Just a précis on budget negotiations today: the Big Five leadership has met over the last couple days, with more heat than light.  The Governor remains committed to adding unrelated policy changes into any budget deal, items like changing contributions to public employee pensions, and tightening eligibility and rooting out fraud in programs like in-home supportive services for the disabled, Medi-Cal and Cal-Works.  These items will do nothing to affect the current budget numbers, a fact Schwarzenegger has acknowledged, but he continues to leverage the impasse to capture long-sought goals.  The Governor also has taken to lying about how these issues suddenly appeared in the negotiations, claiming that “reform issues were very clear” from the start, which is true if you define “reform” as “whatever Arnold wants it to mean.”  Karen Bass signaled her frustration with the Governor’s clear unwillingness to close a deal by inserting unrelated items, boycotting today’s meeting and questioning the Governor’s figures on what reducing “fraud” would actually reap in savings (and since he’s been consistently wrong on this front in the past, it’s a good bet).  The Governor did concede that suspending the Prop. 98 education funding mechanism would not be viable, but he keeps pushing for the amorphously defined “reform”, no doubt because he thinks it plays well with the public (Matier and Ross transcribe that private polls show a jump in Arnold’s approval ratings).  This speaks more to the Democrats’ inability to clearly explain reality than anything else, though Bass gave it a try today:

But Bass said she believes talks have gotten worse, not better. And she publicly blasted the governor for comments he made in Sunday’s New York Times Magazine, in which he said he explained why he doesn’t go home depressed by budget woes.

“Someone else might walk out of here every day depressed, but I don’t walk out of here depressed,” Schwarzenegger told the Times. Whatever happens, “I will sit down in my Jacuzzi tonight,” he said. “I’m going to lay back with a stogie.”

“He said he’s happy to just go home and sit in his Jacuzzi every night,” Bass said Monday. “I’m very, very concerned about this. He doesn’t seem to be concerned that people are getting IOUs, and all he has to do is go out and blame the Legislature.”

With squabbling and posturing like this, you’d think I’d agree with the Calbuzz take of why this crisis has dragged on for so long.

The constitutional requirement for a two-thirds vote of the Legislature to pass a budget is clearly the single most important reason why the Capitol is in a state of near-permanent political gridlock. But the two-thirds rule has been around since the New Deal and budgets used to get passed. So what’s the hang-up?

Power: Nobody’s got it.

The governor and the Legislature fulminate and flounder simply because no one in the Capitol in 2009 has the stature, clout or influence to cut a deal like Ronnie and Jesse or Pete and Willie once did.

Actually, the budget has ALREADY been passed once this year, closing a $42 billion dollar deficit.  The new $26 billion dollar problem points to the unique nature of the current deep recession.  I’d like to see good ol’ Ronnie and Jesse and Pete and Willie deal with a $68 billion shortfall in the space of six months.

But beyond that, what is also missing from this analysis is the lengths to which the “big bully” theory of how to manage California government, where Democrats and Republicans get together and “cut a deal,” is in a real sense RESPONSIBLE for the problem we now face.  Take the assessment of the 1992 budget in the midst of a recession:

Contrast this year’s with the budget meltdown of 1992, the last time California issued IOUs. Although many of the same conditions applied, the big difference was that both Gov. Pete Wilson and Speaker Willie Brown wielded enough political authority to sit down in a room and cut a deal: Wilson took responsibility for rounding up Republican votes for tax increases and Brown for putting a lid on Democratic caterwauling over program cuts.

Somehow the inability of these major players to avoid a situation where IOUs had to be issued gets put to the side.  But what Willie Brown did not use that clout to do, what no Democrat has done since 1978’s Prop. 13 opened the structural revenue gap enforced by the 2/3 requirement for budgets and taxes, is actually solve the real problem.  Instead he  cut a deal, relying on a future asset bubble to bail him out again and again, and setting the table for today’s crisis.

The 1980s saw the construction of the model. Sprawl was used to provide affordable housing. Special tax systems were set up to pay for suburban schools – the 1982 Mello-Roos Act – which were funded as long as there was enough credit to sustain sprawl. The loss of property tax revenue led cities to shift toward retail, further promoting sprawl (big box stores, malls). The jobs and spending created by sprawl provided enough prosperity to keep voters happy and the politicians in power. For those who were left behind – those living in the city centers, people of color, and the poor – 1978 had been partly about their political and economic marginalization, and the majority of Californians embraced it as part of the deal.

