A Public Response to Public Sector Woes

07/06/2010 11:28 am ET | Updated May 25, 2011

In a time of tight budgets at the state level, government should be accountable to community needs and stop subsidizing the private sector.

The recent Time magazine cover story Inside the Dire Financial State of the States raises an issue that is of critical public importance. Unfortunately, it is often misunderstood or used as cover for the worst of Republican policies. To change this, we must have a response to statewide fiscal crises that defends public spending on essential community needs and ends wasteful government subsidies for the private sector.

By now, everyone knows that budgets at the state level are tight. Time reporter David von Drehle does a good job of conveying the scope of the crisis:

"Squeezed by the end of federal stimulus money on one hand and desperate local governments on the other, states are facing the third straight year of staggering budget deficits, and the necessary cuts will cost jobs, limit services, and touch the lives of millions of Americans. Government workers have been laid off in half the states plus Puerto Rico. Twenty-two states have instituted unpaid furloughs. At least 28 states have ordered across-the-board budget cuts, with many of them adding deeper cuts in targeted agencies. And massive shortfalls in public pension plans loom as well."

Before we start talking about how to respond to this situation, we must understand how we got here. Over the past thirty years, Republicans have led a relentless assault on government, arguing that we needed to "starve the beast." They implemented all sorts of limits on raising revenue for the public sector, ensuring that there would be fewer and fewer resources left for public services.

Now we're in exactly the position they wanted us to be in. There is no money left for even the few functions that government still performs. We've arrived here by design.

The Starved Beast Attacks the Public

America is now paying the price for our leaders' unwillingness to defend the public sector. The Time article perceptively notes, "Many taxpayers might say that it's about time spending dropped. But then they start hearing the specifics." When people understand what we are losing, they are not happy.

The American public overwhelmingly supports public education, Medicaid, and early childhood programs. They are distraught to see that our country's infrastructure is disintegrating and that there are few resources left to deal with collapsed bridges or crumbling roads. We also want police services, public fire fighting, garbage collection, and clean water. If we allowed individuals to opt out of pitching in their fair share for these services, we wouldn't be able to provide any of them as public goods for our society.

Unfortunately, there is a common tendency to scapegoat the people who provide us with these services. In large part, the Time article plays into this:

"It's tough to cut the benefits of police officers, firefighters, and schoolteachers. But the long recession has cast a glaring light on the fact that public and private workers increasingly live in separate economies. Private-sector employees face frequent job turnover, relentless downsizing, stagnant wages, and rising health-insurance premiums. They fund their own retirement through 401(k)s and similar plans, which rise and fall with the tides of the economy. Many public-sector workers, by contrast, enjoy relative job security, and the number of government jobs rose even as the overall unemployment rate shot just past 10%."

The truth is -- given their vital roles as the stewards of public safety and educators of our children -- firefighters, police officers, and teachers are the last people we want having to worry about their economic security. Instead of attacking whatever health care and pension benefits that public employees have managed to retain, we should ask why decent standards of employment have deteriorated for the rest of us.

Defending the Public Interest

If we want to move beyond scapegoating and create a response that serves the public interest, we need to change the terms of debate. We can't merely be squabbling over the dwindling public resources that remain. We need to assert an appropriate role for government.

Here is a key concept: Public budgets should reflect the values of a community. Based on those values, we should raise the revenue needed to be able to spend on critical services.

So how do we get there? To respond to state budget crises, we need tax and fiscal reforms. First, government should stop subsidizing the private sector. We need to close tax loopholes that currently sap billions of dollars in public revenue. Right now, federal, state, and local governments give massive tax breaks to businesses, usually without getting anything concrete in return.

"The Treasury Department estimates that various corporate tax breaks will cost the federal government more than $1.2 trillion over the next ten years (2008-2017), a period during which total corporate revenues are projected to equal $3.4 trillion."

Likewise, to use just one state-level example, the Washington State Labor Council reports,

"All together, [Washington State's] existing 535 tax breaks represent 130% of our biennial budget. That is close to $30 billion in tax expenditures."

It is disappointing to see that, going back to the Clinton years, Democrats have bought in to the "starve the beast" framing. They have debated Republicans only about the degree to which we should cut back public services, not on the substance of public policy.

Breaking from this pattern, Democrats should exercise leadership by crafting a federal framework that allows states and regions the flexibility to create their own innovative funding mechanisms. And they should recognize that members of their party who jump on the anti-union bandwagon are only furthering a downward spiral that hurts all working people.

Some people view tax incentives as a way of generating jobs. But the fact of the matter is that we give away countless millions in public dollars without demanding any tangible returns or real accountability. This has to stop.

If government is going to support private business, grant a tax break, or exempt businesses from regulation, there must be a clear public benefit from the public investment. If subsidies are not providing living wage jobs, creating affordable housing, or expanding our tax base, they should not be approved. The impact on public budgets would be tremendous. If we closed these loopholes, we would be able to fund the very things that we now say we can't afford.

Government should be accountable to community values. And it should stop subsidizing the private sector without getting tangible public benefits. Unless we embrace these principles and move beyond a "starve the beast" framework, working people will forever continue to lose in the debate over state budgets.