State hikes may offset Bush plan
As the president urges tax cuts to spur economy, states from California to Kentucky slash budgets and raise taxes.
from the January 10, 2003 edition
The Christian Science Monitor
csmonitor.com
By Mark Sappenfield | Staff writer of The Christian Science Monitor
SAN FRANCISCO - One day after President Bush stood before the nation and announced a plan to loosen the grip of economic stagnation, California Gov. Gray Davis began to tighten it.
It was not his intent. Nor is he alone. Instead, he is but one of many governors - indeed almost all - who are delivering State of the State addresses this month with an ominous message: the promise of huge spending cuts and the possibility of new taxes.
In the face of the massive White House proposal, which would give roughly $100 billion to Americans next year in tax cuts and services, such news might seem less daunting. Yet the depth of the budget crises in statehouses - with deficits totaling as much as $60 billion - is forcing states to pull back on the things that would normally spur growth to the point that it may offset the benefits of the Bush plan.
It is setting up an unwitting collision over fiscal policy between Washington and the states that will help determine the future of the economy and the fortunes of Main Street.
Already, the relationship between governors and Mr. Bush has been strained by the administration's demand that they pick up more of the tab for homeland security and federal programs like Medicaid and education reform. Now, to some degree, Bush finds the success of his plan in their hands.
"Anything states do to balance their budgets is not going to help the economy," says Nicholas Jenny of the Rockefeller Institute in Albany, N.Y. And if state and local authorities have to raise taxes significantly, he adds, "that can actually have a much bigger impact on how people run their finances" than Bush's tax cuts.
Different mandates
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