Facing a growing revolt over his previous budget cuts, including the devastating cuts to public schools, Arnold Schwarzenegger's May Revise 2010 takes a very different approach to insane and reckless spending cuts than was proposed back in 2009. Understanding this difference is key to defeating him.

In 2009, Arnold's cuts hit everyone, and hit everyone hard. Well, everyone except the rich, who Arnold believes should be immune from being asked to contribute to solving the budget crisis. The middle-class saw services cut, particularly schools. State parks were slated for closure, and local government funds were stolen.

In response, a backlash has formed here in 2010 on all fronts. Proposals such as AB 656 (oil severance tax for higher ed) and the simply brilliant Stop the Cuts video starring Megan Fox and denouncing education cuts are just two pieces of a much broader public revolt against education cuts that's brewing. Another overt cut to education would have turned that revolt into a major political force that would threaten the low-tax privileges of the wealthy.

And while schools are still getting hit - they need restored funds, and without federal stimulus aid Arnold's 2010-11 budget is a /de facto/ cut to schools below their 2009-10 allotment - Arnold isn't cutting any deeper, realizing that a middle-class revolt against Republicans and against budget cuts would be very bad for the right-wing shock doctrine agenda.

Similarly, state parks are going to get full funding, after a year where mass closure was proposed. That mass closure fueled a state parks initiative, based on a John Laird proposal, that would increase the vehicle license fee to fund state parks AND let Californians go to the parks for free. Another cut to the state parks budget would have guaranteed that initiative's success (it's likely to pass anyway), just as another raid on local government funding would guarantee passage of a new initiative to permanently ban state raids on such local funds.

And all of this has begun to fuel widespread public support for rolling back the corporate tax breaks that were scandalously demanded and won by Arnold during the 2008 and 2009 budget deals. Worth noting, of course, that Meg Whitman wants to enact similar tax breaks should she become governor.

What this shows is that the way to counter a right-wing shock doctrine is to reject it, say "no" and organize people to fight back at the ballot box. Facing this revolt, Arnold has taken a very different approach to his 2010-11 budget: *hurt the poor.*

Now it must be said that it's not just the poor who will suffer under this budget. But the budget cuts are quite obviously calculated to hit those Californians without a voice, who are seen as marginal, whose funding can be cut with the least public outcry. The elderly who will lose some or all of their IHSS benefits and the children who will lose health care services are not necessarily "poor"; those cuts will hit the middle-class as well.

But the biggest cut, the elimination of CalWORKS, is designed to wedge the middle-class and the working- and underclass apart from each other. It's a replay of the "demonize the poor" tactic that worked so well for Reagan in the '80s and Republicans in the '90s. Arnold is implicitly telling the middle-class "either you screw these poor families or we're cutting something you want" and counting on the middle-class to react the same way they did in the '80s and '90s - by saying "go ahead, we won't stop you."

CalWORKS is itself a shell of its former self. Cuts in 2008 and 2009 have already reduced the maximum grant to a lower number than a family could receive in 1989, despite the fact that the cost of living is much higher today - and despite the fact that we're in a recession. The elimination of CalWORKS and Temporary Assistance to Needy Families is going to cause widespread suffering among many families, especially to children, and will make it more difficult for many Californians to find work, dragging down our state's economic recovery and in turn worsening the budget deficit.

We can't fall for Arnold's wedge. Arnold is shifting tactics because he's scared of us - scared of the public reaction against three years of austerity. Now is the time to ramp up the attack on that austerity, to move beyond tired old Reaganite claims that there's some difference between the needs of the middle-class and the needs of the poor. Many middle-class families have benefited from the very safety net programs Arnold now proposes to cut or eliminate, and many more middle-class families benefit - at their jobs and businesses - from less fortunate families having at least some state assistance.

One of the scariest things to a Republican - especially a corporate Republican like Arnold Schwarzenegger - is an alliance of the middle-class, the working-class, and the poor against their policies that favor the rich. Austerity budgets are merely reinforcing the fact that those groups see they have common interests, especially as 30 years of neoliberal economics have begun to obliterate the old divides between the non-wealthy classes as everyone is watching their standards of living fall, watching their future evaporate before their eyes.

