Saturday, November 27, 2010

Tax and Spending - What did the voters vote for?

A mere few weeks ago, Washington's voters voted anti-tax on three major initiatives. They overwhelmingly voted down an income tax on upper income taxpayers dedicated to education and health care. They overwhelmingly voted for an initiative that required a 2/3 vote of the legislature on new taxes and they overwhelmingly voted to rescind the pop and candy tax the legislature imposed last session. The sum result of all these measures is a clear signal to policy-makers that they would rather see budget cuts than tax increases.

But were voters aware of what the consequences would be? Good question. The slow growing economy has stifled state revenues by as much as 20% for the next three years and making up that deficit through budget cuts alone is going to result in devastating cuts for state programs that have already been slashed each year for past three years.

For one, I'm not sure a large percentage of the voters knew what programs will end up being cut. The problem is there are not a lot of choices. About 60% of the state budget is already off limits due constitutional protection of most of the education budget as well as federal requirements on big programs like Medicaid.

What's left is basically all of higher education and social service programs like the Basic Health Plan which provides insurance for low income working families, the Security Lifeline Program which provides income supports and medical care for disabled and mentally ill clients and much of the TANF program that provides income support and child care to primarily working mothers. These social service programs are the safety net for those who have been hit the hardest by the deep recession. Programs like the community college Worker Retraining Program that provides funding for unemployed workers who have lost their jobs in declining industries to train for the jobs of future are also likely to be on the chopping block.

Many people believe that in reality we could cut spare these programs and cut the salaries and benefits of state workers more severely. The problem is, that these cuts simply don't add up to much money. Raising state workers co-pays by 20% only save a hundred million dollar or so and adding an extra 10-20 furlough days, less. The problem is that the recession's hit on the state budget is so severe and so much of the budget is off limits, that draconian cuts have to occur to virtually every area of the budget that's left.

The impact of the Eyman initiative requiring a 2/3 vote is exaggerated. While there is little chance 2/3 of the legislators will ever agree on a tax increase, the initiative still allows the legislature to send voters a choice. The legislature could clearly send the voters a referendum that would impose a tax to support key selected programs.

Initiative 1098 did not clearly offer voters a choice between taxes and program cuts. The initiative, which taxed upper income tax and dedicated the money to education and health care was very loosely crafted. Voters believed, and rightly so, that there was no requirement that the state limit revenues to those specific areas (they could cut funding from other sources).

I think it is sheer speculation to try and guess as to whether or not voters would choose between a tax increase and the destruction of the safety net. Over the past three years a lot of polling what done on this very question and the results were a toss-up. But I think it would be irresponsible to take the option off the table. The voters should have choices that they can clearly understand.

Sunday, November 21, 2010

The Cold, Mean Season

Seattle's only remaining daily newspaper went on a rampage against an income tax initiative that would have imposed a 5% tax on households earning more than $400,000 or single payers over $200,000 for single (At 5%, the wealthiest 5% among us would be paying less than they do in the people's republic of Idaho, less than in Oregon and less than in California) They argued vehemently that we need to cut programs not raise taxes. And they are argued just as vehemently that we need to increase education spending and for God's sake we need more funding for the University of Washington. What's left to cut? Well, according to the Times and many Democrats and Republicans alike, government waste and special interests.

Hardly. What is left is the Basic Health Plan which provides health care to low income working families. The Security Lifeline Program which provides heath care and a very small living stipend for the mentally ill and those at the very bottom. TANF which provides income support and more importantly child care so low income mothers can actually hold a job.

Apparently, the voters agreed with the Times and voted down the income tax which would have been dedicated to health care and education. They passed an initiative that would require a 2/3 vote for any tax increases. They vote to cut taxes on candy, and pop (equal to about the funding level for the security lifeline). No taxes screamed the conventional pundits. We need to reset to a new smaller government.

Hmmm. Smaller for who? Smaller for the least fortunate among us. Smaller for the sick who have lost jobs and their health care benefits. Smaller for the mentally ill who are wandering the streets without medication. Smaller for mothers who, without child care, who can't afford to work.

It's a cold, mean season in Washington State.

Saturday, November 20, 2010

How did education reform ever get so anti-teacher?

