“When I chaired the appropriations committee, I saw the poor,” says former Minnesota state representative Gordy Voss in the prospectus outlining the State Fiscal Analysis Initiative. “And when I chaired the tax committee, I saw the rich.”
Thus from the very beginning, the SFAI—a program of the Center on Budget and Policy Priorities (CBPP), a left-of-center think tank in Washington, D.C.—manages to strike a thoroughly class-conscious tone, one that seems out of touch with today’s post-welfare consensus that private initiative trumps governmental solutions every time. Indeed, the SFAI seems stuck in the 1970s , recommending increased government spending and regulation as the solution to every problem, real or imagined.
Established in 1992, the SFAI seeks to “strengthen the contributions of state-level nonprofit organizations to policy debates by enhancing their ability to provide reliable budget and tax analysis.” Essentially, the group acts as a distribution network for CBPP studies on tax, welfare, and budget policies, drawing on the national organization’s number crunchers and networking among the 22 state nonprofits in the CBPP’s orbit. The group is funded primarily by the Mott Foundation, the Ford Foundation, the Annie E. Casey Foundation, and the Open Society Institute, to the tune of over $2 million annually.
The initiative says it is “apolitical” and merely fills the “analytical vacuum” in state-level policy, but that doesn’t mean the group doesn’t have guiding principles. Laudably, it’s clear about its intent: developed “in part to respond to continuing reductions of government services for low-income and vulnerable populations,” the SFAI endeavors to expand government support of social services.
The SFAI’s materials abound with language that implies a crisis scenario in state welfare budgets—despite the fact that during the 1990s, at the state level, inflation-adjusted public welfare spending ballooned by over 60 percent (the second-fastest growing category of state spending) at a time when the national poverty rate was dropping and the economy was expanding rapidly. In fact, the nation’s prosperity filled state coffers with revenue surpluses that far exceeded the dreams of even the most fiscally profligate state legislator.
Working in the SFAI’s favor is one of the few immutable laws of modern government: if there’s money to spend, spent it shall be. Increasing funding for various welfare programs is an easy way for politicians to display their “compassion.” Indeed, the entire world of private social service solutions is absent from the SFAI’s work. Every member organization advocates, in one form or another, expansion of most of the government welfare programs that have hitherto been abject failures.
The California Budget Program, for instance, claims that only 65 percent of California’s children in families with incomes at or below the poverty line take advantage of the government-subsidized state childcare system. By some, this might be taken as a sign of success: after all, the best measure of success in the social services sector is not how many people still need government assistance, but how many no longer need or want it.
The report only mentions in passing that some families “appear to manage or make do with the help of families and friends, or have work schedules or situations that permit parent care.” Nowhere does the report mention the possibility that some parents may not want their children placed in government-funded daycare. But the policy prescription is predictable: expand services to these children, which would cost “nearly $1.97 billion annually in 2000 dollars, a 65 percent increase over the 2000-01 total state budget for child care.”
Not surprisingly, just about every other report issued from a member group also ends with a call for expansion of government-run welfare programs.
*The Pennsylvania Partnerships for Children supports “expanding outreach and enrollment efforts, plus benefit offerings” for children’s health insurance programs. This despite the fact that Pennsylvania saw no decrease in spending for children’s health programs—in fact, the spending for Medicare-related programs in the Keystone State grew at the same rate as the national average—4.5 percent.
*The New York-based Fiscal Policy Institute argues for increased “investment”—read: government spending—in housing subsidies, “job creation,” and health care coverage. The cost would be shouldered by raising taxes on “wealthy New Yorkers” and increasing corporate income taxes, though the state already has the highest state and local taxes per capita in the nation and has one of the nation’s most generous welfare nets.
*The Center for Public Policy Priorities in Texas advocates reversing property tax cuts in that state to pay for increases in welfare spending, even though the overall state budget increased by close to 10 percent over the 1999-2001 biennium, which was among the highest rates of budget growth in the nation.
