China's Maritime Threat

Philippine President Benigno S. Aquino III warned Southeast Asian nations during April about Beijing's increasingly aggressive posture in the South China Sea.  The area is becoming one of the most dangerous hotspots on the planet.

   Despite talks going back to 2002, regional tensions have not only remained high but have continued to escalate.  China Brief has outlined a number of incidents. In 2009, Chinese vessels clashed with the American surveillance ship "Impeccable." In 2010, although the United States maintained an officially neutral position (but with an increased area presence,) China informed the United States that it would not tolerate what it termed America's "interference." In 2011, Vietnam accused Chinese vessels of cutting cables on one oil survey ship and ramming the cables on another. 

  Tense standoffs have occurred between Chinese and Philippine vessels, continuing into 2012.  Last month, three Chinese patrol boats confronted a Philippine naval ship near Scarborough Shoals in a dispute over fishing rights.

   A Foreign Policy report by Robert Kaplan describes the South China Sea as the "future of conflict" in the world.  The reasons are clear.  For the first time, China's land borders are secure, allowing it to concentrate on expanding its influence abroad.  The shipping that supplies a resource-hungry planet moves significantly through the region, which in itself is a future source of energy exploitation.  Kaplan notes that "more than half the world's annual merchant fleet tonnage passes through...and a third of all maritime traffic."  Indeed, more than six times the oil that passes through the Suez Canal and seventeen times that which passes through the Panama Canal transits the South China Sea's choke points.

   Beijing, thirsty for energy assets and with a newly powerful navy, maintains that it has sovereignty over almost all of the South China Sea, contradicting the claims of other area nations and in defiance of the United Nations Law of the Sea. 

   The BBC reports that Chinese officials base their claims on the explorations of Chinese navigators in ancient times, a concept not only refuted but mocked by others.  Last February, Lt. General Juancho Sabban of the Philippine Armed Forces' Western Command noted in a BBC interview, "By the same logic, Filipinos travelled to China centuries ago, so the Philippines should be able to claim some of China."

  China's claim is ironic, at best.  The last standing of the great Communist powers is using, essentially, a type of historical imperialist act that it has universally condemned in other nations to justify its own actions.

   Beijing has not been cooperative in attempts to negotiate the issue through regional talks, preferring to deal separately with each national claimant, a tactic that allows it to use armed intimidation as an effective tool. On April 28, China's General Luo Yuan said his nation should be prepared for "war at all costs" to enforce its claims, according to a commentary posted onchina.org.cn. China has rejected attempts to litigate the matter before the International Tribunal on the Law of the Sea.

  

  The problem can be seen most clearly in the heated territorial disputes between Manila and Beijing. While disagreements between the two nations have existed for some time, the rise of China's armed forces and the sharp reduction of the American Navy have transformed the problem from a political argument between diplomats to a military flashpoint between warships. As 2011 drew to a close, The Jakarta Post reported  on an Indonesia Center of Democracy, Diplomacy and Defense study noting an escalated naval presence in the South China Sea that included 27 Chinese vessels, 26 from Taiwan, two from Malaysia and one from the Philippines.

   Two particular areas, the Spratly Islands and the Scarborough Shoal, are the focus of an inflammatory disagreement between Manila and Beijing. They have, as noted by the CIA, no indigenous population, but rest in strategic waters relatively close to the Philippines. 

  As noted in an April Congressional Research Service Report written by Thomas Lum, "In 2011, Chinese naval forces reportedly harassed Philippine fishing and oil exploration vessels and erected structures in disputed waters of the South China Sea near the Philippine island of Palawan...The Philippine government has demanded that Beijing negotiate a code of conduct and settlement of claims with the principal regional body, the Association of Southeast Asian Nations (ASEAN.)"  Philippine President Aquino increased his nations' paltry defense budget (about 0.9% of GDP, according to CIAestimates,) and called for more U.S. assistance. 

