In the last week, even as the bells began their mournful knell on Patriot's Day in Boston and just before a scene of absolute devastation ripped apart the community of West, Texas, Rep. Devin Nunes, R-Calif., and Messieurs Erskine Bowles and Alan Simpson separately proposed threats to state and local tax-exempt municipal bonds.
Congressman Nunes introduced the Public Pension Transparency Act, under which non-compliance would lead to the loss of tax-exemption; Messieurs Simpson and Bowles, the former co-chairs of the President's commission, last week released a new debt/deficit reduction plan, under which all state and local bonds would be taxable.
The timing of these twin proposals could not have been worse.
As the cities of West, Texas and Watertown, Boston and the other cities and towns along the route of the Boston Marathon contemplate recovery, mourning the hundreds of victims, and the costs of replacing emergency vehicles and lost heroes; the proposals threaten to increase certain costs on the taxpayers of those communities — not just costs to replace the fire, police, and other emergency responder vehicles that were destroyed, but also significant new costs on the provision of water critical to putting out fires, not to mention fire stations, jails, prisons, schools, school buses, fire engines, police cars, ambulances, universities, bridges, roads, airports, and wastewater treatment plants to comply with the unfunded federal mandates imposed by Washington.
In Texas, Governor Rick Perry described West as an area of "absolute devastation," warning it would be in for a long recovery. Through the night and much of the following day, the authorities removed bodies from the rubble — most of them firefighters who, much like public responders in Boston, ran to the center of danger, rather than away. The explosion took not just the lives of 12 firefighters who ran towards the center of the fire to save others, but also 50 homes, three schools, 60 percent of the city's fire engines, almost all the city's water lines, 20 school buses, and a nursing home.
There is no option but to replace the schools, water lines, fire engines, and school buses. The lives of Americans, every day, are entrusted to these most basic and critical of services — none of which are provided by Washington or the federal government.
What we need in Washington is recognition that we are all part of one country. There needs to be a clear — and respectful — recognition that the debts and record levels of federal bond issuances or borrowing by Washington, amassed in its last decade, cannot and ought not to be repaid on the backs of the bonds that are critical not just to the country's public infrastructure, but also to its capacity to protect and respond whether to Katrina, to Sandy, to foreign terrorists, or to the events of the last week. The President should ask the Bipartisan Policy Center to convene a panel of is bipartisan leaders — leaders who have served at every level of government in our unique system of federalism in this nation — to make recommendations for a deficit/debt reduction proposal for America, not for the federal government at the expense of the country.
It would be critical, in the wake of rising water levels on the East Coast and droughts in the West and South, that such a panel be charged with the responsibility, going forward, of how we, as a country, will be able to finance the kinds of infrastructure that might increasingly be necessary to address not just incidents such as the country has just experienced, but also the longer term challenges that rising seas and prolonged droughts might mean to America. It is especially critical that such a panel be composed of leaders from all three levels of government and those with federal and local government experience, like former Senator Pete Domenici — an expert not just in the federal budget arena, but the former mayor of Albuquerque.
The bombs that wrought such agony in Boston exploded on Patriot's Day — a day marked to the memory of our forefathers, many of whom met in the City of Philadelphia for the great debates that led to this nation's unique system of dual sovereignty and federalism. One of the fiercest debates was waged over whether to give a new federal government the authority to tax. There was an understanding of how critical federal revenues were to protect the emerging nation from foreign armies and navies; there was fear, at the same time, that a future federal government might someday choose to tax the essential activities of state and local governments. That fear, or apprehension, appears to have been well founded.
The physical parts of America — its public infrastructure; the innovative part of America — its human infrastructure — are financed in great part by public capital borrowing of states and local governments to finance schools and public universities, fire stations, drinking and wastewater infrastructure, roads, bridges, airports, ports. This state and local debt is profoundly different than the debt issued in ever increasing amounts by the federal government every day to finance its operating debt. State and local debt is fundamental to the future of the United States — and, as we have seen with such deep sorrow, to the lives of so many of its citizens.
Unsurprisingly, neither Rep. Nunes, nor Messieurs Bowles and Simpson proposed eliminating the federal tax exemption from state and local taxes on the interest of the seemingly unrestrained issuance of federal bonds. Coming just a week after the christening and dedication of the USS Arlington, the newest ship in the United States Navy — named to honor not just the victims at the Pentagon on 911, but also the firefighters, police officers, and emergency responders from Arlington County, Va., who commanded and led the extraordinary response to the terrorist attack on the United States — it would seem that a critical recognition by bipartisan leaders in the House and Senate, together with the President, would not only be to announce the appointment of a new commission to examine critical infrastructure financing for our country, but also to recommend new laws so that the President and Congress are required to analyze and understand the potential impact of proposed federal tax law changes on the nation's states and local government taxpayers and services before their adoption.
That, at least, would be a fitting recognition to those few who ran towards, rather than from, danger.
Frank Shafroth is director for State and Local Leadership at George Mason University.
