Listen up, everybody. This is going to get a little complicated.

It’s crunch time on this budget-tax stuff, and here’s the lay of Vermont’s fiscal land:

–The House of Representatives proposes minimal cuts in a few social programs,  a small income tax surcharge ,and a few more new taxes;

–The Senate proposes a little more in the way of cutting, and then raising $24 million by raising some income taxes (while cutting others) and raising “sin taxes” on alcohol, tobacco, and satellite television service (not heretofore considered a sin, but it’s a new world).

–Gov. Jim Douglas proposes deeper cuts and no – as in zero, zip, nada, bupkis – in the way of any and all tax increases.

Or as his Secretary of Administration, Neale Lunderville, said, “I am firmly unconvinced that we need revenues to address the challenges that we have.”

Not much ambiguity there. But the Democrats who are in charge of the Legislature have their doubts. Don’t listen to what the Republican governor says, they say; instead, add up his numbers. The numbers point to a big tax increase, though very conveniently for Douglas, it wouldn’t be an increase in state taxes. It would be an increase in local property taxes.

Not if you would do what we suggested, say Douglas, Lunderville, and the rest of the Administration.

Yeah, but what you suggested is not going to happen and was never realistic to begin with, so the result of your policies will be a big property tax hike, say the Democrats.

OK, the exact words in those previous two paragraphs were never uttered by either the lawmakers nor Administration officials. But in effect that’s what they said, and it’s worth examining who has the better case.

Maybe both?

Or maybe neither. It sort of depends on one’s assessment of the relative impact of taxes, layoffs, social programs, and school spending.

Today’s account will not be comprehensive, because a comprehensive account would be as long as War and Peace and be much less interesting. So we won’t get into whether raising the auto registration fee is really a tax increase ,or even whether cutting state aid for town road work is a de facto property tax increase. (It is, but here Douglas and the Democrats seems to be thinking alike). Instead, we’ll concentrate on where the big bucks are – school spending.

In his budget address last January, Douglas proposed paying the annual teacher retirement contribution ($40 million in Fiscal Year 2010) from the Education Fund, instead of the General Fund, which had been financing the retirement plan since its inception. On top of that, he proposed shifting another $23 million from the General Fund to the Education Fund. (No, he didn’t arrive at that figure arbitrarily, but explaining how he did it would take too long here; the curious can find his budget address via his web site).

That’s still the Administration position. And according to the most recent assessment of the Legislature’s Joint Fiscal Office, “these proposals would

increase education property taxes by $63 million in FY2010.”

At last count, every $8 million represented a penny on the property tax rate. Adding $63 million of tax obligation to the Education Fund could cost the owner of a typical $200,000 home about $150, almost surely more than that owner would pay under the House income tax surcharge.

But that’s only because the Legislature refused to do what Douglas asked it to do last winter, which was to force all the state’s school districts to slash spending.

Again, that’s not exactly the way Douglas or his associates put it. What the Governor proposed last winter was that schools spend no more per pupil next year than this year. Considering that the number of pupils statewide is going down, that would have meant deep budget cuts.

But in an interview yesterday, a candid Lunderville came pretty close to acknowledging that the plan was for the state to give the districts little choice.

“The Governor’s plan was not predicated on the assumption that the school boards would voluntarily make the cuts,” Lunderville said.

Instead, he said, the state would require the school districts to “level fund in Fiscal 2010 “based on the (number of) students they’d have (next school year).” The state, Lunderville said, would be “imposing a measure of fiscal discipline above what many of the districts were already doing.”

Had the Legislature agreed to force these budget cuts (and a few other fiscal changes), he said, the state would have been able to shift that $63 million into the Education Fund without causing a property tax increase.

But the Legislature did not agree. In fact, the Legislature never really took the “level-funding” plan seriously. Neither, it seems, did anybody else. The school boards did not heed Douglas’s suggestion to delay finalizing their budget proposals. They presented them on time to the town meetings, where almost all of them were approved. Essentially, the governor  called for a major change in the way the state financed its schools, and the state…well, it didn’t reject the change, as much as it paid it no heed.

