Consortium News: US Austerity Marks Race to the Bottom

March 3, 2011- As state and federal governments face budget deficits, they are cutting critical programs with austerity budgets that will weaken education, health care, essential services and the economy. …

We are in this race down because of choices the government is making for their wealthy campaign contributors.

Take Wisconsin, not too long ago the state was seemingly well run with a budget surplus. The economic collapse, as it did for many states, created a budget deficit as expenditures rose and revenues declined; and now that the meager Obama stimulus is running out, the deficit is here.

But, in Wisconsin the current deficit and future economic challenges are being made worse by choices made by the government. The Legislative Fiscal Bureau of Wisconsin, the state's official fiscal budget examiner, explained on Jan. 31 how the state went from surplus to deficit:

“More than half of the lower estimate ($117.2 million) is due to the impact of Special Session Senate Bill 2 (health savings accounts), Assembly Bill 3 (tax deductions/credits for relocated businesses), and Assembly Bill 7 (tax exclusion for new employees).”

Essentially, in a special session, Gov. Scott Walker signed into law two business tax breaks and a tax break for health savings accounts, a conservative approach to health care which primarily benefits the wealthy.

This cost the state $117 million and none of these costs were offset by other sources of income. This contributed to a budget already stressed by a bad economy and built significantly reduced revenues into future budgets.

So, the race to the bottom escalated. Comparisons were made between salaries for workers in private businesses and public workers in ways designed to produce biased results.

When you look at age, education, hours worked and other factors, a new study by the Economic Policy Institute indicates that “Wisconsin public employees earn 4.8% less in total compensation per hour than comparable full-time employees in Wisconsin’s private sector.”

Of course, private industry has been in decline for years in the Midwest as unions shrunk, good manufacturing jobs fled and were replaced by poor paying service economy jobs. So, in this race to the bottom, as private industry declines, the public sector must keep pace by cutting its salaries and benefits.
In reality, Wisconsin public workers have not seen major pay increases in recent years.

Pulitzer Prize-winning tax writer David Cay Johnston recently focused on one of the big lies of those encouraging the race down. They attempt to divide workers by claiming private workers’ pay the health and pension benefits of public workers.


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