Back on federal merry-go-round

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Published: January 16,2011

Tags: Marty Wiseman, MBJ Columns

President Ronald Reagan’s dream of a return to the practice of “dual federalism” as described in the original constitution is coming closer to reality. Dual federalism is a term used by those who attempt to sort out and describe the relationships between the national, state and local levels of government within our federal system.

Over the years, these levels have become so intertwined that it has become almost impossible to fix responsibility for the delivery of certain services or, perhaps most importantly, which level should be responsible for paying for them. President Reagan accepted the original approach at face value, and thus he often promised to “get the federal government off of the back of the states.”  Of course, he said less often that they would take their money with them when they left. Nevertheless, President Reagan dreamed aloud of the time when the federal government would be getting ever smaller and less consequential, and the states would at the same time be evermore free from the burdens imposed by Washington. The picture was painted of a citizenry at peace since only a minimum of loathsome taxation need be levied given the shrinking responsibilities imposed by government. While Reagan had some limited success in bringing about this nirvana it appears that his dream is now headed toward reality.

David Stockman, Reagan’s budget director, and then Bush-era tax expert Grover Norquist proposed that the only way to cut the size of government was to starve it of its life-sustaining revenues. No one would argue that such has been accomplished by the trillions of dollars in terms of the annual deficit and national debt. Even the most cynical progressive appears ready to agree that major cuts in expenditures are unavoidable. It is here, however, that Norquist and Stockman part company. Grover Norquist maintains his vigil against anyone who would raise an extra dime in revenues, immediately condemning such a culprit to a Tea Party-induced re-election battle. David Stockman, on the other hand, admits that we cannot cut our way out of the deficit swamp, and that additional revenues are going to be required to balance the budget. It seems certain that the disciples of Norquist are destined to win.

What does this cut-and-cut-deeply strategy mean for Mississippi?  Several news stories in the last few days have alluded to the opinions of a number of corporate hiring types. Their comments related to the sluggishness of employment growth have been remarkably similar. For one thing, they site a continued lack of “rip roaring” consumer demand as a caution producer. Secondly, they have pointed to a desire to hire to accommodate a demand for increasing technology and innovativeness on the job. Some claim to have job openings but no one with the advanced technical skills yet available to fill them. Finally, of course, there is the uncertainty as yet over the issues related to implementation of the new healthcare plan. In the end, the mantra of these seeking the next generation of private sector employee is “educate, educate, educate!”

So where will Mississippi stand in the wake of government cutback euphoria that is sweeping the land?  As requested by so many, the era of earmarks in the federal budget is gone for now. Mississippi benefited more than any other state from the efforts of our congressional delegation to fund programs within the state. Next, the specifics on deep and comprehensive federal program cuts are beginning to appear. The new Republican majority in the United States House has vowed to trim $100 billion. Tea Party caucus chair Michele Bachman of Minnesota is pressing for $450 billion. Defense has now been placed on the table alongside major cuts to discretionary spending. As stated here previously, Mississippi is more dependent on federal dollars than any other state. The cuts will be more noticeable because the money to pay for these cuts comes from elsewhere in the system, and not out of the pockets of Mississippians. It is true, however, that the line is being held on taxes both at the national level as well as the state level.

What will be the bottom line for this period of contraction of the size of government for a state like Mississippi?  Private sector firms that depend on contracts from government at all levels will likely need to park some equipment. Highways and other infrastructure construction will almost certainly be drastically curtailed. The same will be true for defense contracting. The earlier demand for a ratcheting up of high-tech education will have to wait for funding. An increased rate of passing the funding of education down to the local level will allow for few if any new programs. There will be a lag in revenue generation if even the mildest projections of supply side economists are realized. There are calls by many to totally pass massive entitlement programs such as Medicare to the states along with a fixed appropriation to get them started.

The big question as far as Mississippi is concerned is whether business will prosper in the absence of Uncle Sam to the point where we will generate our own revenues without further sustenance from Washington. It is fairly certain that we are on the verge of being given ample opportunity to find out.

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