Friday, February 06, 2009

The State of the State of California

California is in a dire financial condition. The state has a budget deficit of $40 billion, and the state is not supposed to have an unbalanced budget. The only reason taxes haven't gone up to pay for this is due to the work of the Howard Jarvis Taxpayer's Association. Propositions sponsored by the HJTA have made it difficult to raise taxes. Any measure that increases taxes must pass with at least 2/3 of the vote. While the Democrats have a permanent majority in the State Assembly and State Senate they are short of the 2/3 necessary to pass tax increases.

The Republicans have, until now, actually stood firm against tax increases. California is already one of the most taxed states in the United States.

At one point the legislature tried to pass a tax increase by simple majority, in defiance of the law. Governor Schwarzenegger appeared as if he was going to sign it until a lawsuit made him back down.

Now negotiations are going on to try to sell a tax increase to Assembly and Senate Republicans, with the promise of a spending cap and a rollback of some environmental regulations.

The unions are furious about the spending cap, and the environmentalists are furious about the regulation rollback. Meanwhile the average Republican is against any further increase in taxes. Constituents from both parties are against this deal for different reasons.

The spending cap is an interesting proposal. It's interesting in that it is indicative of a false deal that Republicans fall for so often it is cause to wonder if they are actually fooled or merely pretend to be so in an effort to appease constituents.

At the federal level, budget balancing deals usually go like this:

The Democrats propose to increase taxes now and in two years will implement spending cuts. The Republicans agree.

Two years later the Democrats have conveniently forgotten about the promised spending cuts, and any efforts by Republicans to remind them are met with "everything's different now."

The interaction is so regular and so routine it gives serious cause to wonder if the Republicans are actually fooled, or if they hope that by pretending to be fooled they can fool those who vote for them.

A better deal, if the Republicans actually support a balanced budget would be "spending cuts now, and if that's not enough tax hikes later". An even cannier move would be to conveniently forget about the tax hikes when "later" arrives.

The spending cap is just such a proposal. It will be overturned as soon as it is met unless stringent controls are put in place. These controls would need to be stronger than the 2/3 majority needed to raise taxes. It should require at least 75%, and preferably 90%, to overturn the spending cap in the face of an emergency.

Offering that sort of a spending cap will reveal just how genuine the Democrats are in their efforts to balance the budget by more than just raising taxes.

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