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The Public Economy

12/27/01 12:00AM By Ellen David Friedman

A few days ago I was at a meeting with a group of public employees who are struggling to settle a contract and make a livable wage.

People were debating what to do next. A beat or two of silence, and one woman asked, " But what can we do when IBM and Bombardier have just laid off so many people? Aren' t we going to be told we're lucky to have a job?" Silence.

So, is this a reasonable time for workers to demand higher wages? Many would say no, but I think it is. And especially because these are public employees, I think the push for higher wages could actually help the economy recover. Here's why:

Let¿s consider the President¿s plan for economic stimulus. This president protects corporate wealth. That's his plan. He wants to cut the capital gains tax. He wants to accelerate depreciation deductions and expand off-shore tax shelters. He would repeal the corporate minimum tax. Actually, he wants to refund this minimum tax back to 1986 - a windfall of hundreds of billions of dollars to a handful of corporations. Over seventy per cent of the benefits in this package would go to the richest ten per cent of American taxpayers.

Then there's his response to September 11. He authorized fifteen billion dollars in bailouts to the airlines. They took the money and promptly laid-off nearly one hundred thousand workers. But the Bush recovery plan offered no protection for them, no extended unemployment benefits or health insurance coverage for the laid-off employees who are also innocent victims of September 11.

In Vermont, and other states, federal tax cuts trickle down. State revenues decline. The cooling economy produces more lay-offs such as those at IBM. This results in reduced state income tax revenues.

If the Dean administration responds by cutting state spending, this in turn, will lead to lay-offs of state employees and even lower tax revenues.

And what if Dean goes further? He threatens to eliminate what progressivity we have in our property tax system. This approach is wrong for ethical reasons because it places the hardest burden on those at the bottom. But it is also wrong because it won't repair the economy.

We need other strategies. Our greatest problems are going to be unemployment and depressed wages. When a market economy crumbles government intervention is usually needed to stop the downward spiral. Government can reallocate its resources. It can run a judicious deficit if necessary, as Governor Richard Snelling did in his time. Government can support wages by extending unemployment benefits and providing job retraining. It can stimulate economic activity in areas where the free market fails to provide affordable services. Health care, electricity and housing come to mind. It can make public investments that maximize job growth. When government expands, it provides things we all need. This includes not only the public services we count on, but also stable jobs, with decent pay and benefits.

And the rush to cut public spending during a recession only makes matters worse.

I'm Ellen David Friedman in East Montpelier.

--Ellen David Friedman is Vice Chair of the Vermont Progressive Party and has been active in the Labor movement for 25 years.
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