We've got Arnold on the run. Now is the time to come together to defeat him and his budget plans for good. Californians want prosperity, not austerity. Let's give it to them.

Later today Arnold Schwarzenegger will release his "May Revise" of his proposed 2010-11 state budget. It is going to be an extremely cruel and destructive proposal. But it will be defended as a necessity given the economic times and the resulting collapse in tax receipts.

That is precisely the *wrong* kind of thinking to use at this time. This latest round of Hooverism will be an economic catastrophe for California, in addition to the human toll it will take. If California does not embrace new revenues to fund the services and jobs we need to produce economic recovery, then California faces a catastrophic slide into a prolonged depression.

The problem we face is that few in Sacramento or in the media have adapted their thinking to this new crisis. They're still locked in the outdated thinking of the last 30 years, which says that if we just cut back on spending, somehow economic recovery will magically appear, and that the spending cuts have no relationship to said recovery.

But it is extremely difficult to see how there can be any economic recovery if we've laid off 30,000 teachers and raised tuition at public colleges and universities to unaffordable levels, destroying the education of an entire generation. The same goes for taking away health care from children and the elderly - someone has to pay those costs, and if it's coming out of family budgets, that reduces their ability to spend money and therefore acts as a drag on the economy.

Austerity budgets like this are inherently deflationary. They make it harder, not easier, to produce economic recovery. They make it harder, not easier, to deal with California's debt problems, small as they are.

And they will merely worsen future budgets. It's no accident that this is the fourth summer in a row where budget cuts are being seriously proposed. The cuts begun in 2007 have produced a downward spiral, where the economy worsens due to lack of state support, causing deeper declines in tax revenues and therefore exacerbating the budget shortfall.

In a situation like this, someone has to pay to close the gap. Arnold Schwarzenegger believes it must be the poor, the sick, the young and the old who must pay. Why? In order to prevent the wealthy and the large corporations from paying.

By closing corporate tax loopholes and raising other taxes on those with high incomes, California can just about close the entire $20 billion deficit expected to be announced today. We can close it without making any further cuts to schools and health care services. We can close it without causing long-term damage to our economy.

The usual argument, of course, is that such tax increases will cause large employers to not hire workers. I'm skeptical that would be the case, and the evidence suggests it won't be the case. In 1991 California pushed through billions in tax increases. It didn't prevent economic recovery from taking hold soon thereafter, and didn't prevent the 1990s boom from taking place. In April 2009, taxes went up in California, and it did not worsen the recession, nor has it prevented a slow and halting recovery from beginning.

But there's a more fundamental issue that needs to be dealt with regarding the question of taxes and jobs. The current budget process, where taxes on large corporations are kept at all-time lows and forcing devastating cuts to services, favors the big businesses over the small ones. It's those small businesses that need our support. Those are the businesses that create jobs, that keep money in the community and in the state, and that ultimately will provide the basis of a 21st century economy in California.

California isn't Greece. We don't need to follow this road to ruin. Instead, by rejecting the concept of spending cuts as well as the specific cuts that will be proposed today, we can begin to provide economic recovery to California and position ourselves to lead the 21st century economy while providing prosperity for everyone.

Is the Tranquillon Ridge offshore drilling proposal dead? That's the word coming out of Sacramento today as Governor Arnold Schwarzenegger told reporters that he will no longer support the project. From KQED's John Myers, who has really established himself as one of the state's leading reporters, going from moderating the Whitman/Poizner debate last night to being the first to report on this scoop via Twitter:

Big news. Schwarzenegger officially removes support for Tranquillon Ridge oil drilling project..based, he says, on Gulf oil spill.

Schwarzenegger says of Gulf spill: "That will not happen in CA." His rejection of T-Ridge probably kills the project.

Schwarzenegger's rejection of the T-Ridge oil project also means an extra hole - $200 mil - in the #cabudget that he'll need 2 fill.

"Why would we want to take that risk?" Schwarzenegger says in response 2 reporter's question about abandoning T-Ridge oil project.