The ideal feature of the centrist system, from the view of its practitioners, is that it apparently neutralized the right-wing revolt of 1978. Low taxes could be paired with preservation of core services, albeit at a slightly reduced level, and thereby avoided another Jarvisite outburst. Well-paid consultants could run statewide TV campaigns to force the public to accept the consensus, without having to do the messy work of engaging a grassroots that would challenge the centrist status quo.

When the system came crashing down in 1991-92, the centrists found it possible to cut a deal to keep things going. Pete Wilson and Willie Brown had much in common, and were able to hammer out a package of tax increases and spending cuts that got a 2/3 majority. I don’t romanticize that deal, but instead use it to show that it confirmed to the centrists that the system they’d built in 1980s could withstand crisis as long as everyone was willing to sit down and make a deal, damn the consequences.

However, the right-wing wasn’t sleeping. In 1990 they managed to convince a bare majority of voters to approve Prop 140, a radical term limits measure that should have fallen afoul of the “revision” rule. But the real moment of change came in 1994, when the far-right in the Republican Party grabbed control of the agenda and launched a massive attack on Latino Californians. Pete Wilson wholeheartedly embraced the attack, and although it brought Republicans gains that year, it was a victory to make Pyrrhus jealous. Latinos registered for citizenship and to vote in massive numbers, and beginning in 1996 what had once been a state whose politics were fairly balanced shifted massively to the Democrats.

As long as Republicans stood a reasonable chance of winning control of California’s legislature or its electoral votes, Democratic deal-cutting with Republicans could be sold to the base as a necessary move to stave off the Jarvisite hordes. But after 1996 this became less and less plausible. The California Republican Party became a captive of the extreme right, even more than usual, and in one of its last acts before leaving power in 1998, pushed through a massive and reckless series of tax cuts.

I don’t disagree at all that we currently face a lack of leadership and clout to get deals done in Sacramento.  Arnold Schwarzenegger has no role inside his own party, and Bass and Steinberg preside over a dysfunctional set of rule requirements and are term-limited out of gathering political capital.  My point is that such leadership has ALWAYS been lacking from the Democratic side of the aisle, at least since 1978.  When prosperity waned, it was clear that California’s political structure would resist responsible governance at every turn.  But instead of preparing for that eventuality by changing the rules, those good old boys of the past cut deals that exacerbated the problem.  They forced the current crop of non-leaders into ringing up the state credit card and enabled the right-wing faction that holds a veto over economic policies.  The center did not hold – but it could never hold.  And the centrists who ruled California in the years after Prop. 13, the timid types who ran away from real solutions and put the state in the position to fail, should not be lauded.  They should be ashamed.

Both the Washington Post and the LA Times have stories today about the budget crises facing the states, where governors and legislatures have exhausted every gimmick and now must enact painful cuts that will work against the federal program to bring us out of the economic downturn.  The personal stories are significant:

Nevada resident Margaret Frye-Jackman, 71, was diagnosed in August with ovarian cancer. She had two rounds of chemotherapy at University Medical Center, the only public hospital in the Las Vegas area.

Soon after, she and her daughter heard the news on TV: The hospital’s outpatient oncology services were closing because of state Medicaid cuts. Treatment for Frye-Jackman and hundreds of other cancer patients was eliminated […]

“If this is what it’s like in Nevada, with cancer stuff closing, is it like that everywhere?” said Frye-Jackman’s daughter, Margaret Bakes, accompanying her mother to the doctor’s recently. “Are all the other states closing stuff too?”

The answer, in at least 39 states, is “yes” — or “soon.” With personal, sales and corporate income tax revenue plummeting, state governments — which recently trimmed their budgets to cover a cumulative $40.3-billion shortfall for the current fiscal year — are now watching in horror as a $47.4-billion gap opens for 2009.

And for fiscal year 2010, they will face a $84.3-billion hole, according to the National Conference of State Legislatures. The total shortfall through fiscal 2011 is estimated at $350 billion, according to the Center on Budget and Policy Priorities, a nonpartisan think tank in Washington.

This article frames it as there being “no choice” but tough budget cuts or tax increases for states facing shortfalls, states that cannot print money or run budget deficits.  But that’s not entirely true.  There was a good deal of help being offered by the federal government in the House stimulus bill, which included $79 billion in state fiscal stabilization aid.  But among their other cuts, the Axis of Centrism cut that aid in half, by $40 billion dollars, and in so doing guaranteed additional layoffs to teachers and firefighters and cops and nurses and all sorts of other professions which rely on a state paycheck.

