For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies.

It is the kindness to take in a stranger when the levees break; the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours.

What’s confusing is that, even after all the criticism of the Bush administration for borrowing money to cut taxes, Obama plans to do the same. Indeed, $275 billion of the Democrats’ proposed $825 billion stimulus plan comes in the form of tax cuts, even as the Obama economic team concedes that those cuts lack the stimulating punch of direct federal spending.

(A report this month from two members of that team — Council of Economic Advisers Chair Christina Romer and Jared Bernstein, Vice President Joe Biden’s chief economist –  claims that, “because there is a limit on how much government investment can be carried out efficiently in a short time frame, and because tax cuts and state relief can be implemented quickly, they are crucial elements of any package aimed at easing economic distress quickly”).

Moreover, the Democrats’ stimulus plan includes business tax cuts that would allow companies suffering losses this year to recover taxes they paid going back as far as 2003 — a stark change from the two year window over which they can currently spread those losses. That provision is seen by some critics as a giveaway to the finance and construction industries, both of which lost tons of cash in the past year, but were also largely responsible for creating the economic crisis to begin with.

Notably, the banks and other companies (such as the automakers) who benefited from the Wall Street bailout won’t be eligible for more help under the stimulus proposal. Still, with nothing but giveaways coming down the pike, one wonders what sacrifices Obama was requesting.

Suffering the recession’s painful squeeze, more states are eying cuts to low-income health care programs to salvage their budgets.

At least 19 states have already proposed or installed cuts to public health programs, including Medicaid and the State Children’s Health Insurance Program (SCHIP), according to a report updated this week by the Center on Budget and Policy Priorities, a liberal policy analysis group. Those programs provide health coverage to the states’ most vulnerable residents, leaving state officials and health care advocates worried that affected patients will be left dangling without access to treatment.

Illustration by: Matt Mahurin

“It’s adding enormous hardships for those who rely on Medicaid for their health care needs,” Ron Pollack, executive director of Families USA, a consumer health care advocacy group, said of the trouble facing state budgets. Families USA released a report earlier this month finding that 1 million people would lose their health coverage if the cuts were realized in just eight of the 19 states that have proposed or enacted them.

Pollack said the problems will only get worse if the recession deepens, as many expect it will next year. “With each passing week we’re hearing of more states [proposing health cuts],” he said, “and I expect we’re going to see that accelerate in January.”

The threat to these public health programs arrives as most states are caught in an ugly economic cycle. Unemployment is up, creating greater demand for expensive social programs like food stamps and Medicaid, while home values and consumer spending are down, leaving less revenue from sales and property taxes for states to fund those programs. And the fiscal gaps are growing.

At least 41 states and the District of Columbia face 2009 budget shortfalls totaling $42 billion, CBPP has found. Looking ahead to 2010 and 2011, the number of struggling states rises to 44, while the shortfall figure skyrockets to $350 billion.

Compounding these troubles, almost every state in the country has some form of legal balanced budget requirement, meaning that, unlike the federal government, they can’t simply fall back on deficit spending to survive the recession. Instead, legislators have been forced to hike taxes, lay off state employees and cut back on services. Medicaid and SCHIP, because they represent one of the largest chunks of state budgets, have been early targets for cuts.

Indeed, California is increasing co-payments and reducing dental services under SCHIP, CBPP found. In Maine, some patients will be hit with a $25 Medicaid enrollment fee, which will likely discourage participation. In South Carolina, new income-eligibility rules are expected to push 3,700 folks out of Medicaid, CBPP reports. Arizona is forcing some Medicaid patients to reapply more frequently, which is expected to reduce the rolls, even among those eligible for the program, CBPP said.

Ann Kohler, director of the National Association of State Medicaid Directors, said states that are traditionally reliant on the finance industry for revenue — New York, New Jersey, Rhode Island and Connecticut — have had a particularly tough time balancing their budgets as that industry has collapsed. “It’s become very dire,” said Kohler, who once headed the Medicaid programs in New York and New Jersey.

There are many other examples. In Michigan, another state that’s been crushed by the downturn, Medicaid enrollment is up 70,000 in the last year, said James McCurtis Jr., spokesman for the state health department. In Colorado, Medicaid enrollment is increasing by 2,000 each month, said Joanne Lindsay, spokeswoman for the Dept. of Health Care Policy and Financing.

In New Mexico, where Medicaid enrollment jumped from 408,000 in August 2007 to 450,000 a year later, the legislature has plans to meet next month to weigh potential cuts to the program. As options, officials will consider benefit cuts, rate hikes and reduced outreach efforts, according to Betina Gonzales McCracken, spokeswoman for the state’s Health and Human Services Dept. “We’re seeing the need to reduce our budget across the state,” she said.

Some state officials say the recession’s effects on Medicaid and SCHIP aren’t tangible just yet. Karen Smigielski, spokeswoman for Minnesota’s Dept. of Human Services, said it’s “too soon” to gauge the ultimate impact of the recession on low-income health programs. “It takes awhile for people to get poor enough to become eligible,” she said.

