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Local-Federal Partnership in Danger of Unraveling
Published on Monday, August 4, 2003 by the Seattle Times
Local-Federal Partnership in Danger of Unraveling
by Neal Peirce

Must America's states and cities be enduring the fiscal hell that 2003 has served up for them?

Was it inevitable that the federal government would be announcing a stunning $455 billion deficit that confirms the extreme pain being felt now pain likely to trickle all the way down the federal system's fiscal food chain?

President Bush's severest critics should acknowledge that hard times were coming, no matter what. Even if Al Gore had won the 2000 electoral vote, the "fat years" of the Clinton era, culminating in the first balanced federal budgets in decades, would likely have ground to a halt.

Surely, there was no way to sustain the dot-com boom and the phenomenal stock market surge of the late '90s. Tax yields to support soaring federal and state income tax receipts were bound to decline. Medical cost inflation, held down temporarily by the impact of managed care, would have reignited in any event.

It's also very possible that the 9-11 attacks, worsening an already gathering recession, would have hit us no matter who sat in the White House. And that the individual states all would have been in a tough spot to continue the extraordinarily high levels of spending for K-12, university systems, Medicaid and corrections that had been budgeted, often combined with tax cuts, in the '90s.

But did the federal budget outlook have to become so alarming, the deficits so massive, the peril to future generations so great?

What kind of stewardship is it for American federalism when Washington stands aside, preoccupied with its Iraq adventure, and offers scarcely any relief when the states face such grim budget crises New York, for example, at $12 billion, Texas at $9 billion, California a numbing $34 billion?

With smarter national policies, with avoidance of the deep tax cuts that Congress has been approving, the states at this moment might be ordering less-crushing cuts in the higher-education budgets we know are critical to our long-term global competitiveness. Budgets for public hospitals, schools, firehouses and public-works projects might not be under quite such severe attack. Some two-thirds of the states might not be slashing back on their aid to local governments forcing many to raise local property taxes, even as Mr. Bush tells Americans how lucky they are to have his tax cuts.

And we might have more hope. Recently, the nonpartisan watchdog group, the Concord Coalition, warned the first six months of 2003 were "the most fiscally irresponsible in recent memory," as Congress and the administration engaged in "a schizophrenic pursuit of small government tax policies and big government spending initiatives," leading to a "hemorrhage of red ink."

Concurrently, the administration wants the states to accept huge new funding obligations from housing vouchers to the totally unfunded "No Child Left Behind" education initiative.

On homeland security, the administration supported a nominal amount of federal aid to cover states' and localities' immense new, unanticipated costs for local police, firefighting, emergency medical and communications systems.

One can argue that terrorist attacks are a direct result of inadequate or bungled national government intelligence operations. But the Bush camp's fervor for war in Iraq was a hundred times more intense than its support for homeland-defense assistance to states and cities.

Some people assert the Bush administration's seemingly cavalier disregard of state and local governments isn't accidental that it's based in an ideology that says virtually all government (except, perhaps, defense) is dysfunctional, that squeezing government's size and forcing more functions onto the private sector is the way to go.

What that would constitute, if true, would be a conscious effort to destroy the partnership of federal, state and local governments that began with the Morrill Act for land-grant colleges in the 19th century, widened on every count from transportation to environmental protections to housing assistance, and contributed mightily to making us a great nation.

Maybe President Bush doesn't want to push the evisceration of state and local budgets that far. He remains cordial toward the governors, former colleagues.

But what can it possibly mean when this year's $455 billion deficit balloons, as some suggest, to $500 billion next year? When the red ink washes into the trillions, spurred on by Bush tax cuts over the course of this decade?

Under such conditions, the federal government will be simply unable to aid struggling state and local governments governments whose fiscal futures are already shadowed by outmoded sales tax systems, fast-rising school and health costs, and a federal ban on taxing Internet transactions.

Is American federalism resilient enough to sustain these assaults? Only time will tell. Though it's worth remembering: In the end, the American union can be no stronger than the sum of its parts.

Copyright 2003 The Seattle Times Company


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