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A few budget reminders

Chris Fitzsimon

The House budget process continued out of the public eye Monday as appropriations subcommittees were scheduled to present their proposals for unprecedented budget cuts to the top budget writers.

The plan is to send the revised reports back to the subcommittees for a vote this week, with the full House taking up the spending plan next week. There is still no revenue package on the table in the House; instead, the $4.6 billion budget shortfall is addressed with cuts alone.

More than $2 billion of the cuts come from health and human services, with reductions in vital services to children, people with disabilities and the mentally ill. Education loses $1.7 billion from abolishing 10,000 jobs, increasing class size and slashing early-childhood programs.

The suffering these cuts will inflict on the most vulnerable people in the state is finally getting the attention of advocates and the families of the people they serve.

Teachers are protesting loudly, UNC President Erskine Bowles is rallying university leaders to protest the cuts. And Together NC, a coalition of more than 80 public-interest groups, made its case to lawmakers Tuesday.

Here are five things that House members need to consider before they rule out any tax increase.

1) Severe budget cuts are more harmful to a state economy in a recession than a tax hike.

Contrary to what has become conventional wisdom in the General Assembly, sharply slashing the budget now is much worse for the state than raising taxes on the wealthy.

Nobel Prize-winning economist Joseph Stiglitz of Columbia University and Peter Orszag, now President Obama’s budget chief, concluded during the 2001 recession that budget cuts reduce demand in the economy more than a moderate tax increase.

Stiglitz and Orszag say that tax hikes are the “least damaging way for closing state deficits in the short run.” The long run involves progressive tax reform.

2) North Carolina does not have a spending problem.

The budget passed last session spent the same per capita as the budget eight years ago. The N.C. Budget and Tax Center reports that the current House budget proposal would reduce state spending per capita to roughly the level it was in 1992. North Carolina is growing and its budget has grown with it.

Why would we want to turn back the clock?

3) Other states have raised revenue to protect vital services.

Sixteen states have already raised taxes to address budget shortfalls and 17 more are considering it. Several of the states that already raised taxes have conservative Republican governors.

4) Gov. Perdue and the Senate proposed raising revenue before the shortfall increased.

Perdue’ s budget included tax increases on cigarettes and alcohol. The Senate budget calls for $500 million in new revenue. Both came before analysts increased the projected shortfall next year by $2.2 billion.

Taxes are already on the table. The question is not whether or not to raise revenue. The questions are how much revenue to raise and what is the fairest way to raise it.

5) Lawmakers aren’t elected to get re-elected.

House leaders are nervous that raising taxes this year could cost them at the polls in 2010. That’s far from a foregone conclusion.

Lawmakers need to explain the choices to the people they serve. But even if it were true that raising taxes reduced the Democratic majority in the House or Senate, so what? The General Assembly’s job is to do what’s in the best interests of the state, not what protects their political standing.

No one can deny that people will suffer if the House does not raise new revenue; children, families, seniors, people with a disability or mental illness. No one can deny that universities, community colleges and public schools will be set back a decade by massive layoffs, fewer classes and reduced opportunities for students.

That seems far more important than politics. Take care of the people and then worry about the political implications, not the other way around.

Chris Fitzsimon is executive director of N.C. Policy Watch.

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