President-elect Barack Obama is piecing together an enormous spending package designed to boost the economy and tamper rising unemployment. Early reports indicate that the package could be in the range of  $800 billion, with roughly $100 billion of that earmarked to help states cover their Medicaid costs.

Many experts warn that the budget problems — and their effects on public health — will only get much worse if that stimulus funding is held up for any reason.

“The longer we go without it,” said Kohler, of NASMD, “the more we’re going to need.”

Writing in The Washington Post yesterday, Robert Bixby, who heads the Concord Coalition, a budget watchdog group, pointed out that the request “rang a bit hollow coming from lawmakers who have no plan of their own to avoid a fiscal debacle that could be many times more serious than anything the automakers face.”

From Bixby’s op-ed piece:

Pelosi and Reid declared that the American people “deserve to see a plan that is accountable to taxpayers and that is viable for the long-term,” with “significant sacrifices and major changes to [the automakers'] way of doing business.”

These sound conditions should be applied to the federal budget as well. Unfortunately, though, there is no special guardian of future generations to make such demands. That job belongs to our elected leaders. They, too, must demonstrate significant sacrifices and major changes to their way of doing business. After all, they share responsibility for the nation’s future just as the Big Three executives share responsibility for the future of the auto industry.

Bixby makes a good point. This year the federal debt topped $10 trillion — a figure so large that New York City’s storied debt clock could no longer contain it. And the number is almost certain to leap significantly in the next few years.

Deficit spending in 2009 is expected to top $1 trillion, and there’s mumbling that it could approach $2 trillion. Most economists agree that the Keynesian approach of borrowing to pull through a recession is the right one — and President-elect Barack Obama has plenty of plans to do just that. But there’s been less talk of how Washington policymakers plan a return to balanced budgets when the economy gets better. (All that borrowing, remember, is intended to produce millions of jobs.)

It’s not the first time we’ve heard this warning about out-of-control federal spending. In the days after Congress passed its Wall Street bailout, David Walker, former U.S. comptroller general, pointed out the two significant differences between the current economic crisis and that facing the federal budget: One, the budget crisis is many-fold larger; and two, there’s no one big enough to bail out the federal government.

“My question,” Walker said at the time, “is when are they

Image by: Matt Mahurin

The title of Bixby’s piece is “Congress in a Glass House.” Considering the budget mess the country is in — and considering that Congress has done little to balance its own books, even in the high-flying times of the housing boom — it is certainly apt.

Scrap that.

According to Dow Jones, Rep. Jim Cooper (D-Tenn.), a leading Blue Dog, said last week that the group will probably not hold president-elect Barack Obama to the same budget standards that Democrats urged when they established “pay-go” rules after taking control of Congress in 2006:

“I’m not sure the old rules are relevant anymore,” Rep. Jim Cooper, D-Tenn., who is a member of the House Blue Dog Coalition, said in an interview.

Cooper argued that Obama shouldn’t have to live within the pay/go rules that congressional Democrats sought to apply to President George W. Bush’s proposals. “It would be unfair to the new president to put him in a budget straitjacket,” he said.

The comments didn’t escape the eye of Sen. Charles Grassley (R-Iowa), who has a long history of taking on the Blue Dogs for their inconsistent position on pay-go rules.

“If the Blue Dogs really believed in pay-go,” Grassley said in a statement, “they would seek to apply pay-go rules regardless of which party controls the White House.”

Cooper’s comments, Grassley added, “might reveal what Blue Dogs have secretly believed all along — that pay-go applies only to tax relief they don’t like. That’s intellectually dishonest and raises the questions about whether they were sincere about pay-go in the first place.”

Faced with the country’s economic turmoil, Congress has already committed more than $1 trillion in corporate bailouts, buyouts and prop-ups. With the economy still declining, though, many lawmakers are pushing for hundreds of billions more in funding for infrastructure projects and social services — most of it borrowed from abroad; all of it applied to the country’s exploding debt. If Congress doesn’t pass that bill this month, Obama has vowed to do it first thing in January.

All things considered, it looks like 2009 will be a tough season for budget hawks.

Senate Leader Harry Reid and House Speaker Nancy Pelosi. (flickr)

In the wake of Tuesday’s elections — which swept a Democrat into the White House and widened the party’s margins in the Senate and the House — it’s tempting to conclude that the Democrats’ legislative challenges just eased, that the days of GOP obstructionism are over and that the party’s congressional leaders will have their way next year on Capitol Hill.

It would also be misleading.

As Democratic leaders shift their energies from electoral politics to policy choices, they’re in for no cakewalk. Internally, the party will probably move toward the center, as many of Tuesday’s congressional gains came in conservative-leaning regions. Republicans, meanwhile, are vowing to unite ideologically to thwart Democratic plans, largely in fear that 2010 could be a repeat of 2008.

Illustration by: Matt Mahurin

Most important, the country is broke. It is using borrowed money to fight two long-running wars and to address the worst economic downturn in 80 years. On Friday, the news got worse. The Labor Dept. reported that roughly 240,000 people lost their jobs in October, pushing the unemployment rate to 6.5 percent, the highest in 14 years.