   The over 100 Spratly Islands are a resource-rich region claimed in whole or part by The Philippines, China, Taiwan, Vietnam, and Malaysia. Brunei also claims some portions of the abundant fishing grounds in the area.  Similarly, The Scarborough Shoal is also a resource prize.  The Georgetown Journalhas reported that estimates of at least 7 billion barrels of oil (at least 80% the capacity of Saudi Arabia) and up to 900 trillion cubic feet of natural gas lay in the region. The Congressional Research Service report notes that the oil and natural gas reserves lie within the Philippines' 200 mile Exclusive Economic Zone, although China has also laid claims to them.   

   The Obama Administration has refused to officially back Manila's rights to the Spratlys and Scarborough Shoal, but has engaged in joint regional exercises with the Philippine armed forces (AFP) a position consistent with that of its predecessors.  At a joint meeting in Washington on April 30 that included U.S. Secretary of State Hillary Clinton, Defense Secretary Leon Panetta, Philippines Foreign Secretary Albert del Rosario, and Philippines Defense Secretary Voltaire Gazmin, Clinton stated:

   "We both share deep concerns about...recent tensions in the South China Sea...In this context, the United States has been clear and consistent.  While we do not take sides on the competing sovereignty claims to land features in the South China Sea, as a Pacific power we have a national interest in freedom of navigation, the maintenance of peace and stability, respect for international law, and the unimpeded, lawful commerce across our sea lanes.  The United States supports a collaborative diplomatic process by all those involved for resolving the various disputes that they encounter.  We oppose the threat of force or use of force by any party to advance its claims.  And we will remain in close contact with our ally, the Philippines."

  Tensions sparked by China's aggressive actions in the South China Sea have sparked a review of the inadequate strength of the Philippine Armed Forces (AFP.)   The AFP is among the weakest in the world for a nation of its size-ranked 140th in strength by the CIA. Manila's Defense Secretary Gazmin believes China has singled out the Philippines for particularly harsh treatment because of its weak military, according to a report in the Philippine Daily Inquirer. The military of its chief external opponent, China, (there are ongoing internal indigenous issues as well) is among the worlds' most powerful. As recently analyzed in The NY Analysis of Policy & Government, Beijing's maritime strength is rivaled only by the US Navy in power. China's submarine force is nearly double that of America's. By 2015, its total fleet will be larger than that of the U.S. Navy.  

  In April, Manila appealed to Washington for help in improving the woefully inadequate condition of its armed forces. Foreign Secretary del Rosario was candid in his assessment of the Philippines' inadequate military, and urged the United States to step up its military assistance.  Last month, as part of a regularly scheduled series of exercises, U.S. and Philippine forces engaged in a joint training maneuver entitled Balikatan 28.  Not unexpectedly, Beijing took offense.  

  The South China Sea will remain a dangerous flashpoint, made more perilous by the reduced size of the U.S. Navy and the inability of regional nations to counter China's military prowess.

Illegal Immigration

Illegal Immigration

    Illegal immigration is one of the most complex problems facing Americans.  Since the onset of the current “Great Recession,” the financial impact of the issue on federal, state and local budgets, and the implications for the job market, have made the topic more crucial than ever.  

The Supreme Court

    As this report goes to press, The United States Supreme Court is preparing to hear the intense conflict between the Obama Administration and the State of Arizona over that state’s 2010 law intended to combat illegal immigration.  Governor Brewer has stated she will be in attendance at the proceeding.

    The statute in question requires police to check the immigration status of individuals stopped for other reasons.  It also makes it illegal for immigrants lacking a work permit to seek employment. Supporters of the legislation point to the tidal wave of unauthorized immigrants, the failure of the federal government to provide adequate oversight of the border, and the costs of providing services to illegal immigrants.  Opponents claim only the federal government has authority in this area, and that the measure may lead to profiling of Hispanics.

    A variety of states have enacted their own measures, mostly acting out of frustration with the federal government’s failure to adequately address the issue, as well as concerns over the cost of educating and providing medical care to illegals.  According to the National Conference of State Legislatures, thirty states have considered 53 omnibus bills.