Similarly, Lt. Gov. Abel Maldonado told his Assembly confirmation hearing he wasn't likely to support Tranquillon Ridge. A spill there would have devastated much of his former State Senate district's coastline. Maldonado now has a seat on the State Lands Commission, and now that he's joined by his BFF Arnold in opposing T-Ridge, it's very unlikely the proposal will go anywhere anytime soon.

But is John Meyers right - is T-Ridge dead? Meg Whitman has supported offshore drilling recently, but with the Louisiana spill she might be joining Arnold in reconsidering that support.

It remains to be seen whether PXP, the Texas oil company backing Tranquillon Ridge, will abandon their plans. It also remains to be seen whether EDC, the Santa Barbara environmental group that has controversially agreed to back the Tranquillon Ridge project, is reconsidering their stance in light of the Gulf disaster that has already brought back memories of the 1969 spill in Santa Barbara.

It's obvious now that the offshore drilling bubble of public support has burst, and not a moment too soon. Offshore drilling was always an unusually bad idea, a destructive way to avoid the need to develop alternative, renewable, clean energy to power economic recovery and prosperity in the 21st century. Let's hope Arnold's abandonment of support for T-Ridge means the proposal finally dies.

UPDATE: The Sacramento Bee has some good quotes from Arnold:

"I think that first of all, it's clear that we have to make up that $100 million a year that we (would) make from that," he said. "But if I have a choice between the $100 million and what I see in the Gulf of Mexico, I'd rather just figure out how to make up for that $100 million."...

"I think that we all go through the endless amount of studies and research and everything, and before you make a decision like that, you are convinced that this will be safe," the governor added. "But then again, you know, you see that, you turn on television and see this enormous disaster and you say to yourself, why would we want to take that risk?"

It's one of those rare, rare moments, but Arnold is absolutely right. Why on earth would California want to take this risk? Offshore oil drilling is a dangerous and now obsolete practice that belongs in the past. We need to hold a firm line against it and ensure that existing rigs come down as soon as possible.

Arnold Schwarzenegger has released what is, mercifully, his final budget. It is a shocking "fuck you" to the people of California, a brazen hostage taking that proposes to eliminate basic social services unless the feds pony up $7 billion dollars. Even if they do so, Arnold plans to propose the same cuts that were rejected by the voters and the courts in 2009. This budget, more than any other proposal he has offered since he became governor in late 2003, shows the massive contempt Arnold Schwarzenegger has for his fellow Californians.

Although we may seem used to this kind of thing, the full details show just how horrifying and thuggish this governor and his budget are. It is a budget designed to protect the wealthy by making everyone else suffer, by driving the economy deeper into recession and strangling what little economic recovery we have witnessed.

• Massive cuts to (and essentially, the elimination of): CalWORKS, IHSS, Healthy Families. The IHSS cuts were done last year and have been blocked by the courts; Arnold's contempt for the law continues to know no bounds

• However, if the feds come through with $7 billion, the above can be spared. The other cuts described below, however, would happen anyway

• Changing gas tax to an "excise tax" to enable state to make further cuts to public transportation, part of Arnold's war on public transportation and his desire to shackle Californians to their cars, to rising oil prices, and to his oil company buddies - and would force $2 billion in further cuts to schools under Prop 98

• Raiding Prop 10 and Prop 63 funds *even though voters rejected this in May 2009*

• Approving the Tranquillon Ridge offshore oil drilling project and giving the funds to state parks, partly to block the ballot initiative to raise the VLF to fund parks

• $1.2 billion cut to school administrators. Before you say "but admin is bloated" - most school administrators are making $50K-$60K if that, and are basically solidly middle-class folks looking to make ends meet

• 14% pay cut to 200,000 state workers, though their furloughs would end

• $1.2 billion cut to prison medical care, even though the federal courts have said this is not possible

• No Medi-Cal benefits to legal immigrants who have been in the US less than 5 years, Healthy Families eligibility slashed to 200% FPL, elimination of adult health daycare

• No new taxes, and preservation of the indefensible corporate tax cuts made in the 2008 and 2009 budget deals

And a host of other things that have likely not yet come to light.

