Who pays for the tax cuts? (continued)

WHERE WILL THEY GO? TO "FRIENDS’ HOUSES."

When pressed, the Baldacci administration does not deny these cuts are planned. But it calls many of them "restructuring."

J. Michael Hall, a DHHS deputy commissioner, provides the $140 million figure — $57 million in the first year of the biennium, $83 million in the second. But his department’s budget "preserves essential services," he insists.

And the cuts allow the department, he says, to make reforms such as consolidating programs, putting them out for competitive bid, and bringing payments to service providers in line — by lowering them — with what other states do.

People who now get cared for in group homes will move into cheaper "community settings," he says.

Such as?

"Live in friends’ houses," he suggests.

He confirms there will be a "less-rich benefit package" for many poor people on MaineCare. Cuts will be to dental care, transportation to medical appointments, and support for the mentally ill in the community, including counseling and long-term-care services.

His boss, DHHS commissioner Jack Nicholas, is quoted in the Brunswick Times Record as saying about his department’s budget that "there’s no benefit reduction," but Hall says Nicholas must have been talking about "core benefits."

Mike Norton, DHHS’s public-relations person, expresses the department’s official attitude about the cuts: "We’re not crying . . . We’re looking at it as being able to do what we wanted to do anyway."

Norton and Hall have a lengthy list of programs to be cut or restructured. These include, in addition to those already described (this is a very small sample):

• $5.4 million saved by ending the Community Intervention Program to check on cases of abuse and neglect of foster children.

• $3.4 million saved by decreasing "the number of [foster] children in state custody by 10 percent over the biennium."

• $908,000 saved by reducing the home visiting program of the state Bureau of Health.

The biggest hit in the social-services budget, though, would be to MaineCare services. It amounts to about $83 million. Part of this plan would reduce the benefits to about 24,000 (non-elderly, not disabled, no-children-at-home) poor people. This reduction would save almost $10 million. Although the administration denies it, some social-service-agency people believe Baldacci wants to move these folks to the Dirigo Health plan, which has had a faltering start [see "Under the Radar," by Lance Tapley, Dec. 31, 2004].

TRICKLE-DOWN SUPPLY SIDE

Although cynics suspect Baldacci’s reverse-Robin-Hood fiscal policies arise from political considerations, including the re-election usefulness of his no-new-taxes pledge, he and officials in his self-described pro-business administration have a philosophical justification for their policies.

Baldacci believes, the officials say, that everything will work out financially for state government because, by its rewards to investors and businesses through low taxes and tax breaks, the resulting economic boom will ensure that tax revenues will flow to state government sufficiently to fund programs. And incomes in the boom will be high enough to remove many people from a need for social services.

"Gotta keep those tax dollars flowing in," says Rebecca Wyke, his finance and administration commissioner, "if we want to keep our level of services." In two phone interviews, she directly tied low state taxes to a flourishing state economy and vice-versa.

At a recent budget conference in Augusta sponsored by the Maine Center for Economic Policy, an upbeat Baldacci promoted tax cuts "to help grow Maine’s economy."

Their point of view is known as supply-side or trickle-down economics. Supply more money to the rich and corporations for business investment, and the benefits of the resulting economic growth will trickle down to everyone. President Ronald Reagan made this vision famous, and George W. Bush shares it. In the political right wing, it is an article of faith.

But many economists and political observers believe that national and international economic developments — especially, the boom-and-bust business cycle — and federal fiscal policy have the ability easily to overpower anything relatively tiny state government can do to stimulate Maine’s economy.

In an article published last year, the University of Southern Maine’s Charles Colgan, the state’s most noted economist, maintains there is "no way the economy will simply supply the needed revenues to make up for losses" if drastic cuts are made to Maine’s taxes. "This is the supply-side delusion."

"Economic growth will not fund property tax relief," he said, flatly, at the recent Augusta budget symposium.

And will lowering state taxes be the economic magic potion when and if the conservative Bush administration cuts the federal two-thirds contribution to MaineCare? "When" will probably be this year when roughly $80 million is expected to be lopped off the federal Medicaid grant to Maine in a change not even calculated in Baldacci’s budget. "If" will occur if a Republican Congress passes a law to put a state-by-state limit on Medicaid spending, as Bush has proposed.

Peter Mills, the Republican senator from Somerset County who is arguably the Legislature’s foremost tax and budget expert, calls recent State House events "the war between education and Medicaid." He sees Baldacci and other officeholders catering to education because, he says, the public sees Maine’s future in education — and certainly not in social services. The service providers and the people who need services — "they’re on the ropes now," he believes.

But Mills concedes that Baldacci and others in the State House who recently supported the big hike in state aid to education did so because of pressure from people wanting reduced local property taxes. They didn’t do it from an irresistible desire to improve education. Thus, their actions were in response to an essentially conservative tax revolt.

Ironically, considering the liberal history of the Democratic Party, Baldacci and the legislative Democrats led the charge.

And now somebody has to pay the bill.

Lance Tapley can be reached at ltapley@prexar.com