Q. I hear that state and city government budgets are in the red. Is that bad?
A. It’s bad. State and local governments provide the bulk of basic public services. With these governments facing budget shortages of some $200 billion (out of annual expenditures nationwide of $1.7 trillion dollars), essential services are at risk. These include public education and health, police and fire, transportation, parks, libraries and building and repair of most sewers and water mains, not to mention funding half the costs of unemployment insurance and Medicaid. Without more money coming in, most localities will witness significant layoffs of police and fire personnel, while close to 200,000 of the nation’s 3.4 million K-12 teachers may receive pink slips by September 2011.
Q. Don’t our elected officials have the situation in hand?
A. Few do. Politicians from both major parties are pushing fiscal austerity measures that slash essential services instead of raising revenues to let these services continue. With 29 million American adults either unemployed or underemployed, it makes no sense to have policies that will lay off as many as 300,000 state and local employees and another 100-200,000 teachers over the next 12 months
Q. How did all that happen?
A. This fiscal crisis is an outcome of the Great Recession, which was caused by unregulated financial speculation. Over the past three years, property values dropped precipitously and mass unemployment led to major declines in sales and income tax revenue. State and local governments lost more than 10 per cent of their income. The federal stimulus package helped cushion some of this shortfall, but that funding is just a trickle today and expires in September 2011. If state and local governments lay employees off, it will only lengthen and deepen the crisis. Meanwhile, Wall Street and corporate America sit – thanks to taxpayer bailouts -- on $2 trillion of uninvested profits. Tax policies that favor the rich starve government of needed money while shifting the tax burden from the wealthy and the mega-corporations to ordinary citizens.
Q. What can we do?
A. Three things: First, return to a system of aid from the federal government to states and localities (this “revenue-sharing” was originally a Republican concept). That alone could begin to stabilize state and local finances. Second, base our federal, state and local tax policies more on ability to pay. Third, cut the military budget drastically.
Q. More taxes? Aren’t we taxed enough already?
A. There is plenty of money to fund basic public services if we go to where the money is. The richest 10 per cent of the population reaped 90 per cent of the growth in income and wealth over the past 30 years. Corporate lobbyists have structured tax loopholes so that the U.S .has the lowest effective corporate tax rate of any democratic society. Restoring income and corporate tax rates to what they were before the Reagan and Bush II tax cuts (to levels existing under Republican President Dwight Eisenhower) would return $500 billion annually to the federal treasury. Enacting an anti-speculative 0.25% tax on all financial transactions would bring another $400 billion per year to our national treasury. And if states such as California, New Jersey, and New York restored their top-bracket income tax rates to 1970s levels and eliminated tax giveaways to corporations and commercial real estate interests, they could readily make up much of their fiscal shortfall.
Q. Do we dare cut military spending?
A. Our imperial military budget of over $700 billion/year funds two unjust wars and 280 military bases around the globe, including in South Korea, Japan and Germany. This is a drain on the economy and does not add a dime to real defense.
Q. How can we change the various governments’ ruinous fiscal policies?
A. Better policies won’t be granted from on high by politicians funded by corporate interests. Fairer policies will only come through democratic protest and mobilization that forces elected officials to serve the people and not powerful private interests. That’s why Democratic Socialists of America will be working with people across the nation to mobilize against state and local cuts in basic human services and in favor of fair tax policies and sane national priorities that put human needs ahead of empire and corporate greed.