State policymakers must face reality to guide Maine toward prosperity
In the middle of the toughest economy we've faced in generations, too many hard-working Mainers have lost jobs, seen their hours or pay reduced, or been forced to clean out their savings to make ends meet.
The state is slashing services just when we need them most and putting on hold timely investment in critical infrastructure. Crumbling roads, fraying support of programs for those the recession hit hardest, and a continued shift away from policies that boost incomes and improve financial stability for working families all put Maine's economic future at risk.
The choices we make today could have lasting negative consequences. Lawmakers should prioritize an agenda that minimizes the recession's damage, gets Maine people back to work, and points Maine toward future prosperity.
Prevent further damage
With more than 100,000 Mainers unemployed or underemployed, policymakers can act to check this job-loss free fall. Medicaid, Medicare, unemployment insurance, food stamps, the earned income tax credit and Social Security all provide some stability and prevent further hardship. The Center on Budget and Policy Priorities' data indicates that some of these programs and others kept almost 7 million people above the poverty line in the United States in 2010.
Gov. Paul LePage's advocacy against proposed cuts to the federal Low Income Home Energy Assistance Program demonstrates his awareness that public programs alleviate hardship for many Mainers. How such advocacy squares with his recent efforts to cut similar safety net programs in Maine is perplexing. These programs must be well run and efficient, but insisting on cuts when the need is greatest is counterproductive.
Working families throughout Maine have experienced significant erosion of their financial stability. This began well before the recession as education, health care, food and housing costs outstripped income gains for low- and moderate-income working families. At the same time, businesses cite depressed sales as the greatest impediment to their success. Demand is the problem. Consumer spending crashed and remains weak.
The Legislature's decision to cut property tax relief by 20% for more than 70,000 households makes little sense, particularly when taxes for Maine's highest income taxpayers — those earning more than $356,000 a year — will fall an average of almost $3,000 in 2013. In essence, the Legislature has increased taxes for individuals and families struggling to make ends meet while granting Maine's highest income earners one of the most significant tax cuts in the state's history.
We need to stabilize working families' finances and put money in the hands of the people most likely to spend it now in Maine's economy. Restoring the property tax relief program and making it easier for more families to take advantage of it would stimulate consumer demand now. So, too, would expanding the state's earned income tax credit and making it refundable.
Another step Maine policymakers can take to create jobs and pave the way for future economic growth and shared prosperity is to send a responsible bond package to voters in 2012. In the short-term, bonds create construction and related jobs, with workers spending much of their earnings at local businesses. In the long-term, bonds create permanent jobs for those who work in the new facilities and help generate and provide infrastructure for entrepreneurs to start and grow their work force.
Mark Zandi of Moody's Analytics estimates that every dollar spent on infrastructure generates $1.44 of economic output. Another analysis by Jeffery Thompson, an economist at the Political Economy Research Institute at the University of Massachusetts Amherst, suggests that every $1 million Maine invests in infrastructure improvements creates 15.3 jobs. Infrastructure investments also improve work force competitiveness and incomes by expanding opportunities and reducing business costs.
The Legislature should also demand a thorough review of the effectiveness, efficiency and economic impacts from Maine's more than 100 personal and corporate income tax and property tax reimbursement programs and more than 100 sales and excise tax exceptions. As Maine Revenue Services accurately recognizes, a substantial number of these "expenditures are the equivalent of a governmental subsidy in which the foregone tax revenue is essentially a direct budget outlay to specific groups of taxpayers."
We must focus our attention now on ending the recession and driving down persistent unemployment. While Maine policymakers have limited ability to improve the broader economic outlook, they can do much to improve the situation on the ground here in Maine.
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