Over at the Sacramento Bee the Capitol Alert examines Arnold’s “doomsday” budget:

So what will be in Schwarzenegger’s doomsday budget? We laid out some scenarios on Sunday. The governor has already indicated some $6 billion in solutions:

— $2 billion in borrowing from cities and counties as allowed by a 2004 ballot measure

— $3.6 billion to $4 billion cut to schools

— $335 million gained through early release of prisoners and burdening county jails

— $80 million through a 10 percent cut in the Cal Fire budget

Schwarzenegger press secretary Aaron McLear said the governor is likely to pursue an extra fee tacked onto homeowner insurance policies to pay for emergency response, at a cost of about $11 annually per homeowner. When the governor proposed the plan last year, it would have raised an additional $105 million.

McLear said the governor is not planning to propose any other fee hikes or tax increases in his budget.

Besides that, the governor has said he will revisit state worker furloughs and layoffs.

Although the actual size of the deficit is unclear, one fact is emerging – there is less room than ever before to actually make cuts. The federal stimulus in particular has had the effect of protecting large swaths of the budget from further cuts – which is a very good thing since every budget cut made means further economic deterioration. From Capitol Alert again:

Chris Woods, budget aide for Assembly Speaker Karen Bass, D-Los Angeles, said Monday that due to various constitutional and federal protections, the state can only target about $38 billion in the budget — largely social services and corrections. K-14 education is protected by Proposition 98 and by a mandate in the federal stimulus package to maintain a certain level of funding. Higher education is also protected by federal stimulus rules, as are some social services….

That leaves vulnerable things like the “optional” benefits that the federal government does not mandate but have been a favorite target for Schwarzenegger and former Gov. Gray Davis. The state will eliminate $259 million of those in July, including Denti-Cal. The state could move to eliminate other benefits such as prosthetic limbs or hearing aids, as Davis proposed in 2003. But even those would only save a fraction of the deficit problem.

It’s becoming clear that a cuts-only solution is not a credible solution to the budget deficit. Arnold refuses to consider new revenues, such as taxing the wealthy and closing corporate loopholes, or finally implementing an oil severance tax, or raising the gas tax. Unless he plans to close all the prisons in the state there’s no way he’s going to be able to close the gap, even if he sends every city in the state into bankruptcy by raiding their funds.

It also raises the specter of default – which Tom McClintock thinks is possible (not that he cares, since he never voted for a state budget anyway). California’s Democratic Congressional delegation is working to provide federal guarantees to state bond buyers. It’s a necessary move to prevent fiscal collapse, but Republicans, so close to the destruction of government they can taste it, are crying foul:

Republican Rep. Tom McClintock of California’s 4th District said he is “adamantly opposed” to the idea and predicted the state would default on a bond for the first time in its history.

“The reason they can’t get a loan guarantee is because nobody in his right mind believes they’re going to repay the money, so why should the federal government do it?” he asked.

But McClintock said he wouldn’t be surprised if it passes the Democratic-led Congress: “I’ve noticed recently that the more fiscally irresponsible the proposal, the faster it seems to pass the Congress, so I would expect it’s got an excellent prospect.”

If the request is approved, Orange County Treasurer Chriss Street said, the federal government “will inevitably become the lender of last resort for all government entities in California and across the United States.”

Why yes, Chriss, that is exactly the plan. Given the severity of the economic crisis, it’s a necessary move for the feds. State defaults would wind up eviscerating what remains of the safety net. The recession would thereby worsen and it would become much more difficult for the nation to provide economic recovery if half the teachers have been fired, if there’s no health care, no buses, and if criminals are walking the streets.

The “Great Recession” is proving that the solutions of the last 30 years have no power or sense left to them. Democrats are slowly but inevitably embracing that reality. We know Republicans won’t, which is why their veto power, in Sacramento and in the US Senate, must be ended as soon as possible.