IN YEARS PAST, the nation's governors had grown accustomed to using their periodic get-togethers to swap information on how to govern and to lay out plans for getting more federal aid. This week, as the governors gathered in Portland, Maine, the mood was quite different. Two years of federal cutbacks and a deep recession have taught the governors that they have to make their own hard choices and shoulder the burden of paying for them. Nor can they expect a more conciliatory federal attitude.
Vice President George Bush told the governors politely but firmly that the administration had no current intention of changing its policy of low taxes, reduced federal aid and high deficits. Forget how bad things are; look at how much better they are getting, the vice president counseled. Why change policies that are working? But many of the governors remained unconvinced that the administration could take credit for anything other than demonstrating once again that a deep recession will curb inflation, at least for awhile, and that sooner or later the economy will rebound under its own momentum. Cutting taxes to promote economic recovery may be a convenient political expedient for national politicians. But it is an irrelevant prescription for state governors, almost all of whom have already been forced to do what one governor called "the unthinkable"--that is, raise taxes while cutting programs.
Economist Alan Greenspan, a frequent presidential adviser, did not share the vice president's sanguine view of federal policy. He noted that the deficit would remain at record levels even with a brisk recovery, and doubted that the recovery could be sustained so long as the high interest rates fueled by federal borrowing continued to discourage long-term capital investment and depress exports. But, warned Mr. Greenspan, the governors should not expect any solution to this admitted long-term problem as long as the 1984 presidential election is in the offing. Perhaps when that inconvenient event is safely out of the way, he conjectured, the administration might support a "domestic summit." Such a summit could produce the consensus for tough decisions on both taxes and spending that the president seems to want to defer as long as the recovery continues to provide apparent support for his policies.
In the meantime, the governors must be content with hope that the recovery combined with the harsh budget-balancing measures they have already taken will provide the funds needed to support current programs and perhaps a few new initiatives. Education is at the top of everyone's agenda. But there is also strong pressure to do more for neglected children, homeless persons and the long-term unemployed. Many governors also plan to be more active in promoting economic growth in their states. The governors have rightly become disillusioned with their old economic tools--tax lures and low-wage policies. The new "industrial policy" emphasis is on developing venture capital, encouraging alliances among businesses and universities to finance basic research and improving the educational, cultural and physical amenities that attract modern industries.
The governors' ambitious plans, however, are tempered by a keen awareness of their current vulnerability. Having already raised taxes and cut essential spending, they have no fallback position should the current recovery falter. That's why the prospect of a two-year delay before the federal government gets its fiscal house in order is not reassuring to the governors.