August 8, 2011
Watching the recent debt ceiling debate in Washington was discouraging, not just because of the vitriol pervasive in the exchanges, but the nature of the discussion itself. We have now come to the point in this country where our focus is not on how we can rebuild our economy and create jobs in a fiscally responsible manner, but on how quickly we can defund proven programs that the American people support without asking all portions of our society, particularly the wealthy, to share the pain in putting our financial house in order.
Our national political debate has shifted away from a policy discussion about jobs, investments, and economic recovery to cuts and deficit reduction. It is time to change the debate.
Remember how we got here. When Bill Clinton left office, we had a budgetary surplus in this country. After eight years of President George W. Bush, with his legacy of massive tax cuts for the wealthy, a new prescription drug benefit that was never properly funded, two wars paid for by massive borrowing, and an economy heading into a recession deeper than anything experienced since the Great Depression, this country had a budget deficit of $407 billion and a debt of $10.6 trillion.
To think we could be pulled out of this ditch without a massive change in direction was fanciful. The stimulus program (American Recovery and Reinvestment Act, ARRA) brought some measure of relief, especially to states like our own, but the economy still lags. Now, the recent actions of Congress, and worse yet, some proposals yet to be realized, run the risk of further depressing job growth at a time when we need it more than ever. For example, Republicans in the House of Representatives are now proposing to dramatically cut transportation funding. All that will mean is that thousands of well-paid jobs will be lost and our infrastructure further ignored. That will be the consequence of a cuts-only approach to our budgetary challenges.
What does this mean for Virginia? Our governor recently praised this year’s so-called state budgetary “surplus,” but failed to acknowledge that we could not be in the black this year without our receipt of ARRA monies from the federal government (a program he decried), cuts to education and the social safety net, and “borrowing” from our state retirement plan (VRS). Because our state’s economy is so dependent on federal spending, we will likely lose jobs and revenues because of the debt ceiling deal, thereby putting greater pressure on our budget.
Even before the federal deal, a report from the independent think tank, The Commonwealth Institute, projected a budget shortfall for Virginia in the next budget biennium approaching $800 million. And a recent study by George Mason University documents the Commonwealth’s inadequate investment in our transportation network, a dynamic which depresses job growth and hurts our competitiveness.
Unless we change the debate and begin discussing ways to close budget gaps without solely resorting to further cuts, the Commonwealth could look very different in five years than it does at present.
What could we do to enhance revenue in Virginia? If we reformed our tax structure to reduce the rate to 5.6% for those who make less than $75,000 a year and increase to 6.85% the rate for those who earn over $400,000, we could raise an additional $300 million in 2013*.
And even if one is skittish about reforming the income tax, what about closing some tax preferences for some of Virginia’s largest industries? If we were to eliminate special tax preference for the coal industry, which costs Virginians $94 million per year**, we could reduce the tax rate for all Virginia corporations by one-half percent, providing them all with monies they could reinvest in factories and jobs, while creating additional tax revenues of approximately $26 million per year to help fund schools and public safety.
Most Virginians recognize the way to address budgetary challenges is through a balanced approach. They recognize the need to further invest in education and transportation to create jobs and a high performing workforce. They realize that helping those most in need, whether they are the elderly in nursing homes or children with inadequate access to health care, are central to what it means to be a Commonwealth. And they believe that everyone should share in the gains of economic growth and the restraint necessitated by fiscal discipline.
In this country and in our Commonwealth, we are at risk of losing our balance. The only way to restore it is to change the nature of the debate.
Reminder: The City Democratic Firehouse Primary for City Council and Clerk of Court is Saturday, August 20, 2011. This is likely to be THE ELECTION for City Council, so I hope we will have a big turnout. If you want your voice heard, vote between 9:00 a.m. and 7:00 p.m. at Burley Middle School.
* This proposal was made in HB 2588 a 2009 bill patroned by Delegate David Englin and which I co-patroned. The bill was tabled in the House Finance Committee.
** This represents $44.1 million of credits claimed under the Coalfield Employment Enhancement Tax Credit, and an estimated $50 million claimed under the Virginia Coal Employment and Production Incentive Tax credit, as estimated by the Virginia Division of Legislative Services. The exact amount for the latter is not released by the Department of Taxation because three or fewer companies actually claim the credit.