This budget is Arnold's parting shot - literally - to the people of California, his effort to prove that he really is, as David Dayen put it yesterday, "the worst, absolute worst chief executive in national history."

In the wake of Arnold's State of the State address, most legislators made silly and obsequious statements to the effect of "we like what Arnold had to say, we can work with him!" One of the only legislators to give a proper response was Ted Lieu, who equated the prison privatization plan to Blackwater and pointed out that many groups, including religious groups, are vehemently opposed to private prisons.

Will Sacramento Democrats fold in the face of this crappy budget? Or will they follow Ted Lieu's lead, and House Speaker Tip O'Neill's lead from the 1980s, and declare Arnold's budget DOA? Refuse to even consider it?

There may be signs that the Sacramento Democrats have found their spines. According to Capitol Weekly Senate President Pro Tem Darrell Steinberg's response was "you have got to be kidding" and "we are going to take a different approach." That's a start, but Steinberg needs to reject this out of hand.

Progressives and Democrats across the state will be watching their legislators very closely and carefully in the coming weeks and months to ensure they take a strong, firm stand against this reckless and insane budget. California Democrats will have a very, very difficult time motivating their base to show up in November if they yet again give in to Arnold's thuggery. It's time they stood up and said "no" in a firm, loud, and collective voice.

Arnold Schwarzenegger wrote a letter to California's Congressional leaders today about health care reform. Most of it is a long extended whine about the feds not offering enough money to states to provide for health care, since Arnold believes California should not be spending much money to help people get health care.

But there's also an interesting proposal from our governor about the public option. Basically, he wants to use the "opt-out" as an opportunity for California to design its own public option, one that would benefit fewer people than the federal option:

In terms of state coverage options, I support the inclusion of language that will provide states the option of developing state-based insurance options for people with incomes above 133 percent of the federal poverty level but below 200 percent. I believe this provision can be strengthened and made more effective by allowing states, especially those with higher costs of living, to serve populations up to 300 percent FPL, providing states access to at least 95 percent of the tax credits and cost-sharing subsidies available for eligible individuals in the state and ensuring sufficient state flexibility to enable continuity of care between Medicaid and the state-based option. Providing states with the flexibility to set eligibility to 300 percent of the federal poverty level recognizes different cost structures across states and is more consistent with existing income eligibility thresholds allowed under the federal children’s health insurance program, which will help support the policy goal of keeping families together for health insurance purposes.

Finally, creating transparent and user-friendly health insurance exchanges at the state level can help facilitate the enrollment process. At the same time, I believe these state-based exchanges must be more than simple clearinghouses of information, but instead allow states to certify plans and negotiate within broadly established federal parameters to help promote competition among health plans. I also continue to believe that states must remain the primary regulator of health insurance in order to maintain the strongest consumer protections possible.

What this means is that Arnold Schwarzenegger would have California exercise the opt-out in order to design a "public option" much more restrictive in who it is available to, provided in state-based exchanges instead of through a national system. Alongside protecting the customer base of his insurance industry allies, this would also enable California to force the people who would want a public option to jump through a number of hoops designed to discourage them from actually getting the benefit, as California now does with things like IHSS, food stamps, and such.

Some may argue that California would never go for this kind of "Arnold option," but let's consider some things here. First, the Senate language regarding the opt-out has yet to materialize. Arnold may well be mainstreaming right-wing and corporate talking points that could be used by conservadems in the Senate to shape the opt-out in a way that would have the program more closely resemble the Nixonian "block grants" that have given states too much power to restrict federally-mandated benefits. In short, Arnold might be saying "hey, here's how the opt-out should look!"

Arnold may also be setting up the language and framing that could be used by Republican gubernatorial candidates to deal with federal health care reform. In a state where the public option concept is popular, Arnold could be showing how the public option could be neutered in practice while preserved in name.

In a state that has gutted much of its public sector over the last two years, with bipartisan support the entire time, it's a strategy worth watching closely. Especially since the outcome of the federal health care reform project now appears to be a shifting of the battleground to the states.

UPDATE by Robert: John Myers reports via Twitter that "Guv's ofc says his health care letter should not be interpreted as support for opt-in/opt-out public option" and that, quoting a governor's office spokesperson, Arnold "is calling for state-based insurance options to offer coverage for lower income populations not eligible for Medicaid."

