Governor Baldacci's proposed state budget will cost Maine as many as 10,000 jobs, according to an analysis by a progressive think-tank based in Augusta. The Maine Center for Economic Policy says the report shows that the state simply can't cut its way out of the recession. But anti-tax activists say the report leaves out the other side of the equation.

The Center's analysis predicts that if approved, the governor's budget has the potential to eliminate between 7,000 and 10,000 jobs, more than the entire workforce of Hannaford Brothers, and about the same as the entire number of people employed in the city of Waterville, "not employed by the city of Waterville, but employed in the city of Waterville," says Christopher St. John, exective director of the Maine Center For Economic Policy, the progressive think thank that derived the projections.

"It's twice the number of people employed by L.L. Bean. So our point by making those analogies is to say, 'This is a lot of people,' even though it's spread throughout the state, throughout the economy," St. John says.

St. John says the job losses would be felt most acutely in the long-term care and nursing home sector, in home health care, and in services for the mentally ill, and developmentally disabled. Major losses would also be felt in schools, both K through 12 and in higher education.

"We're hearing from the Maine Municipal Association that individual school districts and municipalities are estimating a 4 percent cut to their ability to maintain staff, and that translates into as many as 1,200 jobs," St. John says.

The bottom line, he says, is that Maine simply can't afford to cut its way out of the recession, and will have to consider the politically unpopular option of increasing revenues in some form. "And all we're suggesting is that revenues could have less-damaging effects on job growth than some of these cuts, and ought to be considered and weighed rationally, even though there is an emotional reaction by many households to saying 'we can't pay another penny."

"Well, unfortunately the MECEP study is only giving Mainers half the picture," says Scott Moody, chief economist for the conservative think-tank known as the Maine Heritage Policy Center. "The other half is, 'What is the cost of taxation on the private sector?' When you take a dollar out of the private sector, that reduces jobs, it reduces investment in the private sector economy. So you want to know, what is the net difference? Does the cost of taxation outweigh the benefits of government spending? We would say it does."

And that is where the two sides disagree. Moody says even if you accept MECEP's job loss numbers, which he believes are inflated, the real question of how taxes have affected the state's economy can be answered by reviewing recent history.

"And when you look at Maine's economy over the last ten years, even when state goverment spending was increasing, Maine's economy has been stagnent," Moody says. "In fact, we've lost over 20,000 jobs in the last ten years, so we were stagnant up until the recession, and since the recession we've lost almost 30,000 jobs."

The debate over taxes-versus-cuts will no doubt get louder in the halls of the statehouse. But, says one Maine economist, both ends of the ideological spectrum tend to talk past each other.

"In some sense each side is right and in some sense each side is wrong, but they're usually talking about different things when they talk about the effect of taxes on the economy," says Charles Colgan, Professor of Public Policy at the Muskie School at the University of Southern Maine.

Colgan says the impact of taxes depends largely on whether you're measuring short-term, or long-term effects. "By and large, in the short term -- one or two years -- the state goverment tax system doesn't have too much of an effect on the level of economic activity because the money comes into state goverment and goes right back out out," he says. "Half goes out to the towns and pays other people -- teachers and so on, so the money moves around the economy very quickly. In the long term, higher taxes may have some effect on competitiveness."

The Legislature's Health and Human Services Committee, meanwhile, this week unanimously rejected nearly a third of the governor's proposed $90 million in budget cuts to social service programs, with a divided committee rejecting millions more in cuts.

Some Democrats are indicating that they might consider hiking taxes on cigarettes, liquor and snacks in order to raise revenue.