Fiscal liberalism has tarnished California gold

[Marcus Bryant]

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/08/AR2010010803593.html?nav=rss_opinion/columns

[Winehole23]

The process by which reformers seek to replace private responsibility with the fees, fines and services of a paternalistic state, is finding its bottom in California. I think it's sad, both for California and for us, but mostly for California. Hopefully it leads to something more sustainable over the long term.

http://online.wsj.com/article/SB124692354575702881.html

[boutons_deux]

http://www.alternet.org/images/site/logo.gif
Tax Cuts Killed California

By Steven D., Whiskey Fire
Posted on January 11, 2010, Printed on January 11, 2010
http://www.alternet.org/bloggers/http://whiskeyfire.typepad.com//145056/


Once upon a time, there was a Golden State which had the arguably the best public schools and the best public higher education system of state colleges and universities. People longed to move there for its natural beauty, its climate, its good schools, its many jobs in the entertainment, defense and high tech industries, etc. Was it a perfect state? Far from it, but it did seem to be the place everyone wanted to be -- once upon a time.
Now? Not so much. You might even call it an unmitigated disaster, a failed state, one that is, for all practical purposes, ungoverned and ungovernable (http://www.sacbee.com/topstories/story/2448258.html).

Gov. Arnold Schwarzenegger unveiled an $82.9 billion state spending plan today that calls for no tax hikes but envisions pay cuts for state workers, reductions in services to California's neediest residents - and relies on the benevolence of the federal government. Well, the economy is bad. Times are tough. Yet I live in a state (New York) which, despite its fiscal problems (http://www.businessweek.com/news/2010-01-06/new-york-s-paterson-warns-of-deficit-seeks-new-ethics-rules.html), still manages to fund social services, good public schools, a good public higher education system, and provide all the other essential government assistance without massive layoffs or cuts. New York State has an $8 Billion deficit this year, but that's less than half of the budget deficit faced by California. New Yorkers suffer from high unemployment, but the values of our homes (at least those among us who don't live in super rich enclaves like the Hamptons or own condos in Manhattan) haven't gotten flushed down the toilet.
How did this all come to pass? How did New York manage to avoid a California budgetary collapse? Well, for starters, New York wasn't subjected to the grand conservative social experiment known as Proposition 13, a provision that, once approved, altered California's Constitution making it impossible to raise tax revenues and thus do what Government needs to do -- provide for the general welfare of its citizens.

Under Republican Gov. Earl Warren and Democratic Gov. Pat Brown, California epitomized the postwar American dream. Its public schools, from kindergarten through Berkeley and UCLA, were the nation's finest; its roads and aqueducts the most efficient at moving cars and water -- the state's lifeblood -- to their destinations. All this was funded by some of the nation's highest taxes, which fell in good measure on the state's flourishing banks and corporations. [...] ... With the state sitting on a $5 billion surplus, frustrated Californians grumped to the polls and passed Proposition 13, which rolled back and then froze property taxes -- effectively destroying the funding base of local governments and school districts, which thereafter depended largely on Sacramento for their revenue. Ranked fifth among the states in per-pupil spending during the 1950s and '60s, California sank to Mississippi-like levels -- the mid-40s -- by the 1990s.
Since 1978, state and local government in California has been funded chiefly by personal income taxes. Bank and corporation taxes have been steadily reduced. In the current recession, with state unemployment at 11 percent, tax revenue has fallen off a cliff.
But the problem with Proposition 13 wasn't merely that it reduced revenue. It also made it very difficult to increase revenue. Raising taxes now requires a two-thirds vote of the legislature, though in 47 other states a simple majority suffices. California has become overwhelmingly Democratic in the past two decades, but Republicans have managed to retain footholds -- representing just over one-third of the districts -- in both houses of the legislature.
So what was a bad situation for the rest of the country (brought about by the Federal Government's deregulation the financial industry -- but that's another story) was made much worse in Sunny California. Because a bare minimum of legislators, ideologues for the most part, is all you need to turn hard times into a financial catastrophe of epic proportions. All because of a myth that Government is always bad and taxation is always evil.

