There's no magic budget bullet

As next week's budget debate in the House draws near, the cries of pain are escalating: Don't cut the schools. Don't cut the colleges. Don't cut Medicaid. Don't cut ETV. Don't cut the Arts Commission. And those are just the "don't cuts" that I can recall off the top of my head.

When people say such things to me, I always ask: What do you expect the legislature to do instead? I'm not being facetious; I really would like to hear some workable ideas. As much as I want to avoid debilitating cuts - which are going to hurt vulnerable people immediately and could do long-term damage to our state - I simply don't see how I could demand that my favorite program not be cut unless I had a realistic alternative.

Frankly, the largely left-of-center fantasy that we can just cut somewhere else isn't much different than the right-of-center delusion that we can make deep cuts without doing any real harm, because of all that nasty waste in government.

It's one thing to say "don't cut any more taxes." Or "don't slap an arbitrary cap on future spending increases." Or "don't handcuff local governments so they can't address the needs and preferences of their communities." Or "don't tell agencies they have to make deep cuts but then forbid them to make the most logical cuts." Or even, "tell agencies what to cut rather than making them figure it out." Those are all independent actions that require no corresponding reaction elsewhere.

It's another to say "don't cut my program" without suggesting where to get the money to replace those savings.

Actually, there's a very simple way to avoid cutting the State Library, the HIV/AIDS drug program, cities and counties and nearly all of the other agencies and programs that would lose even more funding under the House Ways and Means Committee budget. Lawmakers probably could even spare colleges and universities. All they have to do is make even deeper cuts to Medicaid and the public schools.

Of course, no one who's fighting cuts to their little corner of the budget wants to propose that, and for good reason. Although we could certainly spend our school money better, this budget isn't going to make that happen in any significant way, so cutting school funding means doing less than our already-inadequate amount to prepare the next generation of workers and leaders. And we get $3 from Washington for every $1 we spend on Medicaid - money that provides much-needed medical care and prevents even more job losses.

In fact, education is so important to our future and Medicaid is so important to our economy that our priority ought to be avoiding cuts to either one. But as Ways and Means Chairman Dan Cooper loves to remind me, he has to go after education and Medicaid for the same reason Willie Sutton robbed banks: That's where the money is. Consider: Three out of every five state tax dollars go to public education and Medicaid. The total budgets of the 26 smallest agencies amount to less than 0.5 percent of state funding; 77 of the 90 agencies and obligations funded through the state budget receive just 17 percent of all state revenues.

So short of shutting down the prisons and courts and law enforcement and economic development and practically everything else in the government, there's only one way to avoid cutting education and Medicaid next year: Raise taxes.

Several groups that are best known for backing losing candidates rallied at the Statehouse on Saturday to demand that legislators do just that, focusing mostly on eliminating our ridiculous tax loopholes.

I want to get rid of those loopholes too, because our whole tax code is an antiquated tribute to special interests. It's packed with exemptions and incentives that force us to keep tax rates higher than they have to be. It rewards activities that most of us would not want to reward while punishing activities we'd like to encourage. It creates volatility and prevents tax collections from growing at the same rate as the economy.

But unless you combine closing those loopholes with tax cuts - or, far smarter, with lower tax rates - then it's a tax hike, which I am not convinced is completely safe in this economy. And if you start picking and choosing a handful of your favorite taxes to raise (or lower), then it's more piecemeal tax policy - a favorite legislative pastime that is part of what has gotten us into this mess.

That's not to say we shouldn't be talking about taxes. We should be. If we were willing to do that, we might discover that there are ways to generate more revenue without hurting our shaky recovery or making our tax system an even bigger mess. (Lawmakers might consider another cigarette tax hike, for example, or a temporary hospital bed tax hike that could be structured to have the net effect of no tax increase because of the federal Medicaid money it would draw down.) And of course, we need to overhaul the tax code regardless of our budget situation. Unfortunately, we have a legislature that not only won't talk about such things; it won't even look at a report that it commissioned that lays out some pretty smart recommendations for a revenue-neutral overhaul of our tax code.

On the spending side, lawmakers are promising to find smarter ways to deliver needed services with less money - next year.

Contact Scoppe, a columnist for The (Columbia) State, at cscoppe@thestate.com.