After the election

November 1, 2010

A cuts-only approach to balancing the budget puts Maine jobs and prosperity at risk. On Nov. 3, Maine will have a new governor-elect and its 125th Legislature, and the task of governing will begin. Those men and women will face many challenges, but perhaps the most daunting will be to balance Maine’s budget in the face of an estimated $1.17 billion revenue shortfall and a fragile recovery struggling to pick up steam. In the weeks and months ahead, the new team will make critical choices that will either strengthen or undermine economic security for Maine families and businesses and determine the future we will offer to our children.

When a family or a business faces economic hardship, they not only figure out how to cut their spending, they also try to find ways to come up with more money. If the roof leaks or the foundation cracks, families know it makes more sense to fix them than to put their home in jeopardy. Similarly, businesses know that to remain competitive, they must have the funds to purchase supplies and modernize aging equipment.

Maine’s next governor and Legislature must approach the revenue shortfall with this same common sense. Like the family or business facing economic hardship, an approach that focuses solely on cutting investments and services will do more harm than good.

To ensure that Maine is a place where people can raise a family, start a business and reach their full potential, our post-election discussions must include all options to resolve a situation Mainers did not cause. The collapse in revenues is a result of the longest, deepest recession since the Great Depression, caused by 30 years of unsuccessful national economic policies and the failure of the federal government to effectively regulate catastrophic malfeasance on Wall Street and in the real estate market.

Growth depends upon the public and private sectors working together. Business and household success depends on effective, efficient public spending in areas like education to prepare future workers for the high-skill needs of growing employment sectors. It demands a healthy, productive work force with access to affordable health care that stresses prevention. It thrives on investment in transportation, energy, communications technology and other infrastructure necessary to meet existing and emerging needs.

Maine people have a right to demand the most cost-effective delivery of public services possible, but we cannot simply cut our way to prosperity. Blaming our problem totally on overspending and prescribing cuts as the sole course of action would have disastrous consequences. Beyond the families of teachers, police and fire personnel and other government employees who would lose their jobs, the ripple effect through the entire state economy could trigger a wave of additional job losses, affecting private sector employers who receive state contracts and businesses where the people who lose their jobs currently shop.

Slashing $1.1 billion from the budget in 2011 could cost as many as 25,000 lost public and private sector jobs. With more than 100,000 Maine people already unemployed or underemployed in this recession, such additional job losses would be devastating.

Maine must adopt a balanced approach to its budget challenges that includes additional revenues. Historically, increased federal funds have offset declines in general fund revenues to stabilize state spending. The American Recovery and Reinvestment Act served this purpose during the last budget cycle, but with no such assistance on the horizon, states will have to choose between jeopardizing future prosperity by overlooking widening cracks in their economic foundation or finding new sources of revenue to sustain critical public investments and address growing public needs. Recognizing this challenge, more than 30 states have raised taxes since the recession began. While each has also cut spending, they recognize that relying on spending cuts alone would be counterproductive. To date, Maine has addressed its recent revenue problems with cuts alone.

The early 1990s are instructive. Faced with crippling revenue shortfalls at the federal level, policymakers at both the state and federal level adopted a plan of shared sacrifice that paved the way for economic recovery. The result was the longest peacetime expansion in the nation’s history and the creation of 23 million jobs. Once again, we need to put all options on the table.

Time and again, Mainers have demonstrated a preference for shared solutions and shared sacrifice over rigid ideology and a political blame game. Facing one of the most severe revenue shortfalls in our state’s history, we can only hope that our policymakers’ better angels prevail and that they pursue a balanced solution that includes raising revenues to maintain critical services; provide for infrastructure, education and other vitally important investments; and ensure that all Maine families share fully in a reinvigorated economy.

Mark Sullivan is the communications director for the Maine Center for Economic Policy. 

Maine BIZ