The Irrelevant Income Gap
Each member organization of the SFAI is encouraged to publish state-specific studies on poverty and income, but the core of their work involves promoting the research of the Center on Budget and Policy Priorities. Each group rushes the new edition of the annual CBPP report on income inequality to state media organizations, complete with analysis and sound bites. Every year, the report is widely trumpeted in the media as evidence of an increasing “income gap”—a Nexis search found more than 100 such citations in 2000, and former Vice President Al Gore made extensive use of CBPP analysis in his bid for the presidency. Yet there is little or no critical analysis of the report’s methods, and few reporters ask whether income inequality, in and of itself, is a basis for government action.
Consider the recent CBPP study that claims the average income of the richest fifth of families was more than eleven times as great as the average income of the bottom fifth of families. The study also asserts that middle-class families saw income growth of only 2 percent, while the incomes of “rich” families increased by over 15 percent.
This rhetoric obscures the generally rosy economic picture of the past decade. The income gap did not disappear in the 1990s, but it also did not widen perceptibly, and for a few years even stopped growing. In fact, the number of poor families in America has decreased at an annual rate of around 4 percent over the past several years, according to the U.S. Census Bureau. Even the CBPP is not bold enough to argue that economic growth keeps people poor; they merely complain about lower-class income not growing as fast as upper-class income.
Completely ignored in the CBPP’s analysis is the considerable income mobility that is a hallmark of American society. For example, Federal Reserve statistics show that 98 percent of people in the lowest income quintile in 1975 rose out of that bracket by the 1990s. Despite economic disparities, America, it seems, remains a place where economic status is not determinative.
Of course, the poor are still with us—some 32 million of them, according to government statistics. (Though other estimates of poverty—based on the better measure of how much families consume versus income—put the actual poverty rate some 30 percent lower than “official” estimates.) But income disparity is clearly not the cause of such poverty so much as persistent social disorders that are not entirely amenable to government solution. Yet SFAI member groups continue to cling to the faulty premise that income redistribution is the answer to poverty, the result being policy remedies that are far worse than the disease.
For example, take the matter of “tax fairness,” a shibboleth of left-of-center budget analysts that is anything but “fair.” Roughly half of the groups involved in the SFAI state that “tax fairness,” in one form or another, is one of their primary policy goals. These groups oppose across-the-board tax cuts, claiming they benefit the rich more than the poor—which they do in real dollar terms, since the rich pay more in taxes to begin with. Yet cuts in marginal tax rates still result in the rich paying more in taxes, both in real dollars and as a percentage of income, than the poor. The SFAI’s answer to what they perceive as inequality is to make tax systems more “fair” by giving tax cuts only to the poor and middle class or punishing high income earners with even higher taxes.
Such is the philosophy behind the Tax Equity Alliance of Massachusetts, a project of the Commonwealth Center for Fiscal Policy, an SFAI member. Because recent tax cuts in Massachusetts were across-the-board and not targeted—and hence, by SFAI standards, not “fair”—the group spearheaded a $1 million advertising campaign to defeat two tax reduction initiatives at the polls last November. While a reduction of the state income tax from 5.85 to 5 percent over three years passed by a nearly 3:2 ratio, the group managed to help defeat a rollback on excise taxes and tolls—levies that are disproportionately burdensome on the poor.
Despite the recent strides that families across the income spectrum and across the country have made over the past 20 years, there are still coalitions of think tanks like the State Fiscal Analysis Initiative that seek to use government’s heavy hand to drag down those at the top under the guise of helping those at the bottom. The best way to reconcile class distinctions is to make government less discriminatory in its approach to tax and budget policy, not more so. Researching non-government solutions to these problems would be a far more fruitful avenue for any state-level policymaker. Indeed, most states are already experimenting with new solutions of this sort. But don’t expect the SFAI to help pioneer innovative solutions anytime soon.
Stephen Slivinski is a fiscal policy analyst at the Cato Institute and co-author of The Fiscal Policy Report Card on America’s Governor’s: 2000.