Elizabeth Pearson

Roosevelt Institute Fellow
 

Recent Posts by Elizabeth Pearson

  • When a Surplus is Really a Deficit

    Jun 3, 2013Elizabeth Pearson

    States are showing budget surpluses, but that doesn't mean that everything has been fixed post-recession.

    States are showing budget surpluses, but that doesn't mean that everything has been fixed post-recession.

    News of surging income-tax revenues and surprise budget surpluses has brightened statehouses over the past few weeks, but it’s worth asking whether we should be thinking of these revised fiscal projections as surpluses at all. After all, current state surpluses are the product of deep cuts to higher education, delayed repair to basic infrastructure, and unfunded pension liabilities — in fact, these surpluses are better viewed as evidence of serious, structural budget deficits.

    For one thing, welcome news from the states comes with the disclaimer that much of the revenue surge prompting headlines is due to one-time revenues caused by taxpayers with capital gains and other types of non-withheld income accelerating income into the 2012 tax year as they anticipated higher federal income-tax rates in 2013.

    But the larger cause of current budget surpluses is the deep cuts state governments imposed during the recent recession. For instance, states are now spending 28 percent less per student on higher education compared to when the recession began in 2008. The recession also produced more dramatic losses in state government jobs than in any other downturn over the past fifty years. State-government spending cuts and job losses have dragged down the economy, slowing recovery and prolonging the jobs crisis.

    States (with the exception of Vermont) have legal requirements to balance their budgets each fiscal year, and therefore do not have recourse to deficit spending. One reason recent cuts were so deep is that states relied disproportionately on spending cuts rather than revenue increases to balance their budgets during the recession — and because federal recovery aid to states expired in mid-2011 even as states struggled to cope with increased obligations due to the economic collapse.

    As states cut to the bone to survive the recession, prolonged under-investment eventually produces misleading surpluses. Meanwhile, it is perversely harder to actually see the budget gaps that states grapple with each year. At the federal level, recessions produce annual deficits and increase the size of the federal debt, prompting political wrangling over sustainable solutions. As ideologically charged as these debates can be, they at least engage a visible target: no matter whether the federal books balance in any given year, we still confront the costs of past wars and economic downturns in arguments over the size of the public debt.

    But, because states don’t have the option of deficit spending, budget gaps at the state level are effectively internalized through cutting services, laying off employees, and delaying improvements. Each year’s painful shortfalls are solved through cuts that swiftly and quietly become a “new normal.” With no mounting debt to remind us of these structural imbalances, past years’ debts seem to disappear — but in fact they are leaving lasting impacts on states’ abilities to underwrite economic growth in the long term.

    Hollow as they are, today’s surpluses are being cited in states like Wisconsin to call for permanent tax cuts that will start the austerity cycle anew by generating future shortfalls that can then be “solved” by new cuts. Such efforts come on the heels of attempts in several states to abolish income taxes during the past legislative session — and fly in the face of the simple fact that, while state tax revenues now have three years of growth under their belt, they still have not surpassed their pre-recession levels. Advocating tax cuts when state revenue remains below pre-recession levels would be laughable if it were not so dangerous. This recession has impacted state tax collections far worse than in past recessions, and even if current revenue growth rates continue it could take years for revenues to catch up to pre-recession levels, adjusted for population growth and inflation.

    More responsible discussion of revenue increases and “surpluses” has revolved around whether funds should be set aside in state rainy-day funds or used now to restore services. These are important conversations to pursue. But we must also consider a broader conversation about state budgets as a reflection of our public priorities. As states rebuild in the wake of the recession, which public investments will support economic growth and meet fundamental needs for safe infrastructure, quality education, and services for vulnerable citizens? Viewed in this light, today’s improving bottom line is a step in the right direction but still falls far short of both pre-recession goals and our broader common priorities. In other words, we are still faced with severe deficits.

    Seizing on recent changes in state tax collection is the wrong place to focus these broader discussions. Instead, we need to be talking about revenue increases and much-need tax-system modernization like extending the sales tax to services and digital goods. Revenue increases have always been part of the state government toolkit when it comes to balancing budgets — Republican and Democratic policymakers alike recognized this fact as recently as the 1960s and 1970s when they repeatedly adopted major new taxes to invest in their states. Remembering this bipartisan legacy can be an important part of making the case for responsible tax reform at the state level.