Nor did Douglas do much to try to get anyone’s attention. He got the State Board of Education to endorse his plan. But most people (perhaps including most educators) are barely aware of the State Board. Its statement got a one-day headline. Aside from that, the Governor mounted nothing like a political or public relations campaign designed to put pressure on the Legislature, the school boards, the teachers union, or anyone else.

Raising the question of whether even he took his own plan all that seriously.

But he hasn’t given up on it. In fact, a few weeks ago, Lunderville said, the Administration presented its “Plan B” to the Legislature, adding that “to date, they haven’t’ taken it up.”

Perhaps that’s because the lawmakers don’t consider it much different from Plan A.

“It’s an extension of the original proposal of shifting teachers retirement to the Education Fund, said Rep. Mark Larson,  the Burlington Democrat who is Vice Chair of the House Education Committee.

The difference, Larson said, is that now Douglas would apply $38 million of federal stimulus funds “to offset some of the costs so that it limits the impact on the property tax.”

But limiting is not the same thing as eliminating, Larson said.

“Based on the (school)  budgets that we were passed, we  can’t shift (teacher)retirement (payments) into the Ed Fund without  raising property taxes.”

Whoever is right about the numbers, perhaps it is unfortunate that more people, perhaps including Douglas, did not take the school spending problem seriously. Oh, both sides took it seriously enough as a political opportunity. But had they taken it seriously in detail, they might have dealt with some difficult questions instead of ignoring them.

Starting with the question of whether the per-pupil spending freeze was the best – of even a rational – mechanism for judging how and when schools should restrain their costs. Then continuing to the question of  whether school spending is “continuing to grow at unsustainable levels.”

That’s Lunderville’s description, so it isn’t objective. But neither can it be casually dismissed. Vermont schools are expensive. They’re also good, by all the usual measurements, so maybe they’re worth it. But as Douglas said in his January speech, it’s a little hard to explain how the number of teachers kept going up as the number of pupils kept going down.

Until now. This year, there are fewer teachers in the state’s schools than there were last year. OK, it’ a minimal decline. A whole drop of ten (count ‘em 10) full-time equivalent teaching positions. But Jill Remick, the spokesperson for the State Education Department, said there would be another decrease next year and probably on into the future.

Lucky Vermont. Maybe it never will have to take the matter seriously.

Meanwhile, one way or another, expect a tax increase.

Beware! Dangerous rhetoric ahead.

Subject: health care for the poor and near-poor.

Prospects: More and more over-heated rhetoric ahead, at least until a State budget is approved.

Possible side effects for innocent bystanders: drowsiness, dyspepsia, confusion. Sometimes ignorance.

This rhetoric will come from both sides of the political spectrum; from conservatives warning that the state budget must be trimmed, from liberals warning that the proposed trims will cause unacceptable human suffering.

Both sides could be right.

Or, just as (more?) likely, both sides could be wrong.

Let’s examine some of the rhetoric we’ve already heard. From Richard Davis, the executive director of the Vermont Citizens Campaign for Health, the cuts in health care services proposed by Gov. Jim Douglas would cause “more people to suffer and die.”

But perhaps the only alternative to these budget reductions is higher taxes, and Douglas’s Administration Secretary, Neale Lunderville said. ‘The governor does not believe Vermonters have a capacity to pay more in taxes.”

For now, Davis’s statement can be neither confirmed nor refuted. If the cuts are made, it should be possible to determine after a year or so whether they actually killed anyone. But it’s hard to see how and why they would. Suffering is quite a bit more subjective; one person’s suffering is another’s inconvenience.

