Big issues, hard choices, weak decisions
Budget time in hard times poses some stark choices, both in Congress and in Olympia. How are we doing?
By Ted Van Dyk
April 14, 2009.
"To govern is to choose," observed Nigel Lawson, former British Chancellor of the Exchequer. At this time of budget decisionmaking at national, state and local level, we would do well to recall as well the second part of Lawson's statement on governance — namely, that "to appear to be unable to choose is to appear to be unable to govern."
Nationally, President Obama and the Congress face the need to finance Social Security, Medicare, and Medicaid; interventions in Iraq and Afghanistan; financial/economic rescue packages; the normal business of government; and, on top of it, ambitious new Obama initiatives in health care, energy, and education. All this without burying this and the next generation in public debt.
It is just as well that the latter initiatives, for now, seem destined for extended debate in the Congress before having any chance of near-term passage. The health care and energy agendas, in particular, are complex and could have many unintended consequences.
Health care, right now, accounts for 21 percent of Americans' personal consumption. There are subchapters to the story. For instance, some 10 percent of Americans consume some 60 percent of medical care. Among those who consume it least are those who presently, by choice, are uninsured. Many Americans who are under 40 and in general good health simply opt to go without health coverage, playing the odds that they will not incur big health-care expenses in the near term. Mostly, they are right but those who lose their bets can be left with costs beyond their means. Others, in all age groups, simply cannot afford to pay the premiums and/or cannot obtain appropriate coverage because of pre-existing medical conditions.
I have taken part in numerous exercises which involved development of national health-care schemes that would provide coverage to those who need it but at the same time contain exploding health-care costs. A universal, government-run scheme? A public/private scheme which offers choices among private insurers (much as the Medicare prescription-drug plan)? A universal scheme offering catastrophic (i.e., major medical) coverage to all, but with a high deductible which patients would have to pay before that coverage kicked in? A requirement placed on individual citizens to obtain their own coverage (as with state-mandated auto insurance requirements) or on employers to provide it?
Sponsors of one scheme or another — including Obama in his advocacy of his current proposal, still under development — always claim their plans would contain costs. But, on close examination, they do not.
My personal preference for a first-phase plan would be a) catastrophic coverage for everyone, provided by b) private insurance companies meeting federally required standards for that coverage. Medicare and Medicaid would continue to serve the elderly and the poor. But that is not satisfactorily ambitious for national health insurance's principal advocates. Thus the big Hillarycare plan of 1993-4, scuttled by Congressional Democrats, and the evolving Obama plan, at present still in its formative stages.
Energy is another problem area. A BTU tax, proposed and rejected in the early Clinton administration; "cap-and-trade" proposals adding to the cost of oil, coal, and natural gas; or just plain at-the-pump big gasoline-tax increases — all, in one way or another, would amount to big new tax burdens which, in turn, would finance development of alternative fuels that might or might not turn out to be economically efficient. In this field, environmental belief often has run ahead of hard-nosed cost-benefit analysis. Present cap-and-trade proposals have an uphill path in the Congress, where legislators of both parties fear what cost-benefit studies might yield.
Here at home, Gov. Chris Gregoire and the Legislature are responsible for creating a major part of the huge deficit with which they now must cope. On taking office, Gregoire pledged to restrain spending, not raise taxes, and review the huge number of "tax expenditures" (i.e., loopholes and subsidies) benefiting politically favored companies, such as Boeing, and certain business sectors. But, in her first term, she and the Legislature substantially raised both taxes and spending — but taxes not nearly enough to pay for the spending — and added new tax loopholes without killing any of the old ones.
Public spending levels, once established, are always difficult to reduce. Public-employee and teachers unions, among other groups, figure they helped elect state officials and threaten to punish them if they freeze or reduce their pay and benefits. Unemployment, social service, and health costs always rise in a recession — and they will continue to rise for at least the next six months. Tough fiscal policy always is promised. But, in the end, elected officials always find it easier to seek new revenue sources than take goodies from politically potent single-issue or single-interest groups.
Already a search is on to provide new multibillion-dollar subsidies to Boeing Co., our local version of the Somali pirates, to quiet that company's fresh threats to move operations out of state.
When the Legislature adjourns, it will do so to the accompaniment of tax-increase proposals in this already highly-taxed state. An income tax, if only for highest-income individuals? (Only over her dead body, Gregoire says.) That brings us back to increased sales taxes, which hit hardest those least able to pay. And, of course, local-level property taxes, penalizing families and homeowners. Nominally liberal elected officials once again will propose to increase the regressivity of our tax system while preserving tax breaks which, if repealed, would close the budget deficit several times over.
At state and local level, in addition, there will be little serious cost-benefit consideration of projects which could not withstand it. The 800-pound gorilla of these, of course, is Sound Transit's pending three-county light rail system, to be financed by the largest local-level tax increase in the history of the United States — at least $23 billion and no doubt much more, if present construction delays and route changes continue. The system, still behind its Seattle construction schedule, will not move passengers in any number for several years, whereas immediate expansion of bus service would cost far less and move more passengers to far more destinations now and in the future.
