Grumbling About Deficits

The Governors Cry Uncle

The lobster and steamers were tasty, and the ban on alcohol at Fort Williams Park was relaxed so the nation's Governors could enjoy beer and wine. Still, there was a bigger reason for the rare harmony that pervaded the National Governors Conference in Portland, Me., last week. Democrat and Republican alike, most of the state executives are being forced to raise state taxes and cut services, partly because Congress and the Reagan Administration refuse to do the same thing at the federal level, and that is not their preferred mode of governing.

Though an election year is imminent and the Democrats hold a 34 to 16 dominance in the state houses, the Governors avoided issuing anti-Reaganomics broadsides during the 2 1/2-day meeting. But Republicans as well as Democrats did criticize the huge federal deficits and worried over their likely impact on interest rates and on the economic recovery. These concerns were hardly assuaged by two of the conference's major guest speakers, Vice President George Bush and former Reagan Economics Adviser Alan Greenspan, who diametrically disagreed.

Bush left his audience cold with his insistence that the Administration must not raise taxes or it will risk stifling the recovery. At their last meeting in March, the Governors had urged tax hikes and smaller increases in military spending on the Administration. Bush argued optimistically that "a surging economic recovery is on the way." By contrast, Greenspan warned the Governors that unless the deficit problem is faced, the pressure of rising interest rates will begin to slow the recovery next year "in a rather dramatic way." Greenspan called for a bipartisan summit meeting to seek solutions and share the political heat.

Like many Governors, Illinois Republican James Thompson clearly agreed with Greenspan rather than Bush. "I don't believe the Administration can avoid the deficit problem for another 18 months," said Thompson, who became the new chairman of the association at the meeting. "If we continue to borrow from the future to pay for the present, we risk destroying the present." Utah's Democratic Governor Scott Matheson, the outgoing chairman, declared, "If we're not willing to face up to more taxes--and make the decision soon--we can kiss the recovery goodbye." Massachusetts Democrat Michael Dukakis observed that Bush and Greenspan did not seem to be living "in the same economic world." Eleven Democratic Governors signed a letter to the Vice President that complained,"We are weary of self-serving statements calling for reduced spending and taxes without public-serving statements of how to accomplish such things."

The combination of the recent recession, cutbacks in federal grants to the states and the balanced-budget requirement in nearly all state constitutions has forced many Governors to take politically difficult belt-tightening steps. In the past 18 months, 32 states both increased taxes and cut spending. In 1983 thus far, 27 states have approved across-the-board budget cuts (up from 17). Hiring limits have been imposed by 42 states, government workers laid off by 22. Between January 1981 and March 1983, eleven states increased their income taxes; 19 their general sales taxes; 18 their alcohol tax (Utah raised its levy three times in 26 months); 14 their cigarette tax. Increases in gasoline and motor-fuel taxes occurred in 31 states. Both higher income taxes and sales taxes were passed by Indiana, Mississippi, Minnesota, New Jersey and Nebraska.

The Governors fear that more such drastic remedies may lie ahead, with unknown consequences for their political futures. Lamented Tennessee Republican Lamar Alexander: "It doesn't matter if you're Republican or Democrat, the deficit is too large." This file is automatically generated by a robot program, so viewer discretion is required.