It’s no secret that most cities, counties, states and school districts in the U.S. are facing big deficits. What is less understood is the extent to which austerity cuts have become politicians’ bi-partisan response to the situation. The dramatic measures being implemented in Portland, Oregon are no exception.
By “austerity” is meant a bag of policies intent on “reforming,” that is, reducing spending by cutting jobs and public services, tearing up social contracts that workers have benefited from, and, in general, making workers and the poor do all the sacrificing to close budgetary imbalances. These austerity measures range from potential cuts to Social Security and Medicare to cuts on a local level that go after our schools, social services, parks, and infrastructure.
While this “sacrificing” is imposed on the vast majority of citizens, obscenely low tax rates for big business and the wealthy are being left in place as their profits swell and their dominance over the political system increases. To appreciate the scope of this trend, one need merely note The New York Times report that there are “nearly $1.1 trillion in annual deductions, credits and other tax breaks that flow disproportionately to the highest income Americans and that cost more, each year, than Medicare and Medicaid combined.”
The Case in Portland
Portland’s newly elected Democratic Mayor Charlie Hales has announced that there is a $25 – $40 million hole in the city’s budget. In response, he is demanding that all 27 city bureaus submit budget proposals with 10 percent cuts. This latest round follows several consecutive years of budget cuts.
The cuts already put into effect have resulted in lost jobs, underfunded services and a decline in Portland’s livability. While it is not clear yet how Hales will wield his cleaver, he is signaling that his cuts will be the deepest yet. The programs that he has already targeted — at-risk teen summer internships, job-training efforts and youth bus passes, among others — will have an immediate impact on great numbers of households, shifting the costs of these publicly funded programs onto the shoulders of families that can least take the burden.
The majority of Portland’s residents can ill afford the costs of trying to close the deficit without damaging the regional economy further. Portland’s unemployment rate is 7.9 percent. According to the Business Journal, 8.3 percent of Portland families live below the poverty level; for families with children the number is 12.9 percent, and 27.4 percent for single, divorced and separated women. If he gets his way, Mayor Hales’ austerity axe will continue to swing at the city’s most vulnerable citizens.
Portland’s top companies make hundreds of millions, if not billions, every year. In Oregon the share of total state income collected by the wealthiest 1 percent increased by 70 percent from 1979 to 2009. In contrast, during that same period, the bottom 80 percent of Oregonians saw their income decline.
In 2009 the highest effective state tax rate for corporations with profits over $10 million was less than 1 percent. For a middle income Oregon household, the average effective rate of payment was 4.1 percent.
If corporations paid the same rate of state and city income taxes that is expected of most citizens, there would be no deficit, no crisis, no need for cuts. Given the vast amount of untouched revenue tucked away in these corporate coffers, Hales’ call for public “sacrifice” to balance the city’s budget amounts to a shell game to distract people from asking, “Where is the money?”
Portland is not broke. The problem is that those with the money are being let off the hook.
In addition, Portland’s city budget is far from transparent. It is divided into a General Fund, which is where the so-called deficit is located, as well as Internal Service Funds (ISF). ISFs are unrestricted net assets of the city. They can be used for any purpose. The amount of money in this part of the budget has been steadily increasing. In 2010-2011, the ISF balance was $120.6 million.
But rather than using this money to benefit Portland’s working class communities, the City Council keeps it stashed away for pet projects to lure wealthy investors to the city. Since the ISF lacks transparency and accountability, it is difficult to determine how the money in these funds is used; we only know that it isn’t available when the tax paying public needs it.
Another way Portland’s politicians stash away huge sums to benefit big business is through the use of Urban Renewal (UR). UR requires that money be spent on development projects in a certain area. The revenue created by this development, including property taxes, remains locked up in the area for decades — from 20 to 50 years.
UR taxes in 2010-2011 amounted to $35 million for the city of Portland alone. These funds can only be spent in the UR areas from which they were collected. Consequently, while the posh UR area of Portland’s Pearl District enjoys more public funds than it needs, elsewhere in Portland school closures are looming, streets remain unpaved and infrastructure and park maintenance is done on the cheap, if at all.
Put simply, UR is a means of enriching developers and other corporate interests — like big contributors to politicians’ campaign funds — to the detriment of Portland’s working class communities. The fact that this model, which results in widening inequality, continues to be pursued by those advocating cuts to public programs could not make more clear where these politicians’ allegiances lie.
While Mayor Hales is blaming the city’s deficit on several factors, the math does not add up. When low corporate tax rates, the millions kept in shady city funds, and the revenue drain of development programs such as UR are taken into account, it becomes clear that Portland’s deficit hawks are manufacturing a crisis in order to continue arrangements where workers are left to pay for big business’ greed.
Our Priorities, Our Budget
In addition to the “I feel your pain” displays by Mayor Hales towards those affected by his cuts, he will also employ the tactic of divide and conquer. Those threatened by these cuts will be told the lie that raising revenue by taxing big business and the wealthy is off the table. “The pie is only so big,” promoters of the cuts moan, “you must decide your own priorities.” And in this way they hope to set different communities and unions against one another.
It should be clear, for reasons already discussed, how false this storyline is. While there is likely more than a little padding in upper management that can be cut, and plenty of taxes that remain uncollected, the truth is that a real solution to Portland’s deficit won’t emerge until these priorities are confronted and turned around.
What would a budget that prioritizes peoples’ needs look like? Rather than job cutting, it would fund job creation. Instead of slashing social programs, it would build a thriving and accountable public sector. And corporate interests would take second place behind the health of working class communities. A people’s budget could easily be funded if the 1 percent paid their fair share in taxes and were not given the driver’s seat in determining Portland’s development and political policies.
To change business as usual in Portland will require mobilizing an independent grassroots social force to oppose Hales’ cuts and the corporate interests behind them. It will take a unified Labor and community movement capable of expanding its goals towards winning a people’s budget.
The demands to unite such a movement must be those that the greatest numbers are willing to mobilize behind. “No Cuts! Tax the Rich!” would be a good place to start. While each union and community group has its own priorities, highlighting those which build the broadest unity in mass campaigns and rallies is the best way to bring these organizations’ specific concerns and struggles to the greatest number.
With his austerity cuts, Mayor Hales has issued a challenge to the grassroots. A unified fightback is necessary to meet it. With such a movement it will be possible to shift the political dialogue towards measures that serve the vast majority of citizens. Without it, Portland will be left with Hales’ cuts and worse.
At the same time, a big fight is gearing up as Oregon’s democratic governor has threatened cuts to public workers’ jobs and retirement benefits, on the tail of passing emergency legislation to lock in Nike’s absurdly low tax rate for 30 years. In building a citywide response, Labor and community groups will be strengthening their capacity to take on austerity at a statewide level as well.
Every city, county and statewide struggle against the corporate austerity attacks can set an example for and strengthen our ability to resist cuts to Medicare, Social Security and other socially needed federal programs. From this resistance a movement can develop with the ability not only to resist attacks — but to fight for and implement policies that benefit all working people.