   The Mexican government has filed an amicus brief, contending that the state measure constituted “an imminent threat to Mexico-U.S. bilateral relations.”  (In May of 2010, the Obama Administration and the Mexican government issued a joint declaration “Concerning 21^st Century Border Management.”  The document, which is not legally binding, established a bilateral executive steering committee to further lawful trade, and curb the illegal flow of people and goods.)

    The Supreme Court’s ruling will probably be issued in June. Continuing its ongoing dispute with the Supreme Court, the Democrat Party is planning to contest the Court’s decision through new legislation if it rules against the White House position, according to the Washington Post. While the move is geared to shoring up support among some Latino voters, the move may backfire in the upcoming general election.  Rasmussen reports that 59% of the public supports automatic immigration checks during routine traffic stops, a type of enforcement that cannot be performed by federal authorities.

 Interestingly enough, the Obama administration hasn’t launched attacks on “sanctuary” jurisdictions that defy federal law by not reporting illegals that come to the attention of local officials.  

Statistics

  The federal Office of Immigration Statistics reports that the number of illegal immigrants has grown by 27.5% since the year 2000, jumping from 8,460,000 to 11,200,000. The number is even more significant when compared to the mere 3.5 million present in 1990.   However, since 2005, the number of apprehensions by Department of Homeland Security’s Border Patrol has declined from 1,189,000 to only 340,000 in 2011.

    In fact, border apprehensions in 2011 were at their lowest level since 1972. 86% of those caught last year were male, up from 82% in 2005.   Despite the challenge represented by these statistics, the Obama administration has requested a decrease of 4% in the budget for Immigration and Customs Enforcement (ICE).   The White House has also requested a reduction of $17 million in the Section 187(g) program, which allows Washington to authorize state and local law enforcement agencies to carry out immigration enforcement duties, as noted in testimony before Congress by ICE Director John Morton on March 8. 

  According to the Federation for American Immigration Reform, “Illegal immigration costs U.S. taxpayers about $113 billion a year…At the federal level, about one third of outlays are matched by tax collections from illegal aliens.  At the state and local level, an average of less than 5% of the public costs associated with illegal immigration is recouped through taxes collected from illegal aliens.” 

 The ongoing Great Recession has caused what will probably be a temporary suspension in the growth of the number of illegal aliens present in the U.S., as many frustrated over the lack of work opportunities have voluntarily left.

Crime and National Security Issues

 The Violent Crimes Institute calculates that 240,000 illegal immigrants are sex offenders.  Rep. Peter King (R-NY) has produced a study noting that twelve Americans are murdered each day by illegal aliens.  It has been contended that even those not personally inclined towards lawlessness are vulnerable to being forced into crime by criminals preying on their vulnerability.  Concern has been expressed that terrorists mingling in with illegals crossing the border for jobs present a significant national security threat. 

  A Heritage Foundation study concluded that “The real problem with undocumented workers is that flouting the law has become the norm, which makes the job of terrorists and drug traffickers infinitely easier.”

Health Care

   The impact on health care is a crucial part of the illegal immigration debate.  In June of 2007, a number of Congressional Representatives, including several who are also physicians, wrote to the Department of Homeland Security and the Centers for Disease Control and Prevention to express their concern over the communicable diseases illegals may carry.  Unlike legal immigrants, illegals are not subject to a health examination as part of the process for obtaining a green card.

   “It is not a surprise,” the Representatives wrote, “that the rate of TB infections is highest in the states that attract the most illegal immigrants…In addition to TB, we should be concerned about the many other diseases thought to be nearly eradicated in the United States that could be brought back through unchecked immigrants, including hepatitis B, polio, and avian flu, just to name a few…illegal immigration is a serious health threat to American citizens.”

   In 2008, an analysis by the Republican Study Committee calculated that one sixth of the total number of those without medical insurance were illegal immigrants. 

The Workforce

   Approximately 8 million illegals are in the nation’s workforce.  Philip Valentine cites a Maricopa County study performed by economist George Borjas that indicates wages for entry level workers are approximately 4.7% less due to the impact of those illegals.  Mark Kirkorian, writing in National Review, argues that there has been no proof that illegal immigrant labor has produced any net economic benefit to the nation.  He maintains that self-serving employers seeking access to labor at costs below what Americans would accept is the motive for many who continue to “turn a blind eye” to this issue. 

