MATTOLE VALLEY, Calif. — From coast to coast state governors (including some Republicans) and state legislatures are wringing their hands over budget deficits, acting as if these had been caused by a sudden and random Act of God.
The cause of the deficits is more earthly: reckless spending of surpluses during the years when growth seemed unstoppable and endless. The best — that is, most egregious — example took place in California where Democrat Gray Davis inherited a surplus from his predecessor, Republican Pete Wilson in January 1999. Rather than return the surplus to the taxpayers or sock it away in a “rainy day” fund, Davis put the money into increased spending. At the time, he declared that this would involve only one-time expenditures, committing the state to no new and undue burdens. Sure.
Four years later, upon being reelected, the now-unpopular Davis solemnly declared that the surplus had mysteriously metamorphosed into a $35 billion deficit — more than the combined annual budgets of several other states.
To bring this to human scale, if your family or small business faced a deficit because of reduced income, you would look at your budget and would, as Ronald Reagan said upon becoming California’s governor back in 1967, “cut, squeeze and trim” until you got it to balance.
Republican State Senator Tom McClintock has proposed an updating of the “cut, squeeze and trim” approach with a nine percent, across-the-board cut in state spending for 18 months. He says this would eliminate the deficit. Such a strategy, however, would require reducing the state work force — mostly by attrition. Public employee unions are dead-set against such reductions. They, along with other labor unions, developers and health care entities, were among the most generous donors to Davis’s reelection campaign.
Speaking of that campaign, the news is just out that Davis raised and spent $77.8 million on his, a national record for a non-presidential campaign. Too bad he didn’t save some of it to donate to the deficit-reduction effort.
Instead, the Democrat-dominated legislature is primed to jack up vehicle license fees, which would bring in $4.1 billion this year. Davis is threatening a veto, not over some deep philosophical principle, but because it will cause voter discontent. Meanwhile the Wall Street credit raters are threatening to downgrade the state’s rating if he vetoes such legislation.
Davis & Co. are threatening counties and cities with reductions in various mandated state subsidies. Education, which already gobbles up a majority of the state’s budget, is threatened with that horror of horrors, larger class size. (This is the equivalent of a school district threatening to eliminate the high school football team the day after the school bond issue is defeated.) It should also be noted that despite California’s huge investment in education, student scores in basic subjects have barely budged in recent years.
Davis is also said to be flirting with the idea of taxing Internet transactions. Not only will this not produce hosannas in Silicon Valley where the business downturn has already cost several thousand jobs, it will also bring down the wrath of anti-Internet tax forces across the nation.
At a time like this, Davis must be wishing he’d taken the $77.8 million and deposited it in a Swiss bank account.