Friday, June 4, 2004
Page 7
CALIFORNIA COMMENTARY (Column)
Are We to Repeat the Mistakes of the Davis Administration?
By JON COUPAL
(The writer is an attorney and president of the Howard Jarvis Taxpayers Association.)
For two-and-a-half decades, moviegoers have known Arnold Schwarzenegger as a man of action. But when this bigger than life image decided to turn his full attention to politics, even his most ardent supporters accepted that he would be unable to match the frenetic pace of his film exploits.
Yet, six months after wading into the quagmire that is Sacramento politics, even the governor’s sharpest critics begrudgingly express admiration for the robust energy with which he is attacking the state’s problems. Anyone who even skims the headlines knows that Schwarzenegger promptly repealed Gray Davis’s increase in the hated car tax and then immediately went to work on reforming workers compensation.
Although his adversaries (mostly trial lawyers) were initially smug about being able to stop the reforms, Arnold quickly triangulated the issue with a threatened initiative measure. His compromise quickly became the lesser of two evils readily adopted by the Legislature’s Democrats. It was a stunning strategy for a political novice—but not, perhaps, for a seasoned chess player.
In addition to addressing the “crisis” issues, he has also committed himself to major initiatives that would reorganize government, eliminate duplication and waste, and make government more user-friendly and accountable.
These accomplishments have no doubt contributed to Schwarzenegger’s exceptional popularity as measured by several polls, including the Field Poll which tends to reflect a slightly liberal bent. But despite the accomplishments worthy of a true action hero, for taxpayers it is the state budget where the rubber meets the road.
The Governor’s budget passes the most important litmus test: It rejects the idea of tax increases. In spoken and written word, Schwarzenegger has rightly taken tax increases off the table. He understands that, both politically and from a policy perspective, tax increases would inflict incalculable damage to California’s recovery.
Why then, despite all this good news, are taxpayers still nervous? One reason is that the proposed 2004-05 budget does not aggressively deal with the “structural” deficit, meaning that expenditures still exceed revenue. Under Davis, the structural deficit was huge—$25 billion or higher. Under the Terminator, the structural deficit is shrinking, but it is still there. In short, we are still digging ourselves into a hole.
The current budget also relies on a number of bookkeeping finesses, one time cash infusions such as the $1.3 billion anticipated from a tax amnesty program, using $3 billion of the Prop 57 bond, other borrowing and agreements the governor has made with cities and the education establishment that they will accept cuts now in return for even greater rewards in the future. If these obligations are to be taken literally, it amounts to borrowing now, for repayment in the future when the economy is again humming along. But is this a realistic assumption?
Schwarzenegger can get away with this because he has presented a plan—which he calls a “soft landing”—for getting spending into alignment with revenue in the out years. Critics complain that Schwarzenegger has pulled some of the same accounting maneuvers as Gray Davis, only on a smaller scale.
The response to this is that credibility is everything (perception becomes reality) and the Terminator has already conquered workers comp and the car tax. When he says he can balance the budget in the out years without tax increases, people believe him. Certainly, his focus on attracting and keeping businesses in California bodes well for the revenue side of the equation.
But fiscal conservatives would still like to see deeper cuts—not because they dislike the programs likely to be trimmed, but because they are better students of history than their liberal counterparts.
First, the sooner the budget gimmickry ends, the less likely these gimmicks are to become ingrained as accepted norms in the budget process. Second, a rapid alignment of spending with revenues by cutting spending will spur the spending lobby to embrace the Governor’s long-term reforms, including a massive reorganization and his California Performance Review project. If the Governor rejects tax increases and John Burton realizes that the only way we will increase social spending is to improve the business climate, protect property rights and make government more efficient, guess what happens?
Taxpayers’ advice to the Governor is simple: Listen to your own words and don’t spend more money than we have. The sooner California cuts spending to a level equal to our ongoing tax revenue—without borrowing or gimmicks—the sooner we will have a real picture of where we are and where we need to go.
Copyright 2004, Metropolitan News Company