The current Republican crop has refused in good times as well as bad to raise business or other taxes (increasing the tobacco tax, for instance, has failed each of the past 14 times it has come up for a vote). Abetted by little local Limbaughs who inflame Republican brains, they protest that the state already has the nation's highest taxes. In fact, California ranks 18th among the states in percentage of personal income paid to state government, and its presumably beleaguered wealthiest 1 percent, according to Citizens for Tax Justice, pays just 7.4 percent of their income to the state, while the poorest Californians pay 10.2 percent. But the myth of soak-the-rich high taxation persists among Republicans -- so much so that the GOP front-runner to succeed Arnold Schwarzenegger in next year's gubernatorial election, former eBay CEO Meg Whitman, is calling for cuts in business tax rates even though the state is staring at a $21 billion deficit that it somehow has to close. In short order, unless the federal government steps in with a bridge loan, the state will throw 940,000 poor children off its health-care rolls and lay off tens of thousands of teachers.
In a way I pity Arnold Schwarzenegger. By most standards he is a fairly moderate Republican. But he's hamstrung by his own party, which is far more radical than he is, and by the effects of Proposition 13 which makes it impossible for him to deal with California's present economic crisis in an effective manner.
He can't raise taxes to provide spending to stimulate the economy because it would never pass the legislature. So he is forced to look for tricks to get around the budget crisis he faces -- cruel tricks for all the people who are employed by the state of California, or the kids that attend its schools, or the people who rely on social services for their health care -- while also hoping (and begging) for assistance from the Federal Government led by President Barack Obama and the Democrats in Congress, will come riding in on it's white horse to save the day, or at least keep California from drowning in its own self created sea of red ink for another year.
And you wonder why Progressives laugh at Tea Baggers and other Conservative Republicans who mindlessly continue to repeat their mantra that cutting taxes is the only way to save the economy? Hey, we've seen that disaster flick played out in real life in the state that gave us Hollywood, and frankly the story doesn't have a happy ending.

© 2010 Whiskey Fire All rights reserved.
View this story online at: http://www.alternet.org/bloggers/http://whiskeyfire.typepad.com//145056/

[Winehole23]

If you don't offset with spending cuts, or tax hikes, yeah, that can happen.

The focus on Prop 13 is entirely appropriate, too. One might have suspected in advance that the universe where you continually demand more services and benefits and never, never authorize taxes to pay for it all, couldn't last forever,

[EmptyMan]

I wonder how many of the people actually paying for the benefits even want the benefits...

[Winehole23]

I wonder how many of the people actually paying for the benefits even want the benefits...You've never been to California, have you?

[boutons_deux]

CA wing-nut tax-cutters, representing/financed by the wealthy, used fixed-income senior being property-taxed out of their homes as a smoke-screen to cap property taxes on everybody, which includes the super-wealthy.

TX was just as humane, but smarter (or their wing-nut tax cutters were more stupid), by selectively protecting only seniors by freezing their property taxes when they reached 65.

[Winehole23]

How clever.

[EmptyMan]

One of the biggest economies in the world and tax-cuts are the problem LOLOLOLOLOL

[TeyshaBlue]

CA wing-nut tax-cutters, representing/financed by the wealthy, used fixed-income senior being property-taxed out of their homes as a smoke-screen to cap property taxes on everybody, which includes the super-wealthy.

TX was just as humane, but smarter (or their wing-nut tax cutters were more stupid), by selectively protecting only seniors by freezing their property taxes when they reached 65.

So, you have no idea why Prop 13 was put together anyway. I understand.

[TeyshaBlue]

So, you have no idea why Prop 13 was put together anyway. I understand.

And please, continue to completely "forget" the massive 7 billion tax increase brought by Pete Wilson in '91.:lol

[TeyshaBlue]

If you don't offset with spending cuts, or tax hikes, yeah, that can happen.

The focus on Prop 13 is entirely appropriate, too. One might have suspected in advance that the universe where you continually demand more services and benefits and never, never authorize taxes to pay for it all, couldn't last forever,

But tax revenues were not stagnant. They increased somewhere between 10 - 12% in the 80's. However, over the same time period, the state budget went from 55 to 97 billion....that's one hell of a budget growth rate.

[Winehole23]

Sure. "Never never" was meant archly, not sincerely.

[TeyshaBlue]

Sure. "Never never" was meant archly, not sincerely.
:depressed Ooops! Sorry. :oops

[Marcus Bryant]

The focus on Prop 13 is entirely appropriate, too. One might have suspected in advance that the universe where you continually demand more services and benefits and never, never authorize taxes to pay for it all, couldn't last forever

Essentially what we have at the federal level. CA is just finding it difficult to finance their deficit. That time will come for the feds soon enough.

Of course, it makes sense - as something for nothing is never a hard political seller. So is 'gittin' tuff on krime.'

There are limits to public spending - either you run out of lenders or the taxpayers leave. It's one thing for Cali to lose them to other states. We'll know things are bad in this country when people start leaving, or we're unable to attract the well educated from around the world who want to make a $. In some respects that's already happening. At some point the welfare state drives away the productive.

[EVAY]

Essentially what we have at the federal level. CA is just finding it difficult to finance their deficit. That time will come for the feds soon enough.

This is true, and it is as predictable at the federal level as it was in California's. Isn't this just arithmetic?

When it takes a super-majority to increase taxes but a simple majority to increase services and the resulting expenditures, doesn't that essentially doom any result OTHER than what California is experiencing?

How can the folks in California be surprised at any of this?