    When surpluses are the result of dramatic cuts to services and unprecedented job losses, they shouldn’t be considered surpluses at all. We can cheer the good news of growing state tax collections while pursuing broader measures of fiscal health, most notably a budget that balances with our priorities.

    Elizabeth Pearson is a Roosevelt Institute | Pipeline Fellow and a PhD candidate at UC Berkeley.

     

    Money in vise image via Shutterstock.com

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  • Is the WPA Invisible to Millennials?

    Apr 8, 2013Elizabeth Pearson

    The products of the WPA are all around us, but their history has been erased.

    The products of the WPA are all around us, but their history has been erased.

    The fact that the Works Progress Administration (WPA) is today remembered as an exceptional moment in American economic policy is evidence of the serious blind spots Americans have developed in the way we think about government. Even Millennials, who have experienced perhaps the worst impacts of the current recession, have often celebrated entrepreneurship as a solution to their employment woes, rather than calling for the robust public action that has always been a part of effective responses to economic crisis.

    But making the case that addressing the jobs crisis requires much stronger public investment will have to go beyond advocating for larger stimulus packages or revived public employment programs — we must also challenge myths of economic recovery, both past and present, that render activist government invisible.

    The unfamiliarity of the WPA’s activist-government legacy is startling in light of its truly vast scope. In his history of New Deal public works projects, historian Jason Scott Smith notes that in addition to employing 8.5 million people, the WPA built over 480 airports, 78,000 bridges, and almost 40,000 public buildings. In my own town of Berkeley, California, the list of WPA projects is long: two city parks, several high-school buildings, post-office murals, the former University of California Press building (now being renovated to house the Berkeley Art Museum), a city library, and the planting of 15,000 trees.

    With so many tangible reminders of the impacts of public investment right in front of our eyes and under our feet, why isn’t the memory of government economic intervention  more present? Part of the answer lies in a much broader erasure of government from our lives — from the mis-recognition of publicly-subsidized success as individual initiative to the deliberate concealing of government spending as private savings. Political scientist Suzanne Mettler calls this new type of social infrastructure “the submerged state”: invisible benefits delivered to citizens through the tax code or as subsidies to private companies rather than as more visible direct spending. The home mortgage interest deduction is a (very expensive) government spending program, but most Americans would be truly puzzled to hear that they live in publicly subsidized housing.

    Given this context, it’s no wonder that many Millennials believe that entrepreneurship, creativity, and technological innovation will provide the foundation for economic recovery. But the start-up economy can no more build 78,000 bridges than it can create the close to 9 million jobs needed to match growth in the labor force since the start of the recession. Well-designed public policies alone will not convince young people — or Americans more generally — of the need for a progressive economic agenda modeled on the WPA. We must also literally map the interventions of the past. Only by making the legacy of public investment more visible can we push back against myths that mute the powerful role government has repeatedly played in leading economic recovery.

    Elizabeth Pearson is a Roosevelt Institute | Pipeline Fellow and a PhD candidate at UC Berkeley.

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  • Defunding Political Science Research is the Wrong Kind of Big Government

    Mar 26, 2013Elizabeth Pearson

    By cutting off research funding for ideological reasons, Republicans in Congress have turned themselves into thought police.

    By cutting off research funding for ideological reasons, Republicans in Congress have turned themselves into thought police.

    In a vote last Wednesday, the U.S. Senate took the unprecedented step of prohibiting the National Science Foundation (NSF) from funding political science research, except on topics “promoting national security or the economic interests of the United States.” The amendment’s sponsor, Tom Coburn of Oklahoma, frames the defunding of political science research as part of a broader deficit-reduction agenda, but in fact his approach to shrinking government only perpetuates the worst sort of big government: the kind that polices the ideas it doesn’t like.

    Although the amendment’s passage came as somewhat of a surprise to observers — Republicans in Congress are long-time foes of political science, but previous efforts to limit NSF funding have been unsuccessful — scientists from a host of disciplines have been quick to condemn the dangerous implications of the vote.

