Global Policy Forum

By David Walker

This week, as President Bush presents his latest budget, half of American cities report that they can no longer provide an "adequate quantity" of food to those applying for emergency help. Yet demand for hunger relief on the streets of urban America is rising - the number of free meals served in Kansas City last year went up to 3m. According to the US conference of mayors, 48% of the hungry are from families with children.

For America's poor (many of whom are in work but paid below subsistence level) things can only get worse. Last week I visited a Rockefeller Foundation jobs project in Gilmor Homes, a 570-unit public housing project in Baltimore. It is trying to improve job prospects for residents. But US unemployment is now 6%, and rising. Hope VI, a federal subsidy for revitalising and demolishing city housing - Baltimore, with 250,000 more dwellings than households, certainly needs it - is now being abolished by President Bush.

Because the Republicans control Congress, Bush's budget will go through. A Keynesian might have no trouble with its £180bn projected annual deficit of spending over income. But anyone with remotely progressive leanings must blanch at the tilt of its tax cuts towards the well-off. If the Democrats cannot build a political revival in opposition - as House of Representatives leader, Nancy Pelosi, is saying - they are done for.

The budget allocates about $1bn a day to the US armed forces, or £26m every hour. But there is nothing extra in there for an Iraq war. That means, if war comes, Bush would have to borrow yet more, raise taxes, or cut social spending. Guess which is most likely. But because of the way American public finances work, the president may escape obloquy. It is the states and cities that would have to do the cutting and take the blame.

And yet when Editor and Publisher magazine surveyed the editorial line on Iraq taken by American newspapers in recent weeks, it got a surprise. The further you go from the big cities, it found, the more sceptical the tone in the leader columns. One reason for misgiving was aired time and again: how does the administration justify the scale of spending on an Iraq attack when state and local services are being slashed?

The political fallout depends on whether the states can get a complex message over. All US states, except Vermont, must balance their budgets each year. If federal support drops, they have to raise taxes or make cuts. The bulk of state budgets goes on education, medication and incarceration, and that is where the cuts are being made. State spending will need to fall by some £37bn over the next year.

The table needs to be read in the light of rising demand for services. The White House says that its grants are increasing. But mayors say the 2004 budget is nearly £2bn short of what Bush's own plan for school teaching and curriculum demands. It offers more for "homeland security" while cutting support for regular policing.

One result of the states' penury is the most un-American spectacle of prisoners being released from jail in order to save money. While soldiers and ships are concentrating in the Gulf, the state of Washington - facing a $2.4bn gap between spending and revenue over the next two years - is dropping 60,000 people from its health insurance for the working poor. Class sizes are rising, 1,200 prisoners are being released and 2,900 offenders on parole or probation will no longer be supervised. In Oregon, where voters have rejected a five per cent increase in state income tax, state troopers are being sacked and medical help for poorer citizens cut. College fees for students are being raised in Kentucky, Florida and Ohio.

Some states are resorting to desperate financial measures, such as borrowing against anticipated gains from their big court case against tobacco companies. California is considering going the way of neighbouring Nevada and legalising gambling.

Rightwing thinktanks blame the states, saying services grew too fast in the Clinton years. But it was the Republicans' own presidents - Reagan, then Bush - who switched entire programmes from federal to state level, on the back of a promise to support such schemes as Medicaid, which is the only way some 40 million Americans without health insurance are ever going to get treatment.

The White House says it is increasing spending on another health scheme, Medicare, which helps the elderly to pay for treatment. But there is a good political reason for this, to do not just with the voting power of pensioners but Republican reliance on the hospital industry.

Across many states, public service workers' pay is being frozen, which effectively means cut. You don't need to be a conspiracy theorist to link that effect with determination in the White House to shrink yet further the ambit of trade unions, the public sector being the only area showing any growth in union membership. George Bush is not just a Republican, after all, but a convinced neo-liberal. His opposition to "affirmative action" in education is of a piece with a belief that inequality is not just functional for the economy but morally right. Once again, the poor residents of Gilmor Homes and similar areas will pay the price.

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