A Post-Election Tale of Two Birds

By F. Scott McCown
Leading up to yesterday’s election, Americans expressed a strong hunger for elected officials who would maturely put country first.  Now that the elections are over, we urge our elected officials to do just that—and a good place to start is with our fiscal problems both in Washington and in Austin.
Federal Budget—Like Playing Chicken
Bipartisan consensus generally assumes that we need to reduce the federal budget deficit at least enough over the coming decade to stop our national debt from growing faster than our economy.  To hit this target, Congress must reduce deficit spending by roughly $2 trillion between now and 2021 on top of the $1.5 trillion in spending cuts that Congress has already required through 2021.  We need to do so through a balanced approach that includes both tax increases and spending cuts.
Before the election, however, because our leaders were unable to agree on how to hit this $2 trillion target, they set up a gigantic game of Chicken.  In this game, called “sequestration,” starting January 2013, America faces automatic, across-the-board cuts to most programs in our federal budget—both domestic and defense.  The idea behind requiring sequestration was that the outcome would likely be so terrible that the mere possibility would force an agreement on a deficit reduction package.
How bad would sequestration be?  Sequestration might damage our security because of deeper defense cuts. It would likely damage our economy because demand for goods and services would suddenly plunge with the deep reduction in federal spending.    And it would certainly mean deeper cuts to programs that aid millions of low-income families, the elderly, and people with disabilities.  State and local governments would also be hard hit as federal grants were cut.
Under sequestration, Republicans and Democrats are like two drivers racing head on toward a collision, each hoping that the other driver will swerve.  Of course, if one doesn’t, both drivers are dead—as are all the Americans trapped in each car.  Instead of playing Chicken, both sides need to maturely put country first and make a deal for America—one based on a balanced approach that includes both tax increases and spending cuts.
State Budget—Like An Ostrich with its Head in the Sand
Things are a little different in Texas.  With the lowest spending per resident in the country, we don’t need spending cuts.  Instead, we need revenue.  You may hear talk of a tax “surplus,” but don’t believe it.  While Texas has a technically balanced budget, it is only through some shameful budget maneuvers, including delayed payments, accelerated taxes, and misused dedicated funds.  Additionally, to balance the budget, the Legislature simply wrote an I.O.U. to Medicaid by underfunding it by almost $5 billion.  Fixing these problems alone would likely wipe out any “extra” money on hand from greater-than-estimated tax collections.
But our bigger problem would still remain—Even though our economy is growing, our antiquated tax system captures a shrinking share.  Increasingly we make our money selling services, while our tax system primarily relies on sales taxes on goods.  To make matters worse, in 2006, the Legislature reduced local school property taxes without creating an adequate offsetting state tax, leaving a $10 billion biennial hole in the budget.  Partially as a result, last session the Legislature was forced to cut spending on public education by $5.3 billion.  Texas now ranks 46th in spending per pupil on education.  We cannot meet the needs of our large and growing state with a shrinking revenue stream.  Instead of acting like an Ostrich with its head in the sand, we need our state leaders to maturely put Texas first and deal with our revenue problem by reforming our tax system.

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