By Don C. Brunell
No doubt this Christmas shopping season will be different. Because people are worried about the economy, they are holding on to their money, reducing debt and praying for better times.
In these uncertain times, federal, state and local governments are awash in red ink. Washington is among many states facing huge budget deficits.
The Nelson A. Rockefeller Institute of Government recently reported that 31 of 42 states saw incomes decline — the first time since 2002 — and its researchers predict more bad news will follow.
Recently, Arun Raha, our state’s new revenue forecaster, revised the tax collection projections downward again for the fourth reporting period in a row.
Our projected deficit has grown from $3.2 billion to $5.1 billion, and Gov. Chris Gregoire (D) recently told reporters that the deficit could grow to more than $6 billion by the time lawmakers write the 2009-11 budget.
The state constitution requires a balanced budget, and even though state revenues from taxes and fees will grow 5 percent over the next two years, those revenues would have to grow by eight percent to keep pace with current spending.
In response, Gov. Gregoire, who promised voters she would not raise taxes, imposed a hiring freeze, called for across the board cuts, and announced an additional $240 million in program reductions on top of $330 million in previously planned cuts for the 2009 state fiscal year ending June 30.
The fact that Washington’s struggling employers are not facing tax hikes is good news as they struggle with declining orders, layoffs and credit difficulties.
Nowhere is the pain felt more deeply than Washington’s “Main Street” — the shop keepers, car dealers, small service businesses and family-owned manufacturers and farms.
Main Street businesses are the backbone of communities across our state, and they are hit hardest by recession.
Lagging sales are prompting cutbacks and layoffs, but unlike AIG and automakers, small employers don’t want taxpayers to rescue them.
They only want an opportunity to work their way back to prosperity without facing the burden of higher taxes, user fees and costly government mandates.
In looking forward, the governor is right to point out that she and lawmakers are faced with some “ugly choices.”
The situation reminds me of the 1981 revenue crisis. It was a time of high unemployment, astronomical interest rates and soaring inflation.
After several special sessions and a series of deep program cuts, Gov. John Spellman (R) and the Republican-controlled Legislature even resorted to temporarily extending the state portion of the sales tax to groceries.
In the process, however, they eliminated what was called the Economic Assistance Authority (EAA), a program put in place after the 1971 Boeing crash to stimulate new manufacturing jobs.
Repealing EAA was a mistake. Manufacturing investments slowed to a trickle stalling the economic recovery.
Later, Gov. Mike Lowry (D) and a bipartisan group of lawmakers restored the incentive, which created new jobs and brought in more tax revenue.
As we look toward 2009, we need to keep some important things in mind.
First, we need to focus on how we are going to recover. We need to deal with the issues in front of us, not what is in the rear-view mirror.
Second, we need to make sure we position “Main Street” Washington to recover faster and stronger than our competitors in other states and around the world.
Lowering costs will allow those merchants, retailers and manufacturers to compete, which will create jobs and ignite our recovery.
Third, we have to work together to get out of this mess.
Our economic problems have gone far beyond politics, and we all will be sharing the pain to one degree or another.
Americans are a resilient, innovative and industrious people, and if we work together, we will not only meet our current challenge but we will be positioned for new opportunities not yet envisioned.
That’s what “Main Street” is all about.
Don Brunell is president of the Association of Washington Business.