Still, besides their greater majorities, Democrats have accumulated a good sum of political capital in the wake of the vastly unpopular Bush administration. The problem is that their ambitious priorities don’t come cheap. Proposals to expand health coverage, cut taxes for middle-class workers and revamp the energy industry to produce a greener 21st century would benefit the economy over the long run. But they would cost billions of dollars now. Some economists anticipate a budget deficit near $1 trillion next year even without these items.

So Democratic congressional leaders will have to pick their battles carefully.

“Those are the two 800-pound gorillas (two wars and the economic downturn) that you’ll have to address before you get around to doing many other things,” said Michael L. Mezey, political science professor at DePaul University. “The budget debate is going to be front and center.”

Last week, President-elect Barack Obama laid out his domestic priorities, including sweeping plans for energy and health-care reform. Yet nothing will be possible if the economy continues to tank. On Saturday, Obama urged more government intervention to reinvigorate the economy.

“We need a rescue plan for the middle class that invests in immediate efforts to create jobs and provides relief to families that are watching their paychecks shrink and their life savings disappear,” Obama said.

Democrats want to pump billions into infrastructure projects, unemployment benefits and help for states, many of which face severe budget deficits. Party leaders hope to pass legislation this month, but the Bush administration has opposed any such plan. It’s unclear who will win the partisan battle. Obama, however, has vowed to make an economic-stimulus bill his first priority in January if Congress fails to act this year.

With Democrats having picked up at least six seats in the Senate and 19 in the House, a stimulus plan should pass easily. Yet numbers are not the only factor determining the success of the Democrats’ agenda.

Many newly elected Democrats represent moderate or conservative-leaning districts, and they tend to favor balanced budgets. These Democrats may oppose big-ticket reforms if they require more deficit spending. Membership in the House’s Blue Dog coalition — fiscally conservative Democrats — now stands at 47, but that figure could grow with the arrival of 2009’s freshman class. As federal revenues fall because of the sinking economy, the burden on Congress to find precious dollars without cutting vital services will only get heavier.

Much will also depend on Obama’s working relationship with congressional leaders, particularly House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.). If the new president doesn’t consult Congress on his agenda — the way President Bill Clinton did with his health-care reform in the early 1990s — he could face push-back from his own party.

“It’s a matter of melding their priorities with Obama’s priorities,” Mezey said, referring to Reid and Pelosi. “The question is whether there’s a willingness on both sides to find common ground.”

On many party plans, Obama and congressional leaders are on the same page. Yet sticking points remain.

Take energy issues. Reid, for example, opposes greater reliance on coal as an energy source. Obama has pushed hard for what he calls clean-coal technologies. (Illinois is a large coal producer.)

Obama also wants to increase fuel-efficiency standards for the nation’s automobiles — a goal almost certain to be opposed by Michigan’s powerful Democrats.

Then there’s this paradox: While wider congressional margins should make it easier for Democrats to carry the legislative day, greater numbers also increase the chances of dissension. “It’s always easier to have discipline with a minority party,” Mezey said. “As you widen the tent, it’s going to be very difficult to maintain the same level of unity.”

To help their chances, Democratic leaders have been quick to reach across the aisle. In a news conference Wednesday, Pelosi vowed to work next year “in a strong bipartisan way and with civility in our debate.”

No amount of civility, though, will probably curb the ubiquitous influence of lobbyists, who tend to care much less about party affiliation than who holds power. For example, there has been a strong push among some Democrats to reform the credit card industry. In September, the House passed a bill to do just that. But in the Senate, the legislation remains mired in the banking committee.

The stalemate may be due to the fact that the finance industry is the single greatest contributor to Washington lawmakers regardless of party — a trend that’s not about to change just because more Democrats will be arriving on Capitol Hill in January.

“It’s less partisan than it is the tremendous industry influence treading on a committee,” said Ed Mierzwinski, program director of the U.S. Public Interest Research Group, a consumer advocacy organization.

Republicans, meanwhile, are down but not out. In an Op-Ed in The Washington Post Friday, House Minority Leader John Boehner (R-Ohio) said the GOP is ready to fight the Democrats’ “far-left agenda.”

“This election was neither a referendum in favor of the left’s approach to key issues nor a mandate for big government,” Boehner wrote. “Obama campaigned by masking liberal policies with moderate rhetoric to make his agenda more palatable to voters. Soon he will seek to advance these policies through a Congress that was purchased by liberal special interests such as unions, trial lawyers and radical environmentalists, and he’ll have a fight on his hands when he does so.”

Obama seems to recognize the Herculean task he faces. In his victory speech Tuesday night, the president-elect pointed to the many issues plaguing the country — crumbling infrastructure, rising unemployment, war in Iraq and skyrocketing health-care costs. He asked the nation for its patience and sacrifice as he attempts to tackle them.

“The road ahead will be long,” Obama told the crowd in Grant Park. “Our climb will be steep. We may not get there in one year or even in one term.

“But, America, I have never been more hopeful than I am tonight that we will get there.”