Henry Clay is Not the Man for Our Times

The United States Senate has proven again the maxim that a camel is a horse designed by committee.

Thank you centrists Collins, Nelson, et. al., for this: $40 billion for state fiscal stabilization eliminated.If Governor Paterson's record of rolling budget slashing is any indication, this compromise puts us all on a toboggan ride to fifty third-world states.

Paul Krugman, whose Novel Prize in economics has not yet amplified his voice to audible levels on the Senate side of Capitol Hill, is getting snarky in his impatience:

What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?

A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.

Fair enough. And who to blame?

All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering.

But how did this happen? I blame President Obama’s belief that he can transcend the partisan divide — a belief that warped his economic strategy.

Also probably fair enough. After all, most of those on the other side of the partisan divide are signatories to Grover Norquist's "National Taxpayer Protection Pledge," as are a number of so-called "centrists." And that pledge would be...?

ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and
TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

That would be Hooverism on steroids. Or as Norquist himself famously put it, shrinking government to the size where you can drown it in a bathtub. 172 Representatives and 34 Senators in the 111th Congress live in Norquist's pocket. Including "centrists." Even after Katrina.

How does one compromise with people who believe this? Henry Clay was known as The Great Compromiser, but his greatest compromises didn't accomplish much. At best, they only delayed the civil war. Clay is not a role model for our time. This is not the change America voted for.

One of 50 Mini-Hoovers? Yep.

The Deficit Reduction Plan passed. Austerity will be the name of the game in New York State government for the remainder of this year’s budget. Yesterday the legislature approved a third round of cuts for this year alone. Because New York, like most states and unlike the federal government, must balance its budget, four options, in any combination, were open to the Governor and legislature:

• raise revenue
• seek help from the federal government
• use reserves
• cut the budget.

Revenue increases are under consideration for next year’s budget through an assortment of fee increases, but the elephant in the room – New York's virtually flat income tax brackets is not (top bracket of 6.85% applies to adjusted gross incomes of $20 thousand for single filers, $40 thousand for joint filers.) Although billions of dollars could be raised through adjusting those rates, on Monday Governor Paterson reiterated his disinterest in restoring a progressive income tax system to New York State:

"What I'm saying is if you tax the rich right now, while the economy is disintegrating, you're going to lose jobs and you're also going to lose from the tax base as people leave the state...I don't think that taxing the rich is the best way to go right now."

The Governor is repeating the very same claims made by his predecessor's predecessor, which were refuted by the facts after New York placed a temporary surcharge on upper incomes, in the wake of the post-9/11 recession and a $12 billion New York State budget deficit, in 2003. It also is of some concern that the term "tax the rich" evokes images of class struggle, when advocates simply are calling for restoring a progressive tax system commonly regarded as just since ancient Greece.

Governor Paterson also dismissed pleas to wait for federal stimulus funds:

“Regardless of any action that may be taken at the federal level, it is clear that New York has a responsibility to get its own fiscal house in order. Any stimulus aid we receive will only cover a fraction of our long-term deficit. We cannot simply look to Washington to solve all of our budget problems.”

No advocate called for Albany to "simply look to Washington to solve all of our budget problems," and the inference is unfortunate. Advocates had asked Albany to wait and see to what extent the federal government might help. That's quite different.

Finally, New York’s rainy-day fund was not considered, presumably because times are not hard enough, despite Governor Paterson's claim that "the economy is disintegrating."

The Albany Times Union has a good summary of the cuts, to which you can link here.

[Of particular note: many non-profits get their funding from the pool of funds known as New Legislative Programs. Funding for new legislative programs will be reduced by 20 percent of remaining spending. Here is a link to the chart that details all of the new legislative programs cuts.

FPI Answers How to Balance the Budget (Fairly)

The Fiscal Policy Institute's Frank Mauro and James Parrott lay out the case succinctly in the Gotham Gazette:

As the economic damage ripples out from Wall Street, Gov. David Paterson has proposed drastically slashing state spending. School aid, health care, SUNY and CUNY, child care, program for the elderly, homeless prevention and long-overdue wage increases for social service workers struggling to stay above the poverty line will all feel the effects of the budget ax. While he chops away, though, the governor has steadfastly refused to call for a progressive hike in the state income tax -- an increase that would affect only the most affluent New Yorkers. For the governor, "shared sacrifice" means that the state's low- and moderate-income families and communities must sacrifice while the fortunate few at the top, who benefited the most from the tax cuts of the last 15 years and from this decade's economic growth, will emerge from the budget largely unscathed.

