A long-term outlook

Thursday, Feb. 10, 2011 | 2:01 a.m.

With states facing severe budget problems, President Barack Obama is offering a plan to help those that borrowed billions of dollars to pay unemployment benefits over the past few years.

According to the White House, the president’s proposed budget will include a provision that would waive interest payments on the loans, set to begin this year, and push back a scheduled increase on the unemployment tax.

The president’s plan also would cut the federal portion of the tax starting in 2014 and change how the tax is levied. Currently, the tax is levied on the first $7,000 of a worker’s wages, a threshold that hasn’t been changed since 1983. Under the president’s plan, taxes would be levied on the first $15,000.

Republicans in Congress scoffed at the plan because they say it would increase taxes. Sen. Orrin Hatch, the top Republican on the Finance Committee, hyperbolically labeled it a “job-killing proposal.” Rep. Dave Camp of Michigan, chairman of the Ways and Means Committee, said the plan “isn’t going anywhere in the House.”

No matter the Republicans’ knee-jerk opposition, the plan will likely be entertained, especially as Republicans in Congress start hearing from their colleagues back home. Governors, including many newly elected Republicans, face huge budget problems. The president’s proposal would provide some relief. During the economic downturn, 30 states, including Nevada, borrowed more than

$42 billion. Nevada took out loans of more than $676 million and over the next two years will owe $66 million.

That obviously wouldn’t solve a budget shortfall estimated at $2.5 billion, but it would soften cuts somewhere in the budget. State leaders, including Gov. Brian Sandoval, are waiting for details of the president’s plan before weighing in on it, but it obviously is attractive. It not only helps states’ budgets, but it should provide some short-term relief for employers as well. Iris Lav, a senior adviser at the nonprofit Center on Budget and Policy Priorities, co-authored a study that concluded that the president’s plan to delay the scheduled tax increase would save employers up to $7 billion over the next two years.

“The near-term problem is the economy is not yet OK,” Lav told The New York Times. “And both the interest payments and the principal repayments are cutting into employers, and it makes great sense to postpone them. The larger question is how you get states to solvency.”

Indeed. The temporary relief could be useful, but it can’t be seen as part of a budget “fix” as federal stimulus money was. There won’t be any simple fixes in this budget cycle, and that will leave leaders with some very difficult choices.

For too many years in Nevada, governors and lawmakers have balanced the books using short-term “solutions” and budget maneuvers just to get through a two-year budget cycle. In the meantime, the state’s problems, like the broken tax system, have gone unaddressed and, as a result, education and other important services have gone unaddressed. The state can’t do that anymore without jeopardizing what services it has.

The governor and the Legislature shouldn’t be content to merely get by cobbling together a budget, whether using the president’s plan or any other short-term approach. It’s time to take a look at the bigger picture, fix the problems and lay solid plans for the future.