   Others, however, believe that illegal immigrants produce unacknowledged benefits to the nation.  Former Federal Reserve Chair Alan Greenspan’s 2009 testimony to the U.S. Senate Subcommittee on Immigration, published on the Pro/Con site, outlines this perspective:

  “There is little doubt that unauthorized, that is, illegal, immigration has made a significant contribution to the growth of our economy.  Between 2000 and 2007, for example, it accounted for more than a sixth of the increase in our total civilian labor force…unauthorized immigrants serve as a flexible component of our workforce, often a safety valve when demand is pressing and among the first to be discharged when the economy falters.  Some evidence suggests that unskilled illegal immigrants (almost all from Latin America) marginally suppress wage levels of native-born Americans without a high school diploma, and impose significant costs on some state and local governments.  However, the estimated wage suppression and fiscal costs are relatively small, and economists generally view the overall economic benefits of this workforce as significantly outweighing the costs.”   

  The Cato Institute also disputes concerns about the economic impact of illegal immigrants.  They argue that most jobs taken by illegals are unskilled, appealing only to the 7% of native-born Americans who lack a high school diploma. The organization has urged the federal government to refocus its border control efforts towards criminals and terrorists.  

Politics

  Democrats seek to leave the enforcement task to the federal government, to the relative exclusion of the states. They emphasize tougher restrictions on employers who hire illegals, and are more inclined to consider amnesty for illegals who have been in the nation for a prolonged period of time. 

  Republicans advocate far tighter border controls, and oppose amnesty.Rep. Lamar Smith (R-Texas) has objected to the Obama Administration’s “backdoor amnesty” actions.  

 Both sides have forwarded positions (for example, the various versions of the DREAM act) that attempt to address the needs of those who entered with their parents at an early age and have not known life in any nation but the USA.

Conclusion

   It is evident that the high rate of unemployment, budget deficits at the federal, state and local levels, and the threat of terrorism will continue to place America’s porous borders and the presence of a large illegal population at the forefront of public debate.

Danger At Sea

The Obama Administration responded to critics of its downsized military budget (see NY Analysis, 2/23/12) with statements that it was maintaining resources on the most likely threats, especially in the Pacific region.  It pledged to provide adequate funding both to protect U.S. interests and reassure America’s allies.  To accomplish this, the White House emphasized that the Navy would be given preferential treatment.

Concerns for maintaining the size of the fleet include not only the traditional challenges faced by America’s seagoing defense, but the highly worrisome naval power China has developed over the past decade.

Details indicate that the Navy was not spared, after all.  President Obama is calling for a 1.7% reduction from the Navy’s 2012 baseline appropriation, according to The Navy Times.  Starting with force numbers that are drastically reduced (down from 600 ships in the 1990’s to just 284 currently) the Navy will likely see further cuts in projected replacement and modernization programs. Additionally, accounting gimmicks are used that will provide “long term delays” rather than cancellation of new construction. This allows the Administration to respond to critics who say that the force has become too small by saying that replacement programs remain alive, even though they are extensively delayed. Despite assurances, the fleet size, under the current budget, could actually shrink to about 280 by 2017. 

Despite widespread agreement that a 313 ship force is the bare minimum necessary for the Navy to protect the U.S., the current budget pegs the maritime force at only 280--285 vessels through the next five years.  Even that figure can’t be guaranteed, since age, accident, or hostile action could produce losses. 16 planned ships will be cut from the five year budget plan. According to a Navy League Report, a 20% cut in the number of warships scheduled to be built is planned. Further, according to the Department of Defense, procurement of the F-35 Fighter aircraft will be reduced by “nearly 50%,” in addition to the elimination of six Marine TACair squardrons. The need to replace the Navy’s aging fighter aircraft was recently emphasized by the crash of an F-18 F/A in Virginia, a disaster that early reports indicate may be due to the advances age of the aircraft.

