National Debt
Are higher taxes needed to reduce the debt?
By Marcia Clemmitt

Washington is wracked this year by intense budget politics. Spurred by the conservative Tea Party movement, Republican lawmakers point to the federal government's $14 trillion debt as an emergency that demands big cuts in domestic programs, including Social Security, plus tax cuts they say will spur economic growth. But Democrats say government spending is needed to sustain the economy while the private. . . .

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• Should debt reduction be Washington's top priority?
• Should Congress raise taxes to help cut the national debt?
• Is Social Security a cause of rising national debt?

Are Bush-era tax cuts a key driver of federal deficits?

Chuck Marr Director, Federal Tax Policy, Center on Budget and Policy Priorities. Written for CQ Researcher, March 2011	Brian Riedl Grover M. Hermann Fellow in Federal Budgetary Affairs, Heritage Foundation. Written for CQ Researcher, March 2011

Recession Intensifies State Budget Battles

The recession that began in 2008 caused the biggest drop in state tax revenues on record, with collections now down 11 percent from pre-recession levels. And fiscal 2012, which begins later this year, may be even more difficult, as federal stimulus funds designed to help states get through the recession run out.

Because of revenue shortfalls, states — which are required by law to balance their annual budgets — are having a tougher time than ever providing services such as mental-health care, education, highway maintenance and policing. Meanwhile, a group of newly elected Republican governors and state legislators has vowed to make their states more business friendly to boost their economies. But the effort is leading to some highly contentious budget politics.

The Wisconsin capitol in Madison, for instance, has seen weeks of turmoil after Republican Gov. Scott Walker vowed to offset new business tax cuts by cracking down on public-sector unions. The unions, he says, have too much power to drain money from the state because they can bargain for high wages and benefits.

But he's not the only governor pursuing this course. Ohio's budget is “$8 billion in the hole,” and the state has lost 600,000 jobs in the last decade, according to newly elected Republican Gov. John Kasich. To get the recession-strapped state back on its feet, Kasich said he hopes to make the state more welcoming for businesses by cutting taxes and retooling how the state does business.

“I'm going to cut taxes” and “preserve” earlier tax cuts and — as “just one piece of an overall reform program designed to make us competitive again” — end the collective-bargaining rights of public-sector unions, he said.

When public-sector unions have too much power they drive up both taxes and costs for businesses, Kasich said. For example, unions demand that workers on publicly funded projects be paid prevailing wages, said the governor. “I've never been for ‘prevailing wage’ because it drives up the cost,” he explained.

Liberal groups dispute the governors' efforts to link public-sector union power with state budget difficulties. The power and reach of public-sector unions varies widely from state to state, says David Madland, director of the American Worker Project at the Washington, D.C.-based Center for American Progress, a liberal think tank. If strong, intransigent public-sector unions drive state costs too high, he says, then heavily unionized states should have some of the nation's largest budget shortfalls.

But that is not the case, he points out. In fact, “some of the states with the biggest shortfalls, like Texas and Louisiana, don't have strong unions at all.” In Texas, which has the third-highest state budget shortfall, only 16.9 percent of public-sector workers are unionized. And in Louisiana, only 9.3 percent of the public-sector workers are unionized while the state has the seventh-highest budget shortfall in the country.

In Wisconsin — ground zero of 2011 state budget battles — 47 percent of public-sector workers are unionized, yet Wisconsin is not among the 10 states with the highest budget shortfalls, says Madland.

— Marcia Clemmitt

[1] Elizabeth McNichol, Phil Oliff and Nicholas Johnson, “States Continue to Feel Recession's Impact,” Center on Budget and Policy Priorities, March 9, 2011, www.cbpp.org/files/9-8-08sfp.pdf.

Footnote: 1. Elizabeth McNichol, Phil Oliff and Nicholas Johnson, “States Continue to Feel Recession's Impact,” Center on Budget and Policy Priorities, March 9, 2011, www.cbpp.org/files/9-8-08sfp.pdf.

[2] For background, see Jason Stein, Patrick Marley and Lee Bergquist, “Walker's Budget Cuts Would Touch Most Wisconsinites,” [Milwaukee] Journal-Sentinel, March 1, 2011, www.jsonline.com/news/statepolitics/117154428.html.

Footnote: 2. For background, see Jason Stein, Patrick Marley and Lee Bergquist, “Walker's Budget Cuts Would Touch Most Wisconsinites,” [Milwaukee] Journal-Sentinel, March 1, 2011, www.jsonline.com/news/statepolitics/117154428.html.

[3] Greta Van Susteren, “Union Battleground Goes to ‘$8 Billion in the Hole’ Ohio,” “On the Record,” FoxNews, Feb. 21, 2011, www.foxnews.com.

Footnote: 3. Greta Van Susteren, “Union Battleground Goes to ‘$8 Billion in the Hole’ Ohio,” “On the Record,” FoxNews, Feb. 21, 2011, www.foxnews.com.

[4] Darrel Rowland, “Points of Division: Jobs Dominate, But ‘Hot Button’ Issues Remain Important in Governor's Race,” Columbus Dispatch, Sept. 26, 2010, www.dispatchpolitics.com.

Footnote: 4. Darrel Rowland, “Points of Division: Jobs Dominate, But ‘Hot Button’ Issues Remain Important in Governor's Race,” Columbus Dispatch, Sept. 26, 2010, www.dispatchpolitics.com.

[5] McNichol, et al., op. cit.

Footnote: 5. McNichol, et al., op. cit.