Late last week we learned that California's unemployment rate dropped 0.1% in September, from 12.3% to 12.2%. That stat obscures far more than it reveals, including the fact that the 12.3% rate for August was an upward revision of the earlier reported number.

More significantly, the stat is not an accurate reflection of the job market in California. We actually lost 39,000 jobs in September. The only reason the rate appears to have dropped is that a significant number of the long-term unemployed have stopped looking for work and are no longer counted as "unemployed.

Nearly 1/3 of those lost jobs came from the public sector, as Steven Levy explained:

The state's job losses were especially pronounced in construction, which lost 14,100 jobs over the month, and government, which lost 12,700.

Cutbacks in government employment, which includes public schools, are partly to blame for the state's lackluster performance this month, said Stephen Levy of the Center for the Continuing Study of the California Economy.

"We are disproportionately hit in the government sector because our state and local governments are having worse budget shortfalls than in other states," he said. (LA Times, 10/17/09)

As Atrios said, that's not the way it's supposed to work. Government needs to be the employer of last resort, especially in a state that has the highest unemployment levels in 60 years. When 12,700 government employees lose their jobs, that translates into less consumer spending, which in turn means pressure to lay off more workers, all of which results in less tax revenue for the state, which merely exacerbates the vicious circle.

Yet Arnold Schwarzenegger simply doesn't care about the unemployment crisis. Instead of working to create private sector jobs through the preservation and expansion of public sector jobs, Arnold has engaged in a right-wing shock doctrine attack on the basic services of the state, an attack that was never going to succeed before the recession hit.

Once upon a time conservative Republicans claimed job creation was their #1 task, and that we had to give corporations whatever they wanted to create jobs - tax cuts, regulation cuts, etc. California did so - and as a result we have a far larger recession and unemployment numbers than we've ever had when Big Government supposedly ruled our political economy.

Today, you'll hear nary a peep out of the Republican Party about jobs. Sure, the Cal Chamber will publish its list of "job killer" bills, but that's only the public excuse to give Arnold the reason he needs to veto bills he'd have vetoed anyway. Instead you have a party that simply does not care about unemployment and the jobless. Instead, to hear Chuck DeVore tell it, the unemployed should just leave California.

California Republicans see unemployment as an unalloyed good, something to be embraced as a tool to destroy what remains of the New Deal and create a working class utterly dependent upon and unable to resist corporate power. California's economic policy has become nothing short of kleptocracy, justified by a constant media drumbeat demanding greater spending cuts, apparently for their own sake.

It is up to Democrats and progressives, then, to make the case to California that jobs matter, that jobs are what this state desperately needs, and that Republicans have not just given up on providing jobs, but are actively cheerleading unemployment and attacking the jobless.

Of course, we don't need jobs for their own sake. We need quality jobs, jobs that pay a living wage, jobs that are sustainable and not dependent on the latest asset bubble Ponzi scheme. And just as we learned in the 1930s, we need government to step in and provide them - instead of actively destroying them.

Six years ago this month, California voters threw out an unpopular governor amidst a recession and a severe budget crisis, replacing him with a Hollywood action star who promised to fundamentally change the way the state does business.

Instead the people of California got a governor who actually is as a bad as Gray Davis was incorrectly assumed to be. And finally, the public realizes just how bad he is. The latest Field Poll shows a state that is fed up with the failure currently occupying the governor's office. Only 27% approve of Arnold Schwarzenegger's job rating, and 65% disapprove.

The lowest approval rating Gray Davis ever sustained was 22% in August 2003, 2 months before he was recalled. And that remains the lowest approval any CA governor has sustained since at least 1958 (Field Poll doesn't offer stats before that year). Arnold Schwarzenegger is now in Davis territory.

This will likely spark more talk in the comments of a recall of Schwarzenegger. But in fact, such a recall is scheduled, just 385 days from now. The November 2010 election will be California's chance to decide whether they want to continue Arnold Schwarzenegger's policies in the form of either Meg Whitman, Steve Poizner or Tom Campbell.

