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Introduction: Why the State Budgets Are in a Mess
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20704 |
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MODERN THOUGHT
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9 / 1992 |
1,107 Words |
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Many states are facing the worst fiscal crisis since the Great Depression. More than thirty states faced deficits in their budgets this year. At least four states-Florida, Massachusetts, Illinois, and Rhode Island--started their 1993 fiscal year on June 30 without budgets. California ran out of money and issued IOUs, as its lawmakers failed to resolve its budget crisis even after six months of wrangling. Several other states took temporary measures to avert financial crisis--by increasing fees and postponing budget concerns for later. Lawmakers across the nation are being forced to raise taxes, slash services and programs to reduce their revenue shortfall, estimated to be over $40 billion this year.
The booming '80s are over and the recession has flattened state revenues. Meanwhile, state governments are called upon to provide services that far exceed the tax base that pays for them. The "New Federalism" of the last decade has forced state government to shoulder a greater burden of federal programs. According to Raymond Scheppach, executive director of the National Governors Association, "it's not a good picture. We're two to three years--and maybe the whole decade."
Faced with the difficult job of maintaining services and balancing the books, state legislators are commonly responding the only way they know how: Raising taxes! Despite all the talk about new tax breaks, combined government receipts now take 35.1 percent from American income-the highest level ever. From 1980-1990 state spending increased 110 percent, paralleled by a soaring 117 percent increase in state tax revenues and 136 percent increase in local tax revenues.
What all this means is that the day of reckoning has arrived. And the American middle class--and especially the middle-class family--is going to get clobbered.
Why have state taxes increased to such an extent? What impact do state taxes have on the economy? Can government be "disciplined" to operate within the actual cash flows available, and to forgo debt? Have the fiscal mechanisms of accumulating debts for public spending and private over absorption become the instruments for economic decline? Where do we draw the line between private and public enterprise? What is proper role for the state to play?
No quick or easy answers exist. The problems we face are not new; Aristotle foresaw them when he wrote Politics. [The ancient Greeks considered democracy to be a regime fraught with danger.
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