Monday, May 14, 2012
Surprise! It’s Worse Than Predicted!
As recently as January of this year, the state’s budget deficit was “only” $9.2 billion. It is now projected at $16 billion. The legislature had passed a budget that in theory at least would have “held the deficit line” with spending cuts and jury-rigging upward of certain state “fees.” Brown announced that he was vetoing the bill because it ignored the “hard choice” of raising income, sales and business taxes. At the time he signed the veto, he predicted that the deficit would remain about the same as he was preparing a ballot initiative which the voters could approve in June or November using his own calculations for raising taxes and cutting spending.
Brown has always been able to put his blinders on, do a few Buddhist chants, and convince himself that the real world doesn’t exist. Among the things he ignored were the cuts he did approve in state employee layoffs, reduced work hours for state employees (particularly the state prison system), cuts to state employee retirement benefits and required contribution to the pension funds for newer state employees. California has more lawyers than entrepeneurs, and Brown somehow didn’t foresee the intrusion into his plan via lawsuits, injunctions and federal interference which effectively blocked most of his cuts.
In an address during which he proclaimed that he was shocked--shocked-- to discover that the deficit had become even worse than he had imagined, Brown pandered to the public. Blaming the legislature for the additional shortfalls, he appealed to his liberal/populist base to “do what I can’t do and the legislature didn’t do.” He was talking about the not-yet completed budget proposal he will attempt to put on the state ballot for the voters to decide on.
A favorite liberal mantra came out during the speech. Do it for the children. “This [the additional deficit] means we will have to go much farther and make cuts far greater than I asked for at the beginning of the year. But we can’t fill this hole with cuts alone (most of which have not been implemented) without doing severe damage to our schools. That’s why I’m bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety.”
Brown also blamed “a crippling decade shaped by the collapse of the housing market and recession.” He neglects to mention that his fellow Democrats were instrumental in creating the economic mess he is now ostensibly attempting to fix. Businesses, the backbone of tax revenue, are fleeing California faster than bugs running from Raid. The worst thing a government can do in the midst of a recession and a lousy business climate is raise taxes, particularly taxes which make it more difficult for small and medium-size businesses to survive.
Brown proposes across-the-board tax increases as well as the ever-popular “millionaire’s” surtax. Like Barack Obama and the other Democrats, Brown simply doesn’t comprehend that those “millionaires” are largely business people whose income includes the income from the businesses that the taxes are crippling. Never having owned or run a business of his own, Brown is like most theorists who think “income” is the same concept as “salary.”
Most of the cuts he has proposed seem big (it’s a BIG budget), but they treat very gingerly the major source of the original and ongoing deficits—public employee benefits. That would be the public employees who are also union members, the unions being Brown’s single largest campaign contributors. The unions showed their gratitude during the first round of cuts by suing Brown and the state to retain all their bankrupting benefits and wage guarantees.
Now it’s important to be aware that Brown says that all the tax increases would be temporary. Temporary like the federal telephone excise tax that first went into effect during the Spanish-American War. Brown says that his temporary tax increases, if approved by the voters, would raise an additional $9 billion. Well, we already know how good his estimates are. The nonpartisan State Analyst’s Office says it would be more like $6.8 billion, and assumes that the economy will get no worse and not another single major employer will leave the state. Unless Brown is planning on deploying the California National Guard to the state borders, the business exodus will continue on an accelerating basis and net tax revenue will continue to decrease.
To punctuate his veiled threat if the voters don’t approve his ballot proposal, Brown says “I have a contingency plan which would automatically result in shortened kindergarten through twelfth-grade school schedules, as well as higher college tuitions at the state institutions.” I can’t help thinking that getting the kids out of the failed public schools and into the real world might actually be a true learning experience.
As a semi-related note, I can’t help mentioning that Brown is in some ways more successful than Barack Obama. Remember my articles about Goodwin Liu, the leftist UC Berkeley law professor whom the US Senate twice rejected for a seat on the Ninth Circuit Court of Appeals? Well, don’t cry for Liu, Argentina. Brown nominated Liu for a seat on the California Supreme Court, and he was unanimously confirmed this past September. Now, both the US Constitution and the California State Constitution are in danger.