It would be nice if the Democratic candidates offered a meaningful change away from Arnold's policies of "cut for cuts' sake, no matter the damage it does to our economy" and his overall right-wing approach to governance. Jerry Brown might have signed AB 98 but he has stated his preference to continue the totally failed Schwarzenegger "no new taxes" policy that is wrecking our state's finances and our economy. Gavin Newsom has made some interesting statements about the need for structural reform, but he has yet to offer a specific solution to the economic and financial crisis.

Which is unfortunate, because Californians clearly, desperately, want change. The candidate that offers a different and better path than the failed legacy of Arnold Schwarzenegger will be the one to sweep into the governor's office in January 2011 with a mandate for change.

We'll see if there is any such candidate willing to step up and play that role.

Yesterday was the deadline for Governor Arnold Schwarzenegger to veto or sign nearly 700 bills passed by the Legislature. It was a mixed bag, with some great news for the cause LGBT rights but some very bad news for health care reformers and women across the state.

Among the vetoed bill was AB 98, which would have mandated that all health insurance plans offer maternity coverage. The governor's veto message:

Maternity coverage is offered and available in today’s individual insurance market. Consumers can choose whether they want to purchase this type of coverage, and the pricing is reflective of that choice. While the perfect world would allow for all health conditions to be covered, including maternity, I cannot allow the perfect to become the enemy of the good.

This is, as I noted back in March, is untrue:

When Wendy Root Askew of Monterey started looking for a doctor she hoped would be her gynecologist as well as deliver her future children, she was shocked to discover her health insurance policy didn't include a single OB/GYN in her county.

The 31-year-old considered changing health plans. But then she learned that while 85 percent of the plans available in Monterey County offered maternity coverage five years ago, just 15 percent offer it now.

She found only two individual policies that included maternity, but they were three to five times as much as the policy she already had and came with annual deductibles of up to $15,000.

Wendy is a very good friend of mine. And now she, like women across the state, have fallen victim to Arnold Schwarzenegger's greed.

Given his veto of AB 98 and a number of other similar bills designed to produce meaningful health care reform, it was somewhat surprising to learn early this morning that the governor signed two bills advancing the cause of LGBT rights, including a bill he previously vetoed. The governor finally signed the bill declaring May 22 as Harvey Milk Day. And even more importantly, he signed Sen. Mark Leno's SB 54 allowing California to recognize same-sex marriages performed outside the state. If a same-sex couple gets married in Massachusetts, under this law, that marriage will be recognized as valid in California. Equality California did some excellent work on both of these bills, and deserves credit for getting them signed.

We can expect right-wingers to challenge that law as well, as part of their campaign to take away rights from LGBT Americans.

Ultimately this very mixed record on bill signings shows us how much damage Arnold Schwarzenegger has done to California - and how much better a governor he could have been. As we begin to look toward the 2010 election, when we will pick Arnold's replacement, progressive Californians should seek candidates who will embrace LGBT rights and health care reform at the same time - for we need both at once if we are to have a progressive state that cares for and respects the rights of all its people.

That headline needs to be tattooed on the foreheads of every politician, journalist, and pundit in this state. The PPIC poll leaves no doubt about the public's dislike for the governor and his insane, economically ruinous policies that cause direct harm to children, the sick, the disabled, and many others:

The PPIC Survey, which began before an agreement was announced on the state budget on July 20 and concluded just afterward, finds Governor Arnold Schwarzenegger’s approval rating at a record-low 28 percent. Approval of a California governor has not been this low since August 2003 (26% approve, 67% disapprove), when then-Governor Gray Davis was facing a recall and budget standoff with the legislature. The governor’s approval rating for handling environmental issues has also declined (35% approve, 43% disapprove) since last July (46% approve, 36% disapprove).

