Will the recent promising trends in some of the leading economic indicators fail to provide practical and political relief to the American people? Unfortunately, it's easy to visualize that exact scenario.
Look at state governments, from California to Alabama. They are leading an emerging trend that finds statehouses looking more like poor houses. As the federal government tries to fight terrorism and rebuild Iraq, the burden of providing essential services to Americans is increasingly falling on the states. More and more, those states can't pay for them. As governors and legislators face elections next year, many of them are confronted with unpleasant and unpopular budget solutions, such as tax hikes or cutting critical services like health care, prisons, transportation and education.
Politically the problem is simply stated, though not so simply solved: polling numbers show neither higher taxes nor fewer services is acceptable to the public. That's because too many people have come to view government as the ultimate guarantor of everything from a good education to daily spending money.
This may sound like the same old shrill conservative critique of "give away" government as the bane of modern public life. Even so, it's today's reality, as is the fact that many voters who call themselves conservative or moderate expect these services as much as anyone. That's what creates the potential for the public to be less understanding of a statistically valid "economic recovery" than might normally be the case.
Keep in mind that it might take months of economic recovery before state coffers feel the boost. As a result, many governors and state lawmakers in the coming year will avoid even the appearance of an unpopular tax or fee increase and instead find ways to "cut waste" from their budgets. Inevitably they will discover, however, that one person's waste is another's fiscal sacred cow.
For example, many high growth states have allocated funds to purchase and protect land as an effort to preserve pristine real estate, or "green space." Some conservatives consider this to be a non-essential service. They should think again. Polling consistently shows that among moderate Republicans, especially women, preserving the environment is one of their top three public policy priorities. Some elected officials next fall may avoid being accused of raising taxes, only to be accused of voting to destroy the environment.
Of course this kind of give and take goes on all the time. But now, the stakes are much higher because so many states have spent the past decade or so inventing new and creative ways to spend cash. Today, they are each facing a budgetary crisis. Not just a crisis in the sense that every little daily problem is declared a "crisis" by the news media, but a genuine crisis, with layoffs of government employees, early release of prisoners, infirm seniors denied nursing home care, and even elimination of benefits for severely ill children. (Or just tax increases.)
It's all enough to make the most conservative heart bleed -- and that's exactly the point. This time next year, unemployment may be down and corporate capital expenditures and the stock market up, but Americans could still be feeling as if happy days are not yet here again. Not if government workers are idle, state colleges and universities are turning away student applicants, long lines are forming for government services like driver's license renewals, and everyone has a sob story on their lips.
If so, it won't be just Alabama's Gov. Bob Riley and California's Gov. Gray Davis feeling the heat. Every incumbent will have a chance to draw the public's ire. And they will have no one to blame but themselves or their predecessors for decades of increased public expenditures designed to attract votes, not to solve problems.
President George W. Bush could end up suffering from a case of misdirected ballot box anger next year if the impact of his tax-stimulus package and other economic incentives are muted by a delayed recovery at the state and local level. Make no mistake: The political impact of Bush's request for $87 billion to stabilize and rebuild Iraq will influence voters, unless things are looking up on the home front when November 2004 rolls around.
Considering how risky it is to sit back and hope for the best, the White House could benefit from working with the states as they approach their most challenging political season. Bush and Congress should also think twice about piling on more federal deficit before it causes a similar fiscal crisis in Washington.