KNOXVILLE, Tenn. — Congress talks about bringing government spending under control but really is trying to shift the problem to state and local governments, a University of Tennessee economist said Tuesday.
Dr. Bill Fox, director of UT-Knoxville’s Center for Business and Economic Research, said Congress historically has been unwilling to deal with the deficit and bring federal spending under control.
“Washington wants to reduce the fiscal consequences to the federal government, and the politically easiest way to do that is to pass the problem to someone else,” Fox said.
Tennessee legislators express growing concern that federal budget cuts will require increases in state taxes or drastic cuts in social services.
Spending cuts now under consideration in Washington could cost Tennessee $132 million — $27 per person — for education, welfare, job training and other social services next year, according to the non-partisan Tennessee Advisory Commission on Intergovernmental Relations.
“The House already has passed a comprehensive bill related to AFDC (Aid to Families with Dependent Children) and other welfare benefits that would substantially (and immediately) reduce the amount of money Tennessee gets (from the federal government),” Fox said.
“The state could try to replace lost federal revenues by raising taxes or cutting other services. I cannot at this point envision a scenario in which Tennessee would raise taxes to make up for lost federal money.”
Republican Gov. Don Sundquist and Democratic legislative leaders have pledged not to raise taxes.
Fox said the more likely scenario is for the state to try to deliver a better, more efficient and effective package of services from the perspective of Tennesseans.
The states will be put in a position of having to eliminate or cut back on programs that were conceived, authorized and funded by Congress, the UT economist said.
“Tennessee will be right there among the other 49 states in having to deal with some tough choices and tough politics,” Fox said.
“Washington is simply balancing its budget by pushing the problems down to the state level. It’s hard to make a strong case for why welfare ought to be a state-funded program. Economists have argued for years that welfare should be done at the national level.”
The latest Gallup poll indicates 88 percent of American voters want Congress to balance the budget, but only 31 percent believe Congress will do it.
Contact: Dr. William Fox (423-974-1697)