Budget Votes Will Renew ‘Scarcity’ Debate

Wisconsin State Capitol. Photo by Mariiana Tzotcheva.

The debate over what famous UW-Madison alum Matt Desmond calls “scarcity diversion” starts Tuesday in the state Capitol when legislators begin drafting the next two-year state budget.

Desmond, the Princeton University sociologist whose two books — Poverty, by America, and Evicted — are national best-sellers, earned a doctorate from UW-Madison in 2010.

In Poverty, by America, Desmond explains his “scarcity diversion” theory this way:

“Our institutions have socialized us to scarcity, creating artificial resource shortages and then normalizing them…Consider how a scarcity mindset frames so much of our politics, crippling our imaginations and stunting our moral ambitions.

“Let’s call it the scarcity diversion. Here’s the playbook.

“First, allow elites to hoard a resource like money…Second, pretend that arrangement is natural, unavoidable – or better yet, ignore it all together. Third, attempt to address social problems caused by the resource hoarding only with the scarce resources that are left. So instead of making the rich pay all their taxes, for instance, design a welfare state around the paltry budget you have left … Fourth, fail. Fail to drive down the poverty rate [or] build more affordable housing. Fifth, claim this is the best we can do.”

Why is Desmond’s book timely for leaders in the Capitol? Because the Republican-controlled Joint Finance Committee starts voting Tuesday on the 2023-25 state budget, which will include spending down the record $7 billion surplus. With both sides — Democratic Gov. Tony Evers and Republicans who control the Legislature — calling for part of the surplus going to cut income taxes, how can that budget include a tax cut and meet social needs? Will the tax cut be so large it will create – to use Desmond’s term – a “scarcity” in what’s left over?

Evers wants to spend $1.2 billion on a “middle-class” tax cut. Senate Majority Leader Devin LeMahieu last week said Republicans will include a much bigger tax cut that benefits all taxpayers.

If Desmond still lived in Wisconsin, here are three budget decisions he’d be watching:

First, how much will Republicans spend on mental health? Evers wants $500 million, defending that ask this way: “The state of mental health in Wisconsin is a quiet, burgeoning crisis that I believe will have catastrophic consequences for generations if we don’t treat it with the urgency it requires. Mental and behavioral health is as much a health issue as it is an economic one: it affects kids in the classroom; it affects workers being able to join and stay in our workforce; it affects whether folks are able to stay in safe housing or have economic security; it affects folks’ ability to take care of and provide for their family and loved ones.”

Second, will Republicans approve any new funds to help ease the state’s affordable housing crisis? Evers wants $350 million, justifying it this way: “We’re creating a new Affordable Workforce Housing program with a $150 million investment into local communities to maintain and develop workforce housing across our state. We can expand housing options in our communities by renovating and restoring housing….So, we’re investing $200 million into renovating and restoring existing residential properties, including providing low-interest and forgivable loans to help working families update and remediate lead in their current homes.”

Third, will Republicans boost the Earned Income Tax Credit (EITC) that helps low- and middle-income workers with children? Evers wants a dramatic, $124-million increase in EITC benefits over the next two years.

Desmond calls the EITC “our biggest antipoverty program for the working poor.” But he also criticizes it, calling the EITC a “generous handout to corporations…whose low wages are subsidized through the program.”

“Walmart,” Desmond explains, “has established initiatives to help their employees claim the EITC and has supported legislation that requires large employers to notify their workers about the benefits.”

Capitol leaders must be careful with the $7 billion surplus, because it’s a one-time windfall largely caused by federal COVID-19 relief funds. And, with the state Revenue Department reporting that general-fund tax collections are running only 1% ahead of the same nine-month period last year, a huge income tax cut now could invite a future budget deficit.

Still, Desmond says, “How many times have we heard legislators and academics and pundits begin their remarks with the phrase ’In a world of scarce resources’? … [W]e cry poor when someone proposes a way to spur economic mobility or end hunger.”

Steven Walters started covering the Capitol in 1988. Contact him at stevenscotwalters@gmail.com