Tuesday, November 16, 2010

Brown on economy: Montana's gonna feel the pain

Posted By on Tue, Nov 16, 2010 at 11:00 AM

Bob Brown is a former Montana Secretary of State and State Senate President. He recently wrote the following editorial on how the federal deficit will impact Montana.

The full text:

The snowballing national debt which is now over $13 trillion pencils out to over $31,000 for every living American; but as things stand now Americans not yet living will end up paying for most of it.

Outrage over the debt and its burden on our children and grandchildren was a leading cause of the Republican rising in the recent election. Deepening anxiety over a deficit-smothered economy contributed to the Democratic waves in 2006 and 2008. Now, washed in on an epic tidal wave, Republicans say they get the message. They didn’t do the job on the debt when it was theirs to do. Given a second chance, they pledge to get started. Republicans advertised themselves as serious budget cutters in the recent campaign, and now they vow to perform as advertised.

Budgetary solutions may not be easy, but the math is simple. The federal government is spending about 3.5 trillion a year, and taking in a little over 2 trillion.

The Republican tide swept across Montana with perhaps even greater velocity than the rest of the nation. There is no question about the mandate for cutting spending here. That being true, Montanans should brace for some belt tightening, because forty cents of every dollar Montana government spends comes from our big brother in Washington.

The most uncomplicated frequently mentioned strategy for cutting back is to return federal spending to 2009 levels. That year Montana received $1.9 billion in federal aid. On a per capita basis, only six states were higher on the federal dole than Montana.

In 2010 our federal piece of the pie jumped to $2.3 billion. That $400 million increase in one year by itself equates to more than 20% of all the money the state takes in from taxes, and would be a $100 million over-draft on $300 million Montana now has “in the bank.” The impact of such federal cuts would surely prove the old saying that a government big enough to give you what you want is big enough to take from you what you have.

Since our state constitution requires a balanced budget, we won’t have the alternative of going into debt to compensate for federal cuts. Our state government will have to severely cut services or drastically increase taxes, or both. With conservative Republicans now in control of both houses of the legislature, don’t figure on any taxing solutions.

Though it pales in comparison, Montana went through this once before. In 1980 the Reagan wave brought conservatives to a great victory. Federal budget cuts followed in 1981. The 1981 legislature, meeting in January, didn’t reckon on the level of cuts, and spent money from the feds we didn’t get. To comply with the Constitution, Governor Ted Schwinden called the legislature into special session in November of 1981 to balance the budget. His recommendation was a five cent increase in motor fuel taxes to relieve the state general fund in federal highway matching requirements so that additional revenue could be freed up to cover the costs of paying for the federal cut backs.

Predictably, the Republican legislature balked at the increased taxes, and the result was a modest $30 million in spending readjustments and reductions. The average Montanan hardly felt a thing.

This time around swallowing hundreds of millions won’t be as easy, but the reality is that our nation can’t continue to live beyond its means. Significant reductions at all levels of Government have to occur. Nickeling our way out this time will not be an option for Montana. This time we will feel the pain.

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