States of emergency

BACK DURING the New York City fiscal crisis of 1975, the New York Daily News ran a headline about President Gerald Ford's refusal to aid the city: "Ford to City: Drop Dead."

But Barack Obama is far outdoing Ford in refusing to provide sufficient federal assistance to states reeling from severe budget cuts.

While California's budget meltdown has captured the headlines, almost every state is carrying out devastating cutbacks. Nevada and New York, for example, share with California the plight of having budget deficits equal to one-third of the state's general funds. The Center on Budget and Policy Priorities (CBPP) estimates that total state budget cuts will total an incredible $350 billion for the 2010 and 2011 fiscal years. In a recent report, the CBPP explained:

The cuts enacted in at least 43 states plus the District of Columbia are occurring in all major areas of state services, including health care (28 states), services to the elderly and disabled (24 states and the District of Columbia), K-12 education (27 states and the District of Columbia), higher education (36 states) and other areas.

States are making these cuts because revenues from income taxes, sales taxes and other revenue sources used to pay for these services have declined due to the recession. At the same time, the need for these services has not declined and has, in fact, risen as the number of families facing economic difficulties increases.

Of course, rescuing the states isn't just up to Obama. The Democratic-controlled Congress has to approve such funding. Federal aid to the states comprised about $140 billion of the $787 billion stimulus spending bill passed by Congress nearly a year ago. But because of opposition from "moderate" Republicans and conservative Democrats, Obama and his allies in the Senate caved and removed $35 billion from a fiscal stabilization funds for the state.

The aid that was included doubtless prevented states from eliminating some government jobs and services--in particular, in schools. But it was far short of what's necessary to staunch the states' budget bloodletting, the worst since the Great Depression of the 1930s, Arturo Pérez of the National Conference of State Legislatures told a reporter.

As a result, the most vulnerable people in society are paying the price. A few examples from data gathered by the CBPP tell the story: Minnesota is eliminating health care coverage for 29,500 low-income adults. Tennessee has frozen applications for its children's health insurance program. Ohio has slashed community mental health services. Rhode Island is requiring low-income elderly to pay higher prices for adult day care. Hawaii is furloughing teachers for 17 days. The list goes on.

"There's no question this is extraordinary--the worst situation in 50 years," Susan Urahn, director of the Pew Center for the States, told ABC News. "Fiscal year 2010 will be just as bad as it was last year. We saw a $180 billion cumulative budget gap in 2009 and predict the same for 2010."

In fact, according to the National Association of State Budget Officers, states' overall spending has contracted two years in a row for the first time in history--a 4.8 percent decline in the last fiscal year, with another drop of at least 4 percent expected in the current fiscal year.

And all that is prelude to even greater downsizing and outsourcing, as access to vital public services at the state and local level are rationed.

That's if they're available at all. Michigan, hammered by the collapse of much of its auto industry, is projected to have lost 25 percent of its jobs between 2001 and the end of 2010. As a result, the state's tax revenues have dropped to 1969 levels. In its most recent budget, the state slashed spending by $1.9 billion, including school funding of up to $600 per student in some school districts.

If government officials have their way, many of these cuts will never be restored. "I think we're kind of in a permanent retrenchment," Raymond Scheppach, director of the National Governors Association, told the Web site Stateline.org. "There are a number of areas where we've got to sit back and almost look at new models for delivering services."

THE FAILURE to stop the state budget cuts puts downward pressure on an economy still staggering from the worst crisis in 70 years. As a report by the Center for Economic and Policy Research points out, "Federal fiscal relief, in the form of revenue sharing with state and local governments, provides an effective mechanism for staving off program cuts and workforce reductions. The money can be quickly injected into the economy through important public services such as health care and education."

Instead, federal money is being injected into Wall Street bankers' bonuses and the Pentagon's military machine.

Since taking office, Obama has let nothing stand in his way as he continued George W. Bush's policy of bailing out the banks and other companies at all costs. According to the Bloomberg news service, the government has lent, committed or guaranteed nearly $13 trillion to rescue ailing companies--an amount nearly as big as the U.S. annual economic output.

Just the amount of the government takeover of insurance giant AIG--$180 billion and counting--would cover more than half of the states' budget shortfall.

If AIG had gone bankrupt, it would have repaid its debts at about 20 percent on the dollar. But under pressure from then-New York Federal Reserve President Tim Geithner--now the Treasury secretary--AIG used its federal funds to make $90 billion in debt payments in full. The biggest share, $12.9 billion, went to Goldman Sachs. That taxpayer money--along with has now been transformed into bonuses, with Goldman setting aside $16.7 billion for bonuses in the first nine months of 2009.

Next in lines for taxpayer money is the generals. When the generals publicly campaigned for the White House to come up with money and troops for the $30 billion surge in Afghanistan, the president obliged. Earlier, Obama had jacked up overall military spending from $513 billion in 2009 to $534 billion in 2010 to fund the endless wars in Iraq and Afghanistan and the global American empire.

Yet somehow, the same urgency isn't there when the person who needs money isn't a Wall Street baron or the armed forces brass, but a deaf person in Utah cut off from speech or hearing therapy because of Medicaid cuts, or a legal immigrant in Massachusetts suddenly priced out of affordable and adequate health insurance, or a schoolchild in Georgia whose school is hurt by the state's $446 million cuts in spending on K-12 schools.

If this is an example of Obama's promise of "change," it's obviously for the worst.

A RESISTANCE to the budget-cutting agenda is emerging. Last fall's activism at California universities and colleges, involving students, faculty and union staff workers, has set the stage for a day of action March 4 in defense of public education at every level of the state system--from pre-K through the universities.

College students have spurred the fightback, but important labor union bodies have signed on. Some plan to walk out, others to organize marches and rallies. This will be the biggest and most important public challenge yet to the priorities being pursued by Gov. Arnold Schwarzenegger--and by other government officials across the U.S. Solidarity actions are planned in other cities as well.

Building a movement to resist the budget-cutting onslaught will take time. There are no shortcuts around the day-to-day organizing that's needed. But March 4 can be an important step toward that goal, and should be built as widely as possible. They can send the message that people across the U.S. are fed up with attacks by the politicians--from Obama on down--and they're determined to fight for their own agenda.