California law mandates that layoff notices to teachers be given out by March 15 for the next school year. Arnold Schwarzenegger is proposing $10 billion in education cuts. Republicans, which use our state’s rule requiring a 2/3 vote of the legislature to pass a budget, are demanding these cuts as the price of a tax increase to close the remaining $40 billion and ensure that the cuts aren’t bigger.

But all of us were hoping and expecting that the US Congress would come through with aid to stabilize state budgets, to help ameliorate the problem and save teacher jobs by providing stimulus money. It must be in the stimulus because, as I just noted, the layoff notices will go out within 5 weeks – there is no time to include it in another bill.

Now we are told that Ben Nelson and Susan Collins, two Republican Senators, have reached a deal to cut that education assistance and that the Senate is likely to accept it.

In short, what they have done is guarantee to my sister and to thousands like her that they will receive a pink slip within five weeks.

To call this fearmongering, as John Ensign did on Meet the Press today, just denies reality, par for the course for both Republicans and bipartisan fetishists like Claire McCaskill, who was at first giddy about cutting 600,000-700,000 jobs in the stimulus, and then passive-aggressively “defended” it by saying the alternative was no bill.

Claire McCaskill is now defending herself against Krugman on Twitter:

Just saw Krugman’s comments on reduction in recov act. Question for him. Would no stimulus act be better than one thats 800 B instead of 900.

She follows that up with

Compromise had to happen or we would NOT have 60 votes. Period.

And for further evidence of how much the bill is the same, she claims:

Original Senate bill was 60% appropriationss, 40%tax cuts. Compromise was 58, 42.Senate bill is 90% the same as House bill.

I’m glad that’s she expressing herself here, and that we’re able to somewhat have a dialogue. But I’m not sure how much in good faith it is. McCaskill began by stating how glad she was that they got a $100 billion cut out of the bill, that the “silly stuff” that Republicans didn’t like is now out. She then switches to a passive aggressive mode in defending the cuts – it’s basically the same bill and it wouldn’t have made it through the Senate – but glosses her own role in making the cuts. From the way she talks about the bill, wouldn’t she have been among those voting against the bill if the cuts hadn’t been made and new non-stimulative tax cuts hadn’t been added in?

McCaskill doesn’t want to admit her role in putting 600,000 Americans out of work on Friday, which will harm public safety and increase class sizes and shut down bus and rail lines and send the sick and uninsured looking in vain for treatment and a host of other inadvisable outcomes.  And there’s no rational economic reason for it, just that the Axis of Centrism choked on the price tag and had to compensate for the non-stimulative tax cuts the Senate tossed into the bill.  Massive job loss or increased property tax rates (as states compensate for the loss to education funds) is on McCaskill and Nelson and Collins and Spector’s hands.

The big question is what will come out of the House-Senate conference next week, whether the cuts, especially the state government relief, will be restored at the expense of things like the $70 billion dollar patch to the alternative minimum tax.  Larry Summers left that an open question on ABC this morning.

One of President Barack Obama’s top economic advisers forecast Sunday a difficult struggle with Congress over Senate cuts of $40 billion for state and local governments from the administration’s massive spending and tax cut package to stimulate the failing economy.

The $827 billion Senate version of the plan — designed to bring the economy out of the worst downward spiral since the Great Depression — was expected to pass the Senate on Tuesday. The House had already passed its $819 billion version of the measure.

And in the opening moments of This Week, an exchange between George Stephanopoulos and Larry Summers went like this:

STEPHANOPOULOS: …does that mean the President prefers the Senate version to the House version?

SUMMERS: No, the President feels that above all, we need a major program enacted very quickly that would create 3 to 4 million jobs. He believes we need to perfect it in every way we can.

If the cuts are restored, suddenly the sense of urgency works back in the direction of passing a bill more like the House version.  The Republican business lobby is urging passage.  I don’t think the moderates signed on to the bill could break ranks on the final vote if the changes in conference are limited to, say, swapping the state cuts for the AMT patch, combined with an assurance from the President that they will make that fix down the road.

The action needs to be entirely directed at the Speaker, who has spoken out against these cuts and ought to appoint conferees that will get the House version at least partially restored.  Being from California, she knows exactly how hard-hit the states are and what the consequences will be.