To soften the public relations impact of cuts to a force that even the President emphasized needed to be protected from the budget crisis, each reduction is rationalized with accounting techniques that term the changes mere delays.  Examples from the Department of Defenses’ related budget proposal statement include:

·     

           The ordering date of the planned aircraft carrier (CVN 79) hasn’t changed, but “The construction schedule will be moved back two years.”

·       Landing Craft Assault class vessels will (eventually) remain the same in number, but “procurement will be slowed.”

·       Amphibious Assault Ship (LHA) construction will be moved from FY 2016 to 2017.

·       The guided missile cruiser force won’t be cut—but nine ships will be “retired early.”

·       The development program for OHIO class subs will continue, “but at reduced levels.”

An objective analysis of the threat level justifies a fully funded Navy.  The Congressional Research Services’(CRS) recent report, China Naval Modernization: Implications for U.S. Navy Capabilities, stresses that Beijing’s maritime modernization effort “has emerged as a key issue in U.S. defense planning.  The question is of particular importance to the U.S. Navy, because many U.S. military programs for countering improved Chinese military forces would fall within the Navy’s budget.”

China’s submarine force is nearly double that of America’s. By 2015, its total fleet will be larger than that of the U.S. Navy.  Chinese naval units have already harassed US Navy vessels.  While Washington discusses how deep to cut the defense budget, China continues its pattern of increasing spending by an average of 16.2% annually, according to the Asian Defence publication. That figure may only be the tip of the iceberg. The Pentagon has charged Beijing with hiding its real military spending. The CRS noted that even “in the absence of …conflict, the U.S.-Chinese military balance in the Pacific could nevertheless influence day-to-day choices made by other Pacific countries, including on whether to align their policies more closely with China or the United States.”

China began its ambitious naval modernization in the 1990s.  Sinodefence reports that the 225,000 man “People’s Liberation Army Navy” is organized into three fleets: North Sea, East Sea, and South Sea.  Each consists of surface and submarine forces, naval aviation, and coastal defense forces.

Beijing’s effort has been successful in every way.  Powerful and effective anti-ship ballistic missiles (ASBMs), submarines, and surface ships have been developed, along with well trained, highly professional and capable crews. 

The high caliber and impressive size of Beijing’s naval force clearly indicates that its goals extend beyond mere self defense and the imposition of its claims against Taiwan.  They include  China’s expansive and controversial claims far beyond its legitimate borders, the expansion of its international influence, and the solidifying of its role as a global superpower, particularly in the Pacific, where, according to CRS, it seeks to displace U.S. influence.  The Department of Defense notes that “China’s rise as a major international actor is likely to stand out as the defining feature of the strategic landscape of the 21^st Century.”  While serving as Chairman of the Joint Chiefs of Staff, Admiral Michael Mullen  noted in June of 2010 that he was “genuinely concerned” about Beijing’s military might. 

China’s technologically advanced naval weaponry combined with its aggressive posture render  it a greater threat to the U.S. than that of the former Soviet navy.  Devices than can disable seaborne electronics from a significant distance, as well as its development of revolutionary “anti ship ballistic missiles,” combined with satellites that provide excellent targeting data, give Beijing the tools to win conflicts at sea, when combined with China’s growing conventional navy.

China has developed its naval power to achieve a number of goals.  In addition to supplanting U.S. influence at sea and intimidating Taiwan, it has committed incursions into Japanese waters, and laid claim to oceanic resources of several other nations such as Vietnam, the Philippines, South Korea and India.  Recently, a worried South Korean military official was quoted in The Chosun Iibo, noting: “We need to establish a new security strategy by looking into a wide range of military partnerships with China as well as strengthening our alliance with the U.S.”  (The China Reform Monitor  reports that China will include Leo Island, controlled by South Korea, in its regular maritime patrols, and would deploy its first aircraft carrier there in August.)

Undisputedly, America’s maritime interests and those of its allies are clearly endangered by China’s dynamic new naval might.  The White House publicly recognizes the threat, but has failed to fulfill its commitment to counter it with adequate resources.