That's George W. Bush territory. Schwarzenegger's overall trajectory in office closely resembles the reviled former president: elected under dubious circumstances, he won Democratic support for stupid economic and fiscal policies that have produced a severe recession characterized by high unemployment. Of course, Bush had the power to run deficits to prevent spending cuts - Arnold doesn't, and in his desire to destroy the services that made California prosperous and a pleasant place to live, he is alienating the public:

"A lot of the cuts being made were not popular, and he really took the lead and was out front on what he said was needed — staying firm on not raising taxes — so the entire deal has his fingerprints," said Melissa Michelson, a political science professor at California State University-East Bay. "I hear from a lot of people who would have understood if some taxes were raised. Raising taxes on the wealthy sure would have been more palatable than cuts on students, elderly and children."

The legislature's approval ratings are low as well - 17% approve of their job, which is actually somewhat surprising given the frequent legislature-bashing that goes on in our media.

As Sacramento prepares for yet another special session, called this time to try and implement Arnold's regressive tax policies, it is worth keeping in mind just how unpopular he is. Legislators should feel themselves under no pressure whatsoever to do anything this guy asks. Arnold will be gone from office in 18 months, and while the Legislature still needs to deal with him on the budget, there is no reason at all for them to deal with him on tax reform.

Democrats would do well to treat Arnold like Bush, and run out the clock on his failed governorship. With record unemployment, no prospects at all for economic recovery, and his desire to smash public services, Californians are going to continue to sour on their governor, and look forward to the day in January 2011 when we are no longer plagued with his corrosive presence in government.

Arnold Schwarzenegger's crazy, reckless budget vetoes have been getting a lot of attention around the state in the last 24 hours or so, and have led Democrats to vow to fight these cuts. So how exactly can that happen, given that Democrats embraced billions in other cuts just last week?

There are three emerging tracks for fighting these cuts. The first is the Courage Campaign's call for a veto override session. (Note: I am of course the Public Policy Director at the Courage Campaign.) We're asking our members to contact Speaker Karen Bass and Senate President Pro Tem Darrell Steinberg to call the legislature back into session and override the vetoes.

Some might contend that this is either not likely to happen, or if an override were attempted, it would fail. I'm not so sure that's the case. The US Congress overrode precious few of Bush's vetoes, but they came extremely close to overriding Bush's 2007 veto of the State Children's Health Insurance Program (S-CHIP) - the votes were there in the Senate to override, including 17 Republicans, and the veto override fell just a few votes short of the 2/3 mark in the House.

Overriding a gubernatorial veto is less difficult in California, where Democrats are very close to having 2/3rds majorities in both houses. It stands to reason that Republicans would be under intense pressure to override vetoes to protect children's health care, domestic violence programs, HIV/AIDS programs, and state parks.

Sure, we all know that the Republican Party in California is insanely right-wing. But even they have their limits. Several of their number are running for statewide office in 2010, giving Democrats an opportunity to leverage them in support of widely popular programs. Dems would also be able to use a veto override to target vulnerable Republican seats in their bid to win a 2/3 majority in the 2010 election.

The best political strategies are those that have multiple avenues of success. In addition to the Courage Campaign veto override action, legislators are stepping up their attack on the line-item vetoes as being illegal. John Pérez offered this statement today:

“The Constitution gives the governor considerable power over the budget, but it doesn’t give him the power to make it up as he goes along. While I consider these cuts criminal morally, they are in fact illegal in the eyes of the law,” said Pérez, who has called for an
immediate restoration of the funds that were cut. “It is wrong for ordinary Californians to suffer so the Governor can spare oil, alcohol and tobacco companies from paying their fair share.”


The California State Constitution gives the Governor "line-item" veto authority, permitting him to "reduce or eliminate one or more items of
appropriation while approving other portions of a bill" [Cal. Const. Art. IV, Section 10(e)]. However, this line-item veto authority only
applies to "appropriations.” When the Legislature takes an item of appropriation – like the budget signed by the Governor and enacted into law this past February - and passes a new bill that reduces the amount of that appropriation, that new bill is not an appropriation because it does not give anyone more authority to spend state money - it takes away spending authority.

While legislators have talked of aggrieved parties taking this to court, Controller John Chiang is reviewing whether the vetoes are legal and constitutional:

While the governor signed the budget revision yesterday, Democratic state Controller John Chiang is charged with carrying out his budget. Earlier this week, Chiang spokeswoman Hallye Jordan said the controller's legal staff was reviewing whether the governor's line-item vetoes were constitutional.

