The unprecedented early revenue forecast due out today is expected to show the state’s 2009-2011 budget deficit will push past $8 billion. That will set off a new round of talk about draconian cuts to the quality services that make this state great.
Amidst this, the respected Economic Opportunity Institute has just issued a new report that says the all-cuts, slash-and-burn method is the worst thing to do.
The report, “Recession Reaches Washington: A State Response,” provides some good food for thought. We may not agree with all of it, but it shows the smart thinking about how to save our state, quality services and jobs.
Download the full report.
The report’s author, Marilyn Watkins, said the all-cuts approach didn’t work during the last recession after Sept. 11, 2001.
“It is more important than ever that the state avoid drastic spending cuts that could feed the downward spiral,” the EOI report says. “The 2001 recession provides clear evidence of public policies not to follow. The federal government enacted tax cuts focused on the wealthy. Washington state relied primarily on cuts in public services to balance the budget. With these policies, Washington, along with much of the country, endured a three-year job slump. Job levels of 2000 were not attained again until 2004. Once economic growth resumed, most of the benefits went to the wealthiest while the majority of families struggled….
“Unfortunately, Washington state appears poised to repeat the mistakes of the last recession by slashing public services—and jobs—which could deepen and prolong the effects of the recession locally.”
The EOI report says the “all-cuts” approach adopted by Gov. Chris Gregoire will harm the economy.
“She has not proposed any state revenue increases,” the report says. “Federal money is likely to offset some state reductions, particularly in health care, but substantial cuts in both services and public jobs will occur without new state revenue.
“The no-new-taxes approach is likely to deepen Washington’s recession. Layoffs of public sector workers are as damaging to the local economy as private sector layoffs.”
The EOI report says our current economic crisis has been made worse by the $900 million in tax exemptions granted by the Legislature over the past five years.
The EOI report basically says we can’t cut our way out of this deficit and calls for new revenue sources.
“Pursuing policies now that both inject money into the state economy and bolster economic security for working families will help stop the erosion of the middle class and rebuild a sustainable economy for coming decades…,” the report says.
The EOI report identifies more than $1.4 billion in new revenue, including $360 million from a business and occupation increase on oil refineries run by companies that have made a killing with rising fuel prices. Other revenue ideas include: $136.5 million from a sales tax on security brokers; $119.6 million from a B&O increase for lawyers, lobbyists and other professionals; and $722.4 million in surcharges on non-nutritious food items, like soft drinks, candy and gum.
Again, food for thought that we hope sets off an out-of-the-box debate on alternatives to the disastrous all-cuts approach.
RESOURCES:
2/19/09 Economic & Revenue Forecast Council report (TVW)
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