State Deficit Crisis

Much attention has recently been paid to the out-of-control federal deficit.  But there has been a relative lack of focus on the crisis facing individual states, whose current enacted budgets account for almost $667 billion in general fund expenditures, with a collective $95 billion shortfall in 2013, as reported by the National Governors Association.

   In 2012, According to the Center for Fiscal Accountability:

   "As of March 2011, state and local government had an outstanding debt of $2.447 trillion.  Furthermore, state and local governments are facing a $3.1 trillion shortfall in projected pension spending-a shortfall of $21,500 for every U.S. household.  These liabilities are government worker pension promises that outpace the size of financial assets held by state and local governments.  State and local governments' unfunded liabilities comprise a massive 22 percent of GDP. However, the true $3.1 trillion cost of state and local government promises continues to be masked with accounting gimmicks."

   The American Legislative Exchange Council reaches a similar conclusion, stating that "Bloated state spending levels and trillions of dollars in unfunded government employee pension liabilities pose huge financial obstacles to economic recovery in the 50 states today...a vast majority of states have set themselves up to fail by spending beyond their means...Rapid growth in per capita spending, a lack of economic freedom, and weak balanced budget rules caused the budget gaps.  The recession just exposed these underlying problems...from 1985 to 2005, most state budgets doubled, and some tripled, in size. In the past decade alone, state and local budgets grew 90 percent faster than the private sector's Gross Domestic Product."

   The future for state budgets appears to be challenging. According to theStatelines report, "State of the States 2012," "As a result of last summer's deal to raise the federal debt ceiling, and the consequent failure of the Congressional 'super committee' to decide on budget cuts, states are bracing for automatic across-the-board cuts in education, social welfare and other programs for the upcoming 2013 fiscal year...More than 150 grant programs that send money to states could get cut...if...'sequestration' occurs...federal aid to states could drop by nearly $9 billion in fiscal 2013.' The Center on Budget and Policy Priorities is concerned that the conclusion of the federal stimulus program will place a heavy burden on state budgets.  A 2011 study entitled "Rich States, Poor States" stresses that "states that took federal stimulus money also agreed to 'maintenance of effort' provisions, which prohibit them from downsizing many programs going forward, compounding the problem." 

   Hovering all of the prospects for the future of state budgets is the specter of Obamacare.  The National Governor's Association believes that related unfunded mandates will impose new costs of $118 billion through the next decade.

   There are some bright spots. The National Conference of State legislaturesreports that fiscal conditions are improving at a slow pace, although tax collections remain well behind pre-recession levels. Four states, California, Missouri, New York and Washington, have reported budget gaps since the start of the prior fiscal year, an improvement over the 15 states with a similar issue the previous period.  The Rockefeller Institute reports that 45 states saw their revenues increase over the prior year.

Case Study:  New York State's 2012-2013 Budget

   In 2011, New York had the third highest cost of government per day in the nation, according to the Americans for Tax Reform Foundation.

   New York State's 2012-2013 $132.6 billion state budget, at first glance, appears to be a more rational approach to the "Empire State's" fiscal challenges than its predecessors.  It is, in fact, somewhat of an improvement, with a $135 million reduction from its immediate predecessor. A substantial part of that improvement results from the Governor's signature accomplishment, the elimination of automatic spending hikes.  And, for the second time in a row, it was completed in time, after years of embarrassment in which legislators in Albany (the state capital) couldn't come to terms until months after the legal deadline.    

   But a closer examination reveals that although some progress was made, the basic problems remain unaddressed.

   On the surface, (and widely reported in the media) the budget cuts spending.  In reality, however, the portion of spending paid for totally from instate revenue (that's state revenue minus federal aid) actually increased by 2%. 

   All parties to the agreement (and again, widely reported in the media) proudly proclaim that no new taxes are in the budget.  Unfortunately, that's inaccurate. 