In the 1990's a bunch of New York's plutocrats called themselves "Change New York," went around bullying politicians, and enabled George Pataki and his long reign of tax bracket squashing. Google "Change New York" and you'll find everything but them -- but the fearsome ghost of CNY must be haunting Albany yet. Their acolytes have not been silent.

Anti-government voices have mounted a steady drumbeat calling for steep budget cuts, ostensibly to rein in "out of control" state spending. The reality? State spending has increased to fund important new commitments such as providing medical care to people without health insurance and aiding urban school districts with high concentrations of children from poor families. The state government also dramatically expanded spending on property tax relief and acted to partially undo years of underinvestment in mass transit and public higher education.

Now to think these voices have the public good in mind would be quite naive. Check out The Shock Doctrine (see the Amazon widget in this blog's right column). So what should New York really do?

What should they do? In addition to its investments in infrastructure, unemployment insurance modernization and other measures, the massive economic recovery bill now making its way through Congress includes aid, called “state fiscal relief,” for the explicit purpose of helping states balance their budgets without putting too much additional drag on the economy. Since this legislation is likely to go to President Barack Obama for his signature in mid to late February, the sensible course would be for Paterson and the legislature to wait to see exactly how much “budget balancing” aid New York will receive under the final legislation. The chances are excellent to certain that the state will get several billion dollars it can use right away, since important parts of the “state fiscal relief” is retroactive to Oct. 31, 2008...

Some budget cuts may be unavoidable, but the state should also consider closing tax loopholes such as one that benefits non-resident hedge fund general partners working in New York State and taking other actions to generate budget savings. These could include ending the wasteful and failed Empire Zones program, increasing the use of state engineers rather than contracting out that work to expensive consultants, or using the state's sizable purchasing power to get better prices on prescription drugs.

Raising taxes on high earners would also be a step toward restoring fairness to New York's graduated income tax, which has become significantly less graduated over the years. Today, because of the state's increased reliance on regressive sales and property taxes, New York's middle- and lower-income households pay a higher share of their incomes in state and local taxes than the top 1 percent or the top 5 percent.

Sounds like a plan.

Is Our Children Gonna Learn?

The Campaign for Fiscal equity (CFE), which won a landmark ruling in New York State for high-need school districts, testified to the legislature against Governor Paterson's plan to cut education funding. Additionally, CFE's Executive Director Geri Palast released this statement:

The Campaign for Fiscal Equity believes the Governor’s proposal to cut $2.5 billion from New York’s classrooms is bad economics. In addition to a budget deficit, there is an education deficit that by law and long term economics must be one of the state’s top priorities. The Legislature must construct a budget based on this comprehensive view of the deficit. New York’s public school children have lived with the education deficit for over 15 years as documented in the CFE litigation. It severely imperils the ability of our children to become skilled and productive contributors to our society. The 2007 Education Budget and Reform Act provided the four year timeline and fnancial commitment to address this education deficit.

While CFE recognizes that we face tough budget challenges, the Legislature must not tolerate changes to the funding baseline set last year, 2008-2009, and must take extraordinary steps to make good on this year’s commitment despite the economic downturn. The proposed federal stimulus prioritizes education.

Those funds must be taken into account along with additional deficit reduction funds that could come from increasing the personal income tax on the wealthiest New Yorkers. We simply cannot afford to increase the education deficit. It will put us back where we started and undermine New York’s capacity to provide its students with their constitutionally mandated sound basic educations. Compliance with this constitutional mandate is a legal, economic and moral necessity. This should be the bottom-line factor in all budget decisions.

The Albany Project puts a face on all this:

In Greece, NY, the School District is preparing to lay off up to 100 people.

Rochester schools are facing the firing of up to 500 staff.

Buffalo School Superintendent James Williams is being forced to dip into a $15 million dollar surplus to ease a $52 million dollar cut in state aid.

In the first of three meetings planned with residents, Williams urged parents to appeal to local state legislators to blunt the blow to school funding, which he said would be catastrophic. "If you [translated] that into people, you're talking about 900 to 1,000 [jobs]. You'd dismantle the system.

There's no way we could operate that way," Williams told local news reporters before the start of the meeting with about 250 parents in Southside Elementary School.