    The arguments against this assault on basic science research are many. The funding is a tiny portion of the federal budget but supports a huge portion of political science work. NSF-funded research in political science supports robust public debate by collecting comprehensive, high-quality data that is then accessible to the public and journalists. And, although some political scientists have expressed optimism that almost any piece of research could be framed to fall under the new mandate, Gregory Koger noted in a piece on The Monkey Cage the particular irony that “in order to receive support for careful scientific testing of causal claims one might have to make unsubstantiated claims about how one’s research is linked to U.S. economic or security interests.”

    But the greatest harm done by the Senate’s approval of this amendment comes in the type of government that it promotes. The National Science Foundation represents exactly the type of “big government” worth embracing: a government that champions robust public investment in the advancement of knowledge while demanding that these knowledge claims be rigorously tested and peer-reviewed in order to deserve public dollars. NSF grants in political science clearly meet these standards, even funding the work of Nobel Prize laureates such as Elinor Ostrom. In an ironic testament to their democracy enhancing effects, NSF political science grants even helped produce some excellent research on congressional oversight cited by none other than Tom Coburn, who is apparently a fan of federally funded political science research when it serves his interests.

    In fact, Coburn’s anti-science agenda represents the sort of big government actually worth fighting against. While cloaking their effort to starve political science research funding as a struggle against wasteful spending, Coburn and other Republicans who share his agenda promote a government that polices knowledge production and attacks ideas it finds threatening. (Coburn is particularly opposed to research on American’s attitudes toward the Senate, which he seems to think require no additional study, stating in his own press release on the amendment’s passage, “There is no reason to spend $251,000 studying Americans’ attitudes toward the U.S. Senate when citizens can figure that out for free.”)

    Of course, Republicans attacking political science are quick to claim they support government investment in other types of science — the kind that can cure cancer and doesn’t criticize Congress in the process. This selectivity about which ideas should be supported and which are simply wasteful is short-sighted given the practical benefits of such research. But singling out specific types of research for divestment is more troubling for its ideological implications than for its practical flaws.

    As a Nature editorial from last summer argued, when moves to cut off political science funding sponsored by Representative Jeff Flake were making their way through the House, “The fact that he [Flake] and his political allies seem to feel threatened by evidence-based studies of politics and society does not speak highly of their confidence in the objective case for their policies. Flake's amendment is no different in principle to the ideological infringements of academic freedom in Turkey or Iran. It has nothing to do with democracy.”

    There are debates worth having about the value of academic research in society, and even about the merits of publicly funding particular research agendas. Clearly policymakers have a responsibility to argue over how to invest public funds most effectively. But let’s be clear: politicians are not interested in engaging in such a debate. The amendment cutting off NSF political science funding was included in a continuing resolution passed to avoid a government shutdown and passed by a voice vote. The whole story would be comical — Congress using arcane procedure studied only by political scientists to defund political science research — if it weren’t so troubling.

    Such a move isn’t part of Congress’s legitimate role overseeing federal spending. Rather, it speaks to a willingness on the part of politicians to let ideological opponents of important research strengthen the kind of government we should all be worried about: one that decides in advance what kinds of ideas are worth public investment.

    Elizabeth Pearson is a Roosevelt Institute | Pipeline Fellow and a PhD candidate at UC Berkeley.

     

    Capitol dome image via Shutterstock.com.

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  • The Secret History of America's Pro-Tax Movement

    Nov 9, 2012Elizabeth Pearson

    Despite conservative anti-tax rhetoric, American voters have a history of supporting higher taxes to fund government-led progress.

    Despite conservative anti-tax rhetoric, American voters have a history of supporting higher taxes to fund government-led progress.

    How do Americans really feel about taxes? Anti-tax groups and limited-government activists are quick to invoke a long American tradition of tax revolt and resistance in making the case that aversion to taxes is as American as apple pie. But this simple narrative gets the story wrong. The most recent such indication came on Election Day, when voters rejected tax limitation measures and supermajority requirements in Florida and Michigan and Californians strongly endorsed increases in the sales tax and income taxes for high earners in order to fund public education. Though notable in a political environment dominated by anti-tax rhetoric, such support is actually not as exceptional as it seems. It’s worth remembering, now that the election is over and we turn to the looming fiscal problems that confront state and federal governments, that Americans also have a long history of embracing and defending higher taxes.

