Let’s see if I have this stuff right.
Some businesses shut down. Others laid off employees, slashed compensation, and eliminated expenses to survive the recession. Families are doing the same, hunkering down until things get better.
So, businesses and people are spending less, which pushes sales tax collections down…way down. Income tax collections have slowed and, no doubt, will be way down this April.
So, state and city tax revenues are way down.
So, the Governor had to force mid-year cuts on state agencies. To date, they have cut travel, supplies, other discretionary spending, and frozen hiring. Cities have similarly tightened their belts and delayed new and non-essential projects.
Have I got it right so far?
As a result of all the above, state and city governments head into the New Year facing the tough options businesses and individuals have already faced…layoffs, compensation cuts, etc.
Some, including a number of legislators, mayors, aldermen, council members, and opinion writers, appear to argue that we should inoculate government and make it immune to these tough choices.
Well, the federal government, apparently, can do it by borrowing money. States and cities with large rainy day funds set aside for downturns can do it.
But, in Mississippi what they’re talking about are revenue enhancements, rebalancing tax burdens, and such. Translated that means tax increases, i.e., we should increase taxes to inoculate government from layoffs, closures, etc.
Economists argue for the opposite: To stimulate economic recovery, taxes should be reduced and incentives increased – much like retailers cut prices when sales are slow. Families with unemployed spouses, small businesses hanging on by a thread, and seniors on fixed incomes would agree.
Individuals and businesses must adapt to real world economic conditions. Should government have to adapt too, or be immune?
“Yes and no” is a popular answer. Parts of government should be immune, they say, but not all parts. At the state level, many would place education, Medicaid, and public safety on the immune list. At the city level, essential services like fire, police, garbage pickup, and water/sewage would be on the list. Add to these ever growing debt service costs and little remains to cut.
And, services consistently protected from change often become those most in need of innovation and revitalization.
As I write this from a hospital cafeteria, I bask in joy over the birth of my first grandchild but grapple with sorrow over a beloved cousin’s sudden death and news my friend’s wife must undergo brain surgery. Oh, to be immune from the sorrow!
Unfortunately, only in heaven will we be immune from the pangs of life.
Is government akin to heaven?