transparency of state spending on economic development subsidies. The victory in Oregon mirrored legislative movement across the states to increase transparency of state budgets.

Conclusion: Rebuilding Prosperity

The results of 2011 legislative sessions demonstrate that the dire fiscal and economic circumstances states continue to confront require policy responses from lawmakers that will ensure states can continue provide essential services, make critical investments in long-term growth areas and public structures, support working and middle-class families who have been disproportionately hit by the impact of the downturn, and ensure that all taxpayers are contributing their fair share.

For an extensive review of progressive tax and budget policies, voters' attitudes, and messaging, please see PSN's Blueprint for Economic Security: Rebuilding Prosperity and Messaging for Government Action in an Economic Downturn.

Quote Of The Week

“In return for holding the line on their taxes, the affluent have been creating jobs like crazy in recent years. Hasn't anyone noticed?”

— Minnesota Star-Tribune columnist Mike Meyers on the plight of the7,700 wealthiest Minnesotans with incomes of $1 million or more who will not be paying their fair share thanks to the terms of a compromise budget bill passed this week to end a 20-day long state government shutdown.

Steps Forward

NY: At 12:01 am Sunday, history begins with Albany vows

WA: State embarks on $140M project to bring broadband to "nearly every unserved community"

ME: Effort underway into allow voters to repeal new law eliminating same day registration

Steps Back

RI: Angering their own party, Rhode Island Democrats approve voter ID

KY: State cuts funding for service to blind children

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Research Roundup: Public-Private Partnerships, Start Up Act and Federal Budget Proposals

In this week’s Research Roundup, reports from U.S. PIRG on best practices in public-private partnerships, the Economic Policy Institute on major federal budget proposals being considered, the Fiscal Policy Institute on economic trends in New York state, and the Ewing Marion Kauffman Foundation on how new policies encouraging new startups, including allowing more foreign entrepreneurs to immigrate to the United States, could help lower unemployment and increase economic growth.

High-Speed Rail: Public Private or Both? Assessing the Prospects, Promise and Pitfalls of Public-Private Partnerships — In this report, U.S. PIRG assesses the experience with public-private partnerships (PPPs) in other nations and makes ten recommendations to best protect American taxpayers and serve the public. The authors find that although PPPs can have several benefits, including tapping expertise and technology, there are additionally considerable risks associated with these types of project, such as higher costs for capital, heightened risks for the public, hefty legal costs, loss of public control, and potential delays. The authors note, “The many problems and pitfalls with PPPs around the globe teach us that there are certain public interest protections that should never be negotiated away, and that the public sector must be an aggressive and capable defender of the interests of citizens in any PPP negotiation. As the nation prepares to make a massive investment in our future in the form of high-speed rail, it is important that government officials recognize that public private partnerships are not panaceas, but are merely useful tools that should only be pursued under the right conditions and with the proper protections for the public interest.”

Major budget proposals pit public investments against vital servicesEconomic Policy Institute (EPI) analyzes major federal budget proposals from the Obama administration, the Debt Commission, and the U.S. House of Representatives, and discovers that each would make significant cuts to public investments. EPI concludes: “Public investment — one of the budget spending categories most important to long-run economic growth and global competitiveness — constitutes over half of the NSD budget. These budget scenarios propose cutting anywhere from 37% to 58% from the NSD budget as a share of GDP. Each one would make it practically impossible (and in the Ryan plan’s case, mathematically impossible) to raise public investment up to the level required to narrow our massive investment shortfall. The numbers in these plans may add up, but to what? Crumbling roads and bridges, a second-class education system, a dirty and hazardous environment, lax consumer protections, and a government that can’t function.

Governor Cuomo’s Fiscal Policies: How Will New York’s Economy be Affected? — In this policy brief, the Fiscal Policy Institute (FPI) assesses economic trends in New York in recent years, and the potential impact Gov. Andrew Cuomo’s largely conservative and regressive fiscal priorities may have on future growth. FPI finds that although the state has fared much better economically than its neighbors and other parts of the country, certain policies, including a property tax cap, may have a detrimental economic impact. They find, “The record of the last
several years should disabuse policymakers and the media of the notion that New York's fiscal
policies are somehow causing it to do worse than the rest of the nation since it has, in fact, been doing better than the rest of the nation. Hopefully, the private sector recovery will not be undercut by the reductions in jobs in the public and non-profit sectors that are likely to result from the implementation of Governor Cuomo's fiscal policies.”

The Startup Act: A Proposal For New Legislation Aimed at Jump-Starting the U.S. Economy Through Successful Startups — This just-released policy proposal from the Ewing Marion Kauffman Foundation emphasizes that — along with other policy initiatives intended to spur growth and job creation through new startups — allowing more foreign entrepreneurs to immigrate to the United States could help lower unemployment and increase economic growth. It notes that “welcoming immigrants capable of building high-growth companies to the United States by providing ‘Entrepreneurs’ visas’ and green cards for those with degrees in science, technology, engineering and math” could be critical to jump-starting the economy.

Please email us leads on good research at

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The Stateside Dispatch is edited by:

Charles Monaco, Press and New Media Specialist

Contributors to the Dispatch include:

Michael Berman, Legal Intern
Devin Boerm, Health Policy Specialist
Fabiola Carrión, Broadband and Green Jobs Policy Specialist
Cristina Francisco-McGuire, Election Reform Policy Specialist
Tim Judson, Workers' Rights Policy Specialist
Suman Raghunathan, Immigration Policy Specialist
Altaf Rahamatulla, Tax and Budget Policy Specialist
Mike Maiorini, Online Technology Manager
Ben Secord, Outreach Specialist

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