The projected deficit for the state budget in 2008 is $10 billion and growing quickly. As the scope of the crisis becomes clearer, the state’s media is beginning to take notice and, as always, trying to spin the situation according to their own preconceived notions.
In that vein comes today’s article by Evan Halper in the LA Times. While the article would seem to boost us by laying the blame at Arnold’s feet, its primary argument is actually that the budget crisis is due to “voter-imposed budget constraints” that limit the legislature’s ability to slash spending when needed, and limiting the effectiveness of government.
It’s not a new claim, of course, and the article quotes Don Perata’s complaint about this that he made earlier in the year. But the politics of the budget crisis are shaped by the media coverage of it, and in that sense it’s not just significant how much the LA Times is playing up the locked-in spending, but how much they’re downplaying the lack of tax revenue.
If we’re going to prevent this budget crisis from seeing the death blow to the liberal state that Pat Brown helped build in the 1960s as well as from crippling our ability to respond to our own ecological and urban crises, we need to aggressively push back against the idea that spending cuts are the answer. California’s budget is in crisis not because we spend too much, but because we tax too little.
The LA Times article begins:
Gov. Arnold Schwarzenegger could soon come to regard the epic budget mess he inherited four years ago as a minor nuisance compared to the challenge he faces now.
As he prepares the budget blueprint that he will release in January, the governor is in a bind. There isn’t as much red ink this time, or an emergency cash shortage — at least not yet. But deals he made to keep the state afloat earlier in his tenure now hamper his ability to take on a rapidly swelling deficit that early projections show will hit at least $10 billion.
Those deals, made when the deficit was substantially larger, put a lock on billions of dollars. Large pots of money that lawmakers have tapped to patch past budget deficits are no longer available to them. The prohibitions are even etched into California’s Constitution, thanks to ballot measures championed by Schwarzenegger.
“There is no question this budget will be tougher” than when the deficit was $14 billion, said Mike Genest, the governor’s budget chief. “A lot of options we had before have been removed.”
The tone is set from the beginning – locked-in spending and prohibitions on cutting funding to schools or raiding local government coffers are going to make things “tougher” and are the basic problem the state faces in trying to resolve the deficit.
And of course, Mike Genest is being disingenuous when he said “a lot of the options we had before have been removed.” There’s nothing stopping you guys from reinstating the MVET, is there? No, to Arnold and his cronies, the only “options” are spending cuts that hurt the working and middle-classes, not tax increases that might capture some of the massive wealth generated by a small class of Californians.
The article quotes some Democrats as well:
We have just tightened the noose around our neck instead of figuring out how to get out of the noose in the first place,” said Hannah-Beth Jackson, a former Democratic assemblywoman from Santa Barbara who plans to run for the Senate next year. “We have all these spending requirements, and they end up working against each other. We can’t take from this, we can’t take from that; we’ve become immobilized.”
Of course, this noose analogy only works if you don’t include the possibility of tax increases. Prop 13 and the state budget rules form a noose as well around state budgeting, preventing legislators from enacting a fair and sensible tax system that pays for the state’s needs without stressing lower and middle income families. Perhaps she was quoted out of context here, but HBJ should know that legislative immobility on the budget has more to do with taxes than spending – and more importantly, as progressives we need to be pushing hard on the tax issue instead of arguing that the problem is an inability to cut spending.
These spending constraints were the product of an electorate angry at legislators for raiding necessary programs:
But legislators have played a role in creating the dilemma they face. Citizen ballot initiatives often draw on the public’s distaste for a Legislature perceived as financially incompetent and politically tone-deaf. Only 25% of likely voters trust state government officials to do what is right most or all of the time, according to a September poll by the Public Policy Institute of California.
Lawmakers’ slowness in addressing skyrocketing property tax bills led voters in 1978 to pass the landmark Proposition 13, limiting how much such bills can increase every year. In 1988, voters approved Proposition 98, which set aside about 45% of the state’s general fund for education programs and gave lawmakers complicated rules for allocating it.
“The reason voters lock in spending is because they don’t trust the Legislature to share their priorities,” said John G. Matsusaka, president of the Initiative and Referendum Institute at USC.
It seems that legislators have not, in fact, actually dealt with this lack of trust. It was lack of trust that created the political conditions in 1978 that helped pass Prop 13, and a similar lack of trust that has led voters to protect important services such as education. It was a lack of trust, exploited by Republican dirty tricks, that led to the recall in 2003 during a previous budget crisis.
So for legislators to complain that locked-in spending is the problem seems to me to be missing the point entirely. But it doesn’t help when the LA Times publishes an article so strongly reinforcing that point.
The real issue here is that in 2008 we face a crossroads in California. Will we continue to balance California’s budgets on the backs of our most vulnerable and needy people, on the backs of an already stressed middle class, so that the wealthy can escape their obligations? Or will we finally push back and work to restore the promises of the 1960s, AND face the crises of our own time?
Further quotes from Arnold’s budget man suggest that they’re going to try the former route, with gusto:
Genest said the governor has no regrets….
Now is the time, Genest said, for hard decisions.