Williams noted that since 2005, the district has shed 1,000 jobs through attrition.

Meanwhile, resistance continues to adjusting New York's income tax rates, so that the haves contribute something more resembling their fair share. And politicians quietly tiptoe around the topic.

Well, is our children learning?

On Halloween, 1936, President Roosevelt gave a campaign speech at Madison Square Garden. The take-away quote was this:

We had to struggle with the old enemies of peace -- business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me -- and I welcome their hatred.

FDR's description is as true today as it was more than 72 years ago. It appears that our Governor and Legislature, on the other hand, welcome their support.

Fairness -- What a Concept

The Fiscal Policy Institute's James Parrott has a timely and spot on summary of New York's tax policy in the Times Union:

Gov. David Paterson's budget proposal shows that the top 5 percent of New York taxpayers had 59 percent of all income in the state in 2006. That's one and a half times the combined income of everyone else. However, if you put this together with the income numbers from 2002, and with the budget's projections for 2009, a curious picture emerges.

Even allowing for some slippage in high incomes in the recession, all of the income growth between 2002 and 2009 will go to the wealthiest 5 percent. The other 95 percent of households taken together will have about the same income this year as in 2002 (and that's without adjusting for inflation.) The incomes of the top 5 percent will have doubled over that period. That's a $200 billion income gain.

Now I'm not surprised that I've been treading water the last seven years. But I am surprised that the top 5% has seen a doubling of incomes overall. Now I'm sure that not everyone with a six-figure income has fared so well, but enough have to make the average staggering.

So what to do with New York's equally staggering deficit?

Asking the top 5 percent — or maybe just the top 3.5 percent with incomes over $250,000 — to pay a slightly higher rate on their state income taxes seems like a reasonable way to share the sacrifice that's being exacted by a damaged economy and a tighter budget.

It would also be a step in the direction of restoring fairness to New York's graduated income tax, which has become significantly less graduated over the years. Today, New York's middle- and lower-income households pay a higher share of their incomes in state and local taxes than the top 1 percent or top 5 percent.

Now there's a concept -- fairness. Now if only we heard such a word from more politicians. The whole op-ed is worth a read.

Health Coverage Options for NY

Approximately 2.5 million New Yorkers don't have health insurance. The number has been rising and will undoubtedly continue to rise as hundreds of thousands of jobs disappear in the current recession. Even those who remain employed risk losing their employer-sponsored plans as companies cut benefits or shift more costs to workers (and in the case of lower paid workers, the costs can become prohibitive).

A new study commissioned by the New York State Health Foundation and conducted by the Mailman School of Public Health at Columbia University looked at five plans for expanding health care in New York that were proposed during statewide hearings last year. The plans examined in the study include:

• a single-payer or “Medicare-for-All” plan that would replace all current insurers with one, publicly financed system and provide comprehensive coverage to all State residents with no costsharing or deductibles;
• three different “building block” plans that would expand government-sponsored programs, create individual buy-in options, and include an option for individual mandates; and
• a market-oriented reform plan that would loosen State health insurance regulations, establish a high-risk pool, and expand private coverage mechanisms.

The single-payer plan would fully solve access to health care, but also is the most costly: roughly a net $5.8 billion increase to the New York State budget. The market-oriented plan would be the cheapest to New York -- $280 to $440 million -- but would make the smallest dent in the problem of uninsured.

CAVEATS from the report:

All of our estimates refer to what spending and coverage would have been in 2004 had these proposals been enacted at that time. They are not intended to be a forecast of future costs. Our simple model does not produce estimates of the distribution of cost across various stakeholders beyond government.

CAVEAT from me: you get what you pay for.

From ONE -- A Petition Worth Signing

The ONE Campaign e-mailed this today, and I encourage you all to sign the petition.

Dear ONE Member,

More than 100,000 ONE members signed our petition to Barack Obama, asking him to make a strong statement about global poverty in his inaugural address. And he did exactly that, saying:

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.

Now it's time to send him a thank you note and encourage his ongoing commitment to the world's poorest citizens. Click [here] to send the thank you note to President Obama:

Although Obama came through for us—and for the 2 billion people globally who live on less than $2 a day—in his inaugural address, strong words are not enough. We must keep encouraging him to make sure critical, proven programs are not frozen or even cut in the upcoming budget battles, which may be difficult as the Administration tries to find resources for the domestic economic crisis.