Then we have Mayor Greg Nickels' proposed several-hundred-million-dollar gift to Vulcan Inc. to change traffic patterns near its South Lake Union real estate developments, without relieving traffic congestion, whereas a far smaller investment would alleviate that congestion in and near the Mercer Mess. Having gifted Vulcan with an Allentown trolley, running virtually empty between Westlake Center and South Lake Union, Nickels and some City Council members now propose to extend trolley service to other parts of the city — cutting regular bus service in Seattle neighborhoods in order to fund the new service. Then there is the matter of Nickels' proposed new city jail.
State-local decisionmaking still is not complete regarding Alaskan Way Viaduct and Evergreen Point Bridge replacement or repair. Will serious cost-benefit analyses precede those decisions? Let us pray. <.p>
As the man said, not to choose is not to govern. It is appropriate that, near the April 15 deadline for filing our tax returns, we should consider the choices at all levels of government which are and are not being made. If you want what you regard as enlightened choices to be made, make your voice heard. If you don't care, or care and don't speak up, we will get the usual outcome: Those with the biggest political clout will get what they want from those governing, whether or not it makes any sense for the rest of us.
Comments:
Posted Sat, Apr 18, 1:18 p.m. Inappropriate
I agree with most of Ted's points, especially closing the loopholes in the sales tax, which are plentiful and non-sensical. With health care, where I worked for 5 years, I'd add these items: (1) pay for physical exams from birth through age 20 at the recommended intervals to head off more serious conditions AND give an incentive to hire pre-21 year old employees; (2) come up with a base package of coverage for all, with employers being able to add on set packages of items to this, something like cable TV does, to standardize the coverage and deductibles between plans (the array of coverages among people is mind-boggling and is a large part of why the U.S. health care system costs so much); (3) begin discussion about which health care facility specializes in what to lessen duplication of expensive machines, perhaps something like franchising; (4) certain claims should not even be processed, e.g. a friend of mine got billed $7.00 for a blood draw, and all of the processing to get there cost more than that! To the Alaskan Way Viaduct discussion, there was cost-benefit analysis! However, the comparisons were incomplete. For example, the deep bore tunnel alternative saves the region 3-4 years of turmoil that all of the other proposals would have resulted in, i.e. the unavailability of the present viaduct due to it being torn down. The deep bored tunnel allows this to stay open except for ~ 6 months. This benefit was never factored in, initially leading folks to rule it out as an option. In addition, it lasts at least twice as long as replacing the existing structure would, yet the costs were put on equal footing, i.e. the cost of replacing the existing structure should have been doubled. Additionally, the deep bore tunnel allows for surface improvements which could result in more tax revenues factored in, yet these weren't added in. Lastly, speak up as you may, but many politicians take this as a requisite part of the process, not something where they can learn valuable kernels to what they are deciding upon. This seems to be particularly true the further up in government you go.
Posted Mon, Apr 20, 10:18 a.m. Inappropriate
Mr. Van Dyck makes a number of interesting points, but I for one find it hard to get past some of his rhetorical flourishes. For instance, I find it patently absurd and insulting to compare Boeing to Somali pirates. Whether or not you believe the company's posture that "location is a choice" and that business costs have to be curtailed to maintain their competitive position, it's tough to argue that the company has been anything less than a -- or the -- major driver of our local economy and has contributed greatly to the civic, cultural, educational and social health of the region and the state. Hardly the stuff of violence and kidnapping on the high seas. I also find it hard to accept the author's contention that closing tax "loopholes" (one man's incentive is another's loophole, I suppose) would make the state's gaping budget deficit, created as it was in large part by patently unsustainable spending decisions by lawmakers, magically disappear. It's ironic that someone writing about "hard choices" and advocating rationale decision making would not hold himself to the same standard.
dfish
Posted Mon, Apr 20, 10:20 a.m. Inappropriate
Oops, bad proofing: Please drop the "e" from "rationale" in post above.
Posted Mon, Apr 20, 12:57 p.m. Inappropriate
dfish: State and local "tax expenditures" in this state, as of two years ago, amounted to three times the state budget deficit at that time. Since then those expenditures have been increased substantially.
Yes, one person's loophole is another's incentive. But I think you would find few serious policy analysts who would defend them. They discriminate against unfavored businesses and sectors not receiving them and also impede general economic growth.
The comparison of Boeing to the Somali pirates was, of course, a flourish.
But their tactics are similar: Boeing, for instance, holds us hostage while demanding big new public subsidies whenever its business model comes up lacking. Perhaps a better comparison would have been between Boeing and the late Seattle Sonics. The message is: Give us bigger taxpayer subsidies or we will leave.
Our state tax code is a mess. It relies on regressive taxes and hands out
benefits to politically favored companies and sectors. If we shifted to a more progressive system, and removed the tax expenditures entirely, we would serve both business and taxpayers and provide a more stable revenue base for legitimate public purposes. That would anger those who presently get favored treatment. But it would serve the general public interest.