Austerity Pleasures: A Look at the Snyder Budget Crisis

Dangerous Dirk, by D. Sands

by D. Sands

The recent news that Michigan’s economy is bringing in higher than expected tax revenues must strike Governor Snyder’s true believers as a little surprising. Ever since the last piece of confetti fell  at his inauguration, the governor has been hitting the state’s airwaves like some tweaked-out late night infomercial host, raging on about the perils of a cataclysmic budget crisis.

Snyder has been urging citizens to accept a package of hard-line austerity measures—tough cost-cutting policies designed to reduce a deficit.  He has been touting these policies along with a massive tax cut for businesses as a wonder cure.

The state’s $429 million budget windfall may have forced Snyder and his GOP allies in the state legislature to rework their talking points, but the substance of their program remains.  They have been using the “budget crisis” to hoodwink us into accepting measures we would never ordinarily accept. These include a restructured tax code that transfers huge amounts of money from regular taxpayers to the wealthy, efforts to crush unions and the public school system, and attacks on the self determination of local and city governments. What Snyder and his GOP allies are attempting is nothing less than a corporate takeover of the state.

Slash and Burn Tax Reform

Snyder may speak about his budget as a “shared sacrifice,” but the facts tell a different story.  The new budget hands over $1.7 billion to businesses and corporations. Legislators are funding this massive tax giveaway by raising taxes by $1.5 billion for the vast majority of Michiganders (by eliminating tax exemptions) and cutting programs that aid the poor.

Here’s a breakdown on the new tax code:

* Old corporate tax code replaced by 6% flat tax
* Tax on pensions for those under the age of 67
* Elimination of $600 child deduction on state taxes; $2,300 in special exemptions for the elderly and the unemployed; and Michigan’s portion of the Federal Earned Income Tax Credit, which affects 25,000 residents, including 14,000 kids
* Elimination of tax credits for the film industry, brownfield redevelopment, and renaissance zones

Republicans slashed social spending in their budget sessions. Here are some of the casualties:

* $300m in cuts to public schools and universities
* $100m in cuts for aid to cities
* $171m in cuts to the Department of Corrections
* $21m in cuts to state police
* 15% cuts to state’s environmental programs
* 48-month limit to welfare benefits, expected to kick 12,600 people off the rolls
* Monthly disability assistance cut from $269 to $200

Snyder’s justification for his titantic tax giveaway boils down to the claim that it creates jobs. This is pure flim-flam, and Snyder himself has publicly cooled down on the subject in recent weeks.

The theory that politicians can generate jobs and other benefits for wage workers by rolling back business taxes is known as supply-side economics. It was tested extensively during the Reagan administration and failed. Snyder doesn’t care. He is a businessman looking after the interests of his own kind. Keeping this in mind, let’s take a look at some of Snyder’s attacks on public schools and unions in the public sector.

Busting Unions and Public Education

While private-sector labor unions have taken a major beating in the last several decades, public-sector unions have remained relatively healthy.  They have also been reliable financial backers of Democrats.

By targeting unions like the Michigan Education Association and AFSCME, GOP lawmakers not only serve to weaken the labor movement, they also strike a major blow to their political opponents. They are doing this both through incremental attacks and outright efforts to privatize state worker’s jobs.

State prison employees are now staring down the prospect of privatized food service and even private prisons. Teachers and school employees are facing a slew of bills in the State House designed to attack teacher tenure, due process, and collective bargaining rights.
GOP lawmakers are also taking an indirect approach. Lately they have been patting themselves on the back for putting $310 million of the budget surplus back into the K-12 school fund. They are, however, tying more than a $150 million of these funds to a “best practices” requirement. These requirements bribe districts to privatize non-instructional positions and force employees to pay 10% of their healthcare.

This pressure is already starting to have an effect. Southfield and Birmingham schools  recently  voted to privatize non-teacher positions. On the other hand, the Farmington School Board just voted against privatization, accepting wage concessions that make up the shortfall. Either way, it’s win-win for the GOP.

Similar tactics are being used against municipal workers. Budget pressures are compelling many local administrations to accept privatization and healthcare concessions in order to gain access to state aid. As if these maneuvers aren’t chilling enough, the recent passage of Public Act 4 (The Emergency Manager Act) aims to take the assault even further.  It threatens to wipe out unions in cities across the state and privatize entire school districts.

The War on Local Democracy

Public Act 4 adds startling new powers to the role of Emergency Financial Managers (EFM). These managers are officials charged by state legislators to take over financially bankrupt cities and school districts. EFMs have existed in Michigan since the early eighties.

During that time, they have provoked controversy for corruption (ex-Highland Park EFM Art Blackwell is now facing 20 years in jail for embezzling more than $250,000) and undermining democratic rule, but until now their power has been limited to financial decision-making.

Snyder’s legislation gives a new breed of Emergency Managers (EM) absolute control over a troubled city or school district with no checks or balances.

Under the new law an appointed EM can unilaterally dismiss elected officials and councils without follow up elections; void previously agreed upon union contracts; close down schools at will; raise bonds without tax-payer approval; dissolve or merge existing municipalities; sell off or privatize public assets, and seize control of local civil service agencies, such as a city’s police force.

The new bill also streamlines the EM approval process, allowing the governor to unilaterally appoint an EM for a city on the brink of bankruptcy that does not pass a financial “stress test”. Snyder says the new bill needed to allow action in order to prevent a city’s financial collapse.

There are EMs in Pontiac, Benton Harbor and Detroit Public Schools. Twenty-three state School Districts and many of the state’s core cities, including Detroit, are under threat of takeover. Almost all the areas under EM threat are majority black. Tellingly, the original draft of the EM bill allowed corporations, not merely individuals, to run local municipalities.

The original language was toned down because Public Act 4, like the rest of Snyder’s program, is simply one piece of a much larger puzzle.

Putting it All Together

Terrifying as these measures are, however, they are not happening in a vacuum. They are echoed by similar battles in Wisconsin, North Carolina, Ohio, Indiana, New York, and all over the country. A recent article in Mother Jones (“Behind Michigan’s Financial Martial Law,” by Kevin Drum) makes explicit connections between these struggles and an organized effort by right-wing foundations like Michigan’s Mackinac Center and the Heritage Foundation, far right politicians and corporations like Blackwater and Wal-Mart, to rework this country’s political and economic foundations.

On an international level, Snyder’s programs are mirrored by the efforts of the International Monetary Fund to impose very similar austerity measures on Egypt and Greece, two nations that have recently broken free from long traditions of autocratic leadership.

Because of the inter-relationship of these battles, it is important to remember we are not simply fighting one man, and we are not fighting alone. Business and political elites around the world are making a power grab right now that is shaking the very foundations of what it means to be a citizen or a worker. We are knee-deep in a social crisis that will determine the fabric of our world for generations to come. Michigan is ground zero for this struggle.

One response to “Austerity Pleasures: A Look at the Snyder Budget Crisis

  1. Pingback: Michigan responds to Snyder’s austerity attacks | Critical Moment·

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