“The governor made these deals fully aware that the day would come when some of us would say we wish we had more options,” he said.
That suggests to me that Arnold is “fully aware” of what those spending constraints would lead to – an overwhelming desire to gut state services in the next budget crisis. It’s the shock doctrine for California – gin up a crisis and then use that crisis to push through a deconstruction of the liberal state, privatizing government services in the name of ending the fiscal crisis but in fact merely enriching a small coterie while the vastly inferior privatized services set most Californians even further behind.
Sound a bit overstated? Consider who was in Mike Genest’s position when these spending limits were made: Donna Arduin. As I explained in my article “The Plot To Privatize Public Education”:
And it is a deliberate privatization. ALL of this is in fact quite deliberate. It is not a reaction to a fiscal crisis. Instead it is a carefully planned effort to destroy mobility and access for the mass of Californians in order to allow those who have already prospered to keep their wealth while shutting the door behind them to those who wish to follow.
It goes back to Donna Arduin. Brought in as Arnold’s finance director in 2003, she is an ardent advocate of privatization. In order to “balance” budgets in Michigan, New York, and Florida under Republican governors, she advocated the gutting of social and educational spending so as to prevent a tax increase. As [an earlier] LA Times article notes, she took a similar approach to higher ed in CA:
Her budget plan for UC and CSU called for hundreds of millions of dollars in cuts for the third consecutive year, major student fee hikes, a reduction in enrollment and a plan to steer thousands of students to community colleges instead of the universities.
With Arduin as his very own Milton Friedman Arnold has maneuvered California into a crisis, and hopes to use that crisis to finish off what remains of California’s liberal promises of equality and opportunity for all its residents.
Will Democrats go along with this? With the media stoking Arnold’s fires, the prognosis is not good. If we are to prevent this crisis from gutting not just our egalitarian heritage, but our ability to respond to our own crises – water, energy, food, transportation, renewed accessibility for higher ed, and health care – all these will require new state spending. There’s simply no way around it.
The only time the LA Times article gets even close to discussing the revenue problem is at the end:
Others are hopeful voters will see that the state lacks the funds to provide all the services they expect, and a tax increase is not unreasonable.
State Treasurer Bill Lockyer says that at minimum, that is a healthy debate to have. And one long overdue after years of the state spending more than it brings in and papering over deficits by shifting funds around from accounts that now cannot be touched.
“The constraints limit our flexibility, but they do not cause overspending,” Lockyer said. “The real problem is tooth-fairy budgeting.”
No, Bill, the real problem is a lack of revenue. It’s really that simple. Since 1978 California has decided to protect a small group of homeowners and the wealthy at the expense of everyone else. A 25-year increase in real estate values and wealth took place and the state saw hardly any of that money because of the unchallenged system of Prop 13. As our needs grew, and as the wealth to help address those needs grew, politicians such as yourself did nothing to tap those resources, preferring “tooth-fairy budgeting” to actual measures to put California on a long-term stable financial footing. Lockyer WAS in the legislature, after all, in the 1980s and 1990s.
Lockyer, you’ll remember, is also the person who recently kicked around the idea of privatizing UC outright. wu ming delivered a classic smackdown of this idea, but it’s worth remembering that to Lockyer, the only viable solutions are neoliberal solutions. We should cut and gut state services, he counsels, but god forbid we actually consider fixing our tax crisis.
Already, 30 years of state budget cuts brought on by legislators’ unwillingness to challenge Prop 13 has led to what the California Budget Project called A Generation of Inequality, where Californians increasingly are stuck in low wage jobs while the wealthy few enjoy most of what remains of the California dream. Health care costs, housing costs, energy costs, and education costs play a primary role in that inequality – and the state can, with proper tax and spending priorities, help alleviate those problems.
The California Tax Reform Association has proposed a series of reforms that would raise upwards of $17 billion for state government – and that doesn’t even include restoring the MVET, which would add another $5-6 billion. If we also rejected wasteful spending like the ridiculous $9 billion prison bond, or the $3 billion in dams that Republicans demand, that’s another $12 billion in bond capacity we could use to help build badly needed infrastructure, like high speed rail or a revitalized Delta, without straining the general fund even further.
But to undertake any of these sensible reforms requires confronting squarely the dominant political assumptions of the last 30 years in California. And it’s important to note they are assumptions. Yes, California has straitjacketed itself on taxes as much as it has on spending – but why assume that the solution is to break the spending rules, and not the tax rules?
Orange County conservatives were hammered in the court of public opinion in recent weeks over their opposition to a 2005 tax measure that would have helped fund fire responses that were found lacking in the recent firestorms. An October LA Times poll showed voters are willing to tax themselves for health care. The opportunities to fight back against the neoliberal assumptions that have ruled California ARE there, to anyone willing to act on them.
And so we face a crossroads. Will we sit back and let Republicans and the media shock doctrine us into giving up what remains of equitable, accessible, broadly prosperous California, and eliminating our ability to tackle the multifaceted crisis of the 21st century? Or will we fight back and finally challenge these assumptions, that we should look to spending cuts before tax increases, and finally put California on a sound financial footing by giving us the resources we need?
