Maine’s economy is slowing, ala the national economy, and revenue forecasters this week again predicted doom. The state budget deficit is now estimated at $200 million, because economic uncertainty will reduce tax collections.

In response to the national slowdown, the federal government is cutting checks. In Augusta, the response is cuts – whenever and wherever possible – to balance the budget with the forecasts, as mandated by the state constitution.

Yet Maine’s spending didn’t trigger this budget problem – shrinking revenue did.

And although the state is often accused of spending wastefully, its biggest cost drivers are beyond its control: the increasing share of local education funding, as approved by citizen initiative, and myriad mandated programs.

There are two things the state can do: cut spending, or raise revenues. This could come from a tax increases, which is political hari-kiri. Reducing Maine’s tax burden is already cited, according to the most recent “Measures of Growth” report, as critical for the state’s economic future.

Raising taxes in a downturn would just be nutty. It seems Gov. John Baldacci thankfully agrees.

Unless, that is, a tax increase comes, part and parcel, with permanent spending cuts and a real, comprehensive tax reform package. But getting one out of three will be hard enough.

So what about a homegrown economic stimulus package?

Not something that mirrors the federal government’s, though. Maine doesn’t have the funds to cut checks back to residents, otherwise the budget deficit would grow deeper.

Rather, a definitive policy proposal of blended regulatory changes, tax holidays and perhaps tax decreases – aimed at warming Maine’s business climate – could be the perfect corollary to Augusta’s tortuous budget review.

The governor’s aid to the forest products industry is a model. There seems little difference between accelerating fuel reimbursements and the federal economic stimulus – both put money into the pockets of those who will spend it.

Baldacci and others have said all options are on the table in this budget balancing. This shouldn’t mean everybody must sit on one side, however.

All that’s emerged from the Capitol is how hard these cuts will hit, and how difficult they will be to find. The language has been doomsaying: House Speaker Glenn Cummings used the adjectives “devastating,” “painful” and “serious” in a recent statement. Senate President Beth Edmonds has said cuts will strike bone.

With all this emphasis on cuts, the focus on enhancing revenue has become fuzzy. If tax hikes are out, a Maine-based economic stimulus package could, at least, reduce long-term harms the budget cuts promise to deliver.

Such a stimulus might mean revenue reductions, a counterintuitive move in a crisis of shrinking revenues. But so is is raising taxes in a down economy, when tax burden is already crippling.

So, which is the lesser of two evils? Lawmakers must find out.


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