Lunderville’s statement is no doubt true, but meaningless. Gov. Douglas has made his belief abundantly clear. But belief is not evidence. There are tens of thousands of affluent Vermonters and thousands of downright rich ones who no doubt have the capacity-though perhaps not the willingness-to pay higher taxes.

So far, then, we have learned nothing, except that people on both sides of this debate overstate their case.

Somewhat milder opposition to health care cuts came from Peter Sterling, executive director of the Vermont Campaign for Health Care Security, who worried that if  low-income Vermonters had to pay more for their own premiums and health care services, many of them would decide they couldn’t afford it, and drop health insurance altogether.

“No one drops their health insurance because they don’t like the benefits,”  Sterling said. “They drop their insurance because they can’t afford it anymore.”

True, but at the risk of seeming harsh, that’s their choice. People who “can’t afford” higher premiums or higher co-pays when they visit the doctor can’t afford it because they’ve chosen to live in a certain house, drive a certain car, and engage in other pursuits that leave them  without enough money for health care. They could find a cheaper apartment, drive a cheaper car, do less of whatever else they are doing so they could keep their health insurance.

It isn’t as though Douglas is proposing huge increases in premiums or copays. For children and the poorest adults, monthly payments would return to their 2007 levels. There are no records of Vermonters starving in the streets or dying for lack of health care two years ago. Some premiums would rise as little as four dollars a month; others as much as $40 a month.

That won’t be easy for some people. But to claim that they absolutely can’t handle it seems exaggerated. The same is true for the slightly better-paid people who are in the Catamount Health program

The fact is that there are two-bedroom apartments  available (from a quick Internet search, meaning cheaper ones are probably there for the more determined seeker) in the Burlington area for $750 a month. They’re probably not  very nice apartments, but nobody really needs a very nice apartment. With that apartment and an old car with a low(or no) loan, a $30,000-a-year family of three (that’s about the poorest not eligible for Medicaid) can pay several hundred dollars a month for health care and still have almost $1,000 a month for food and other necessities. Not much, but it’ll do. Those who choose to spend the money on something besides health insurance, have…well,  so chosen.

OK, the previous four paragraphs do not simply seem harsh. They are. And they do not apply to all those recently laid-off people who had insurance and a house and a car and their other pursuits ,and were going about life quite responsibly, only to find themselves out of work and uninsured at about the worst possible time to try to sell a house and move to a cheaper place.

The point here is not to endorse Douglas’s proposed cuts. It’s to caution against accepting any faction’s rhetoric at face value. These cuts may be a bad idea. They are not likely to kill anyone. Nor will they actually force anyone to drop his or her health insurance.

On the other hand, they may be very bad for the state’s economy. An analysis of 29 studies in 23 states (not including Vermont) by the Henry Kaiser Family Foundation found that cutting Medicaid spending “has an impact on the larger state economy” which leads to “declines in economic activity” in the state.

The analysis doesn’t claim to be conclusive proof. But the studies it cites are from prestigious universities, business schools and journals. Besides, it makes sense. Medicaid effectively gives money to poor people. And as the late comedian Pat Paulson noted, “if you give money to poor people, they’ll just use it to buy food and clothing and pay the rent.”

In other words, they’ll consume more, just what the economy needs right now. Cutting health care for low income people means giving them  less money. So they’ll consume less.

Of course the alternatives proposed by health care advocates-such as a one percent income tax surcharge on those earning more than $500,000 a year-would also take money out of the private economy where it could be used for consumption. But at that level, a lot of money is saved, not spent. At times, encouraging more saving is desirable. In a recession, consumption is key.

The proposed health care cuts might do less harm to the people directly affected than one side’s rhetoric claims, but more harm to the economy-and therefore to the taxpayers-than the other side’s rhetoric would lead one to believe.

Hidden amidst the stilted language of government budget-cutters in Montpelier Tuesday, along with the moaning and groaning—some of it legitimate—from people who will suffer from those cuts was some real news. But you won’t see it in the morning papers or on the evening TV shows.