   Last December, taxes on upper income earners were increased by a whopping $1.5 billion.  Even before that, New York was the worst state in the whole nation in terms of individual tax rates, and was also one of the five worst states for tax increases in the 2003-2010 period.   (New York already had the highest top marginal personal income tax rate in the nation, at 12.62%, and the worst economic outlook in the nation, as reported by the American Legislative Exchange Council) Its' major urban center, NYC, even has its own local personal income tax in addition to that imposed by the state.  There is, of course, a tendency to say that wealthier individuals can afford to pay the extra charge.  The problem is, they don't have to.  Many will "vote with their feet" and simply move to a lower tax state. From 2000-2009, it was the biggest loser in migration of all 50 states. As a result, New York has been losing Congressional representation.

  The state's onerous individual taxes are matched by the highest-in-the nation corporate tax rate of 15.95%, reports A.L.E.C.

  Political pandering is present in the budget.  One unacceptable gimmick relied on is the deferring of pension costs, in the indigestible amount of over $780 billion, for a decade.  This is an example of some Albany's most irresponsible practices.  It does, however, allow legislators to keep public service employee unions at bay-and not coincidentally, prevents those unions from attacking incumbent legislators.

   To gain the support of New York City's Mayor Michael Bloomberg, who has been generous with contributions to both Democrats and Republicans, funds are dedicated to a so-called "Close to home" initiative that allows NYC to take control of at-risk youth; currently, these young people are housed at less expensive upstate sites.  There is no convincing explanation of what benefits this provides, other than appeasing the mayor and other local NYC politicians.

  Education spending is increased, despite the fact that New York already spends far more per-pupil than any other American state.  According to the latest available statistics, Albany and local budgets provide $18,126 per student, dwarfing the national average of $10,499. Unfortunately, for all that extra funding (even accounting for the state's higher cost of living) there is no indication that New York students' dismal performance has benefited. One unacceptable gimmick the budget relies on is the deferring of pension costs, in the indigestible amount of over $780 billion, for a decade.  This is a throwback to the some of the worst practices Albany has used.

   

   Despite New York's precarious economic condition, Albany continues to use taxpayer dollars to fund "pork barrel" projects (as reported in The Wall street Journal) and legislators continue to use taxpayer dollars in "official" newsletters that amount to little more than thinly veiled campaign literature.

Remedies

   It is manifestly evident that states cannot continue on the path that led to their current precarious position.  The American Legislative Exchange Council notes that a number of states have "reset" their budgets to 2007 or 2008 levels to accommodate the new financial reality.  Both liberal and conservative legislators acknowledge that fiscal solvency cannot be achieved with business as usual spending, particularly in the area of state employee costs. 

   The Heartland Institute is advocating a 10 point program to address fiscal problems in the states:

1. 1.     Keep taxes low.  The evidence is clear and has been for many years: High taxes hinder economic growth and prosperity.
2. 2.     Don't penalize earnings and investment.  Taxes on earnings and investment income are particularly harmful to economic growth.
3. 3.     Avoid 'sin' taxes.  Taxes on specific goods and services are often unfair, unreliable and regressive.
4. 4.     Create a transparent and accountable budget.  Focus attention and resources on providing those services that are the core function of state government.
5. 5.     Privatize public services.  Privatization is a proven way to reduce government spending while preserving or improving the quality of core public services.
6. 6.     Avoid corporate subsidies.  Subsidies to corporations and selective tax abatement are questionable politics and bad economics.
7. 7.     Cap taxes and expenditures.  A tax and expenditure limitation protects elected officials from public pressure to spend surplus tax revenues during good economic times.
8. 8.     Fund students, not schools.  States and cities that have experimented with school choice have seen gains in academic achievement.
9. 9.     Reform Medicaid programs.  Spending on Medicaid can be brought under control without lowering the quality of care received by Medicaid patients.
10. 10.  Protect state employees from politics.  State and local government employees should be prohibited from deducting funds used for political purposes from the paychecks of public workers.

   For far too long, state governments have employed every accounting device to provide popular but unaffordable benefits and services.  Governors and legislators have placed their own careers over the fiscal health of their jurisdictions. Their ability to do so any longer has come to an end, and painful but practical steps must be taken.