Gordon L. Weil
“You can pay me now or you can pay me
later,” goes the saying.
When it comes to government budgets, if
it's later, it must be Washington. If it's pay now, it's Maine.
The Congressional Budget Office, which
is independent of both political parties, reported last week that the
federal government will run deficits averaging $1.3 trillion dollars
a year for the next ten years. That's not a typo – trillion dollars.
The government spends far more each
year than it receives in revenues, mostly from taxes. Of each dollar
Washington now spends, 22 cents is financed by borrowing.
Economists think governments can run up
that kind of deficit when times are bad. Government becomes the
major customer in the country and its spending helps restart economic
activity. That's what happened ten years ago.
The economy got moving again, producing
the longest sustained period of economic growth. But, instead of
bringing down deficit spending, Congress cut taxes, reducing revenue,
while jettisoning an earlier agreement to limit outlays.
Republicans have attacked Democrats for
“tax and spend” policies. The Dems supposedly kept inventing new
programs, paying for them with more taxes. The GOP say it wants to
tax less and spend less.
But what has happened is even less
economically responsible. Both parties are behind what amounts to
“cut and spend.” Taxes have been cut as spending sharply
increased. This approach is obviously aimed at pleasing voters, who
get programs they like without paying for them.
Some economists even invented a
justification for the policy. Piling on new debt was all right, so
long as the economy kept growing. That way, the growth of the
national debt could remain about the same share of the total economy
over time.
The theory simply does not work,
because the growth of the economy and of government spending are not
as directly linked as expected.
The national debt is growing faster
than the economy. By 2030, the Congressional Budget Office forecasts
national debt will be at 98 percent of the total economy that year.
In other words, it would take just about all of the national output
to pay off the debt.
This is the ultimate “pay me later”
approach. Eventually, the U.S. will have to deal with debt service
payments that could swallow the underfunded federal budget. The only
solution will be massive tax increases. The people who will pay the
sharply higher taxes will include many who did not benefit from the
spending spree.
In effect, it will amount to “you can
pay me now or your children can pay me later.” That's current
American budget policy.
In Maine, however, people pay now. Like
almost all other states, it cannot run annual deficits, so the impact
of borrowing must be covered by real revenues. If there are tax
cuts, there will be borrowing cuts as well.
Gov. Paul LePage liked tax cuts,
ensuring that insufficient revenue was raised to meet the cost of
maintaining the state's roads and bridges. State funding for roads
was essential for tapping matching federal funds.
His solution was to boost borrowing,
but legislators, especially his fellow Republicans dislike increasing
the state debt. Maine's public debt, equaling 12.66 per cent of the
state's annual economy, is lower than in most other states.
LePage went so far as to oppose any
increase in the 18 cents per gallon gas tax. In effect for a quarter
of a century, it has not kept pace with the increasing costs of
maintaining the roads.
The result is a network of roads and
bridges that falls far below the standard of safety and comfort that
Mainers should expect. Dangerous conditions may occur. But the best
DOT can do is spread coating on many roads rather than maintaining
them. Municipalities are told if they want better roads, they need
to come up with some of the money.
LePage cut taxes. New bonding was slow
and inadequate. With the prohibition of deficits, people get to pay
now, not later. They pay daily in the form of badly maintained roads.
Borrowing, with its multi-year payoff,
makes sense for roads and bridges that are used not only by the
current population but well into the future. Later taxpayers get to
use what they are funding.
But borrowing alone cannot be the
solution. Its fate, subject to voter approval almost yearly, makes
it difficult for DOT to have a long-term plan. Roads are an
essential function of government, making reliable tax funding a
reasonable way of supporting that function.
In the end, the issue of the public
debt, either at the federal or state level, is a matter of taxes. If
people oppose taxes now, they either pay the cost now in lost
services or later when a higher tax bill must be paid.
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