Here it is: This liberal state—sometimes called the most leftward in all the land—is governed by two center-right parties.

This isn’t necessarily undesirable; center-right policies have their claim to wisdom.

But it’s a surprise, considering Vermont’s reputation as a hotbed of liberalism, sometimes even “the Peoples Republic of Vermont,” in semi-jest from both left and right.

In a real “peoples republic” (which does not mean China) the government does not raise the price of college for middle-income students or reduce the quality of mental health services for the poor without at least looking into the possibility of selectively raising taxes or fees.

Again, there is no suggestion here that the budget cuts are bad policy. Many of them are quite reasonable, even for liberals. Taken as a whole, however, they are not liberal policy. Not even center-left policy.

Raising this interesting question: What happened to the institution that supposedly supports and pursues center-left policies? You may have heard of it, especially because its adherents hold four of the six statewide offices and dominate the Legislature. Not only that, but its presidential candidate whumped his opponent but good in Vermont just a few weeks ago.

Yup, it’s the Democratic Party. The party of FDR, HST, JFK, LBJ, and HHH. Not one of whom would have stood by and allowed cuts in legal assistance for the poor, or weaker enforcement of human rights violations, or spending less on services for sick children without saying—no, without proclaiming—‘Wait a minute! There must be some way we can find some money here’

That Democratic Party lives, just not here. We know that because just next door, in New York, Gov. David Patterson is an actual Democrat with budget problems as severe as Vermont’s, with a $15 billion deficit looming for next year. Like Vermont’s Republican Gov. Jim Douglas, Patterson has proposed severe budget cuts. But he would deal with more than 25 percent of his projected shortfall with $4 billion worth of tax and fee increases.

Whether Vermont should follow that course is a subject over which reasonable people may differ. But if any of those reasonable people were Democrats, you’d think that a few of them would be taking that side of the debate.

Debate, however, seems to be something Vermont Democrats avoid, even when most of the evidence is on their side, or would be if they had a side.

For instance, in explaining why no tax hikes should be considered, Neale F. Lunderville, Douglas’s Secretary of Administration, asserted that “economists widely agree that tax increase during challenging economic times serve only to slow recovery.”

Well, sort of. What economists more “widely agree” on is that while tax increases are the second worse thing to do in a downturn, they are not as bad as cutting the budget and laying people off .

Just as Vermont is doing, without a peep from a leading Democrat.

There are economists who disagree with the general consensus, and who think raising taxes is worse than cutting spending. They could be right. But they are not Democrats. They are the most conservative Republicans. Even the center-right economists tend to agree with Democrats on this matter.

Among Democrats, only former State Rep. Paul Cillo, now head of Public Assets Institute, the liberal think tank he started after he left the Legislature, has dared to suggest that the state consider selective tax increases on upper-income earners. So have two writers on the Progressive Party’s “Prog Blog,” Burlington Mayor Bib Kiss and public policy analyst Doug Hoffer. But they aren’t Democrats.

(Well, OK, Treasurer Jeb Spaulding has proposed higher fuel taxes to finance road and bridge repairs. But that’s more of a user fee than a tax).

It’s true that on social issues Vermont effectively has two center-left parties, with few leading Republicans spending much time worrying about abortions or embryonic stem cell research or trying to roll back the state’s Civil Unions law. But when it comes to the fundamentals of governing—the role of the state in guiding the economy and providing basic social services, Vermont’s leading Democrats have converted; they are now Republicans.

Perhaps they are just being prudent. Any suggestion of tax hikes is politically risky. But nobody has taken a poll to see whether most Vermonters would consider some selective revenue hikes or borrowing to soften the impact of budget cuts. They accepted that path when Republican Gov. Richard Snelling chose it in 1991.

Even with the political risk, the behavior of the state’s Democrats leaves us with this question: If the Democratic Party will not stand up for poor, sick children, what’s the point of having a Democratic Party?—Jon Margolis