I'm amazed at how most education reform efforts seem to neglect the importance of harnessing the ideas of teachers in turning many of our troubled schools around. The generic education reform argument seems to go that teachers and the school system they work in, have gotten so bureaucratic that we have to start over. We should provide state funding for the creation of new charter schools where stripped of union contracts and complex rules, we can start to gets things moving.

To me this is terribly ironic. After all, one of the first proponents of charter schools was Albert Shanker, President of the American Federation of Teachers in 1988. Shanker's idea was that groups of teachers would be able to run their own school within regular schools and pursue innovative ways of educating disaffected students. Released from contradictory legislative dictates and complicated school district rules, teachers would be able to innovate and solve tough problems.

Shanker's idea was that a group of six or more teachers should be able to submit a proposal to start a new school. They would be able to try out different ways of teaching to reach students who weren't responding to what schools are currently doing. Proposals would be reviewed by a joint teacher and school district panel. The approved schools would be given 5 or 10 years to try out their ideas and progress in the programs would be shared with others. If a method was particularly successfull, districts could bring the new ideas to scale.

We need to turn this education reform equation around. Instead of measuring performance to reward and punish teachers, we need to harness the power of teachers to innovate and teach in new ways and bring what we learn to scale.

Thursday, November 11, 2010

One Way to get the economy moving again

The Deficit Reduction Commission co-chairs have come up with a big solution to the long term budget deficit of the federal government. Their proposals simplifies tax rates but raises revenue by eliminating loopholes, it raises the retirement age, cuts Medicare and Medicaid spending, cuts the defense budget and slashes domestic spending. And most importantly it reduces the deficit from 8% to 2.2% of GDP.

This is a heavy lift but Democrats have done it before. The Clinton administration cut the Reagan/Bush deficit and left Bush II with a surplus.

And the details of a final package will not likely look like this one. But the co-chairs draft report puts a lot of major pieces on table where everyone shares the pain and lays out the parameters of the solution.

This is a big deal and could very quickly get our economy moving again for two reasons:

1) The long term solution should allow Congress to move forward on an immediate stimulus. We need a stimulus to get the economy moving. Insuring that the stimulus will be made up quickly with future cuts makes this feasible. It's all about timing. You can't cut spending now. That would be idiotic. That would lead to a double dip recession. But you have to close the deficit in the future in order to keep interest rates down and avoid inflation. So, you jump start the economy now and when it starts moving you start cutting.

2) Passage of the deficit reduction plan will assure markets that long term investments are a good bet. As our deficit grow bigger and government borrowing sops up a bigger supply of credit in the economy, we run the risk of ramping up interest rates and creating another recession.

A short term stimulus and a long term deficit reduction package are the key to avoiding a double dip recession and getting our economy moving again.

We need to pressure Congress to get this done and done quickly. Do we have the political courage to move forward?

Thursday, November 4, 2010

Not a Republican tide, not 1994, not In Washington

Despite the deepest recession in 70 years, legislative Democrats evaded the sweep that impacted much of the rest of the country.

The simple fact of the matter is that while Democrats lost seats, 3 to 4 in the Senate and 4 to 5 in the House (one race in each is subject to recount), the change is far below average for off year elections for the part in power

With very few exceptions, since the founding of the state, the party of the President loses seats in the state house in the next off year election. The House is a better state weather vane since only half of Senate seats are up every two years.

At this point in time, under Democratic President Obama, House Democrats have lost 4 to 5 seats and still hold a commanding lead in the state house 57 to 41 - a sixteen vote margin.

In previous off year elections the party of the President has seen bigger losses. in 2006, the Republicans in the Bush era lost 7 seats and in 2002, 3 seats.

In the Clinton days, Democrats lost 27 seats in 1994 (1998 and 1990 appear to be anomalies probably because the previous tide was so big against the party of the President) . In 1986, under Reagan, Republicans lost 20 seats and in 1982 they lost 11 seats.

During the Carter year, 1978, Democrats lost 13 seats and in 1974 under Nixon, Republicans lost 5 seats. In 8 of the last 10 elections, the party of President has lost seats and the average is 10.4 significantly higher than 2010.

Despite the horrible recession and the off year election of the party of the President, Democrats did pretty well.