    We don’t hear as much about this history, in part because it doesn’t fit the story that anti-tax groups want to tell. But this silence also stems from the fact that political fights to increase and defend higher taxes have frequently played out in the halls of state and local governments, rather than in the national spotlight.

    Consider the postwar period in American history between the late 1940s and the mid-1970s. During these decades, state and local governments dramatically expanded investments in public infrastructure and services, particularly in the area of public education. Financing these investments required substantial increases in revenue, which states generated by adopting new taxes (namely, individual and corporate income taxes and the sales tax), increasing the rates or expanding the reach of existing taxes, and making other changes to improve the efficiency of revenue systems. According to the Advisory Council on Intergovernmental Relations (ACIR), a federal commission that tracked these changes, state and local revenue as a share of GDP more than doubled between 1945 and 1972, going from 4.4 percent to 10 percent.

    Although a portion of revenue increases occurred naturally as inflation raised prices on taxed goods and pushed taxpayers into higher income brackets, the largest share was a consequence of specific interventions by state lawmakers. Between 1950 and 1967, the ACIR calculated that 53 percent of the increase in state tax collections resulted from political or legislative initiative rather than from automatic increases built into existing tax structures.

    These actions by state policymakers were by no means uncontested. Vigorous debates took place over whether states needed new revenue and who should be required to chip in to provide it. But in state after state, tax reform aimed at modernizing revenue systems and funding new public services won out, championed by both Democratic and Republican lawmakers. To be sure, the two parties often had different ideas about what types of taxes should be adopted (Republicans tended to favor the sales tax or flat-rate income taxes while Democrats were more supportive of graduated income taxes and higher taxes on business). But policymakers in both parties recognized that their budgetary priorities depended on new sources of revenue; existing funds simply could not be stretched indefinitely in the face of growing populations and increased demands for public services. “Fiscal discipline” during this period actually meant adopting new taxes to fund the growing needs of states rather than relying on borrowing, accounting tricks, or stop-gap measures.

    Crucially, voters also supported higher taxes during this period. By the late 1970s, a backlash against the property tax would be forcefully expressed through ballot initiatives that limited state taxes and expenditures. But during the 1960s and early 1970s in most states that authorized the initiative and referendum, voters repeatedly chose to retain new taxes that had been referred to the ballot by anti-tax groups, often endorsing these new taxes by large margins. For instance, in Nebraska, Maine, and Ohio, voters rejected ballot initiatives that would have overturned newly adopted income taxes, while the same result held in Massachusetts and Idaho for sales taxes.

    How did policymakers build public support for higher taxes? Perhaps the most important lesson of postwar tax reform battles lies in the vocabulary that pro-tax coalitions developed to persuade citizens that higher revenues deserved their votes. In addition to warning about the fiscal chaos that would result if governments did not act quickly to reform their patchwork revenue systems, advocates argued that higher taxes would underwrite a modern, progress-oriented state. For instance, in 1966, the Republican governor of Idaho called the sales tax “the coronary artery of progress” for the state, arguing that “it will take money — not mothballs — in the state treasury to build the Idaho of which we all dream.” In his opening address to the 1967 legislature, Republican governor George Romney of Michigan pressed lawmakers to adopt an income tax so that Michigan might enter “a new generation of progress.”

    Ultimately, the pro-tax coalitions that formed as Republicans and Democrats, labor unions and business interests, teachers and homeowners sided with higher taxes during the 1950s and 1960s would prove unsustainable by the late 1970s. But the anti-tax politics of this later era can by no means be attributed to an innate American dislike of taxes. Indeed, popular opinion about taxation is shaped by political debates, and history demonstrates that Americans are capable of much different debates about taxes than the ones that prevail today. This more complex history of Americans’ relationship to taxes is worth investigating — rather than overlooking — as we confront contemporary fiscal challenges.

    Elizabeth Pearson is a Roosevelt Institute Fellow and a PhD candidate at UC Berkeley.

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