If Chiang does carry out Schwarzenegger's vetoes, expect advocacy groups to file suit against Chiang. If Chiang does not carry them out, expect another legal battle between Schwarzenegger and the controller.

The governor's office is taunting Democrats, convinced that this is all just sturm und drang without any likelihood of materializing into an actual reversal of the cuts:

Department of Finance Director Mike Genest predicted Tuesday that Democrats would not challenge the vetoes because "they have something to lose, too." His comment suggested that Democrats know full well that it is difficult to find another $489 million in savings -- and they might be better off politically allowing the governor to bear the brunt of criticism for the cuts he did implement yesterday.

I read this as Genest wanting to actually avoid a veto session. The cuts Arnold made are extremely unpopular - even Abel Maldonado has called the cuts "too severe". The governor's office probably realizes they would be vulnerable in an actual veto session.

Arnold Schwarzenegger is out on a limb. Let's saw it off by calling a veto session and reversing these heinous cuts.

Over the flip is the email the Courage Campaign sent to our members today.   Read More »

Today has become an impromptu but very much needed day of action targeting Arnold Schwarzenegger and his insistence on massive budget cuts. The California Labor Fed hosted a series of rallies around the state, including an Arnold dunk tank in Fresno. As the budget negotiations are seemingly coming down to the final hours (although how close they can really be with Prop 98 still a wide-open question is unclear), progressive activists get how important it is to push back against Arnold's messaging. Californians *don't* want massive cuts, and they *do* want a truly shared sacrifice.

That's why we at the Courage Campaign commissioned this video, "Up in Smoke," from noted political video producers Truth and Hope. It plays off Arnold's notorious "jacuzzi and stogie" comment to inspire our members to take action and call the governor to demand the budget not be balanced on the backs of the poor and working families.

We all know the numerous and structural reasons for the crisis in Sacramento. And we know how difficult it is to produce anything other than a regressive right-wing outcome on the budget. Yet Arnold holds a significant amount of responsibility for the present mess as well, particularly in his refusal to embrace shared sacrifices that would, oh I don't know, actually require the wealthy and corporations to share in the sacrifice?

If we're going to overturn 30 years of right-wing framing, we have to be persistent about it. This video and our call the governor action are part of that strategy.

Over the flip is the email Marqueece Harris Dawson of the Community Coalition of South LA sent to our members this afternoon.   Read More »

And so it begins. As Anthony Wright is tweeting, a group of disabled activists have taken up positions in the Capitol building and are refusing to leave until the health and human services cuts are reconsidered:

Wheelchairs blocking the Governor's office for the last two hours over the budget cuts.. CHP threatens arrest, they say they are prepared...

Over 100 folks protesting cuts in the hall outside Governor Schwarzenegger's office. Gov is at Mason's having lunch... maybe Jacuzzi later?

CHP threatens not just arrest-and-release, but taking disabled protestors to county jail. They say they rather be in jail than nursing home.

Outside Gov's office... Several Dem legislators came down to talk to/cheer on the disabled protestors: Cedillo, Perez, Beall, Skinner, etc

Budget protesters call out "hold the line" when someone tries to pass. The wheelchairs effectively stop any traffic in hallway.

Bad budget boon for Blimpie's: Food arrives for protestors with disabilities, as thet settle in for the long haul in front of Gov's office

This is just the start. These protestors are taking matters into their own hands. As Arnold is actively burning down the state and forcing through destructive cuts to some of California's most vulnerable people, more and more Californians are going to start pushing back.

One doesn't want to overstate this. But after Arnold's "let them eat cake" moment in the NYT magazine article - replacing cake with stogies and Versailles with the smoking tent - it's sensible that the Third Estate is going to storm the building to demand justice and equality.

UPDATE: The protest organizers, the "People's Day of Reckoning Coalition" (an offshoot of the IHSS Coalition) have explained their actions to the media:

Caregivers and people with disabilities are furious that Gov. Arnold Schwarzenegger is asking for more cuts to California's in-home support services.

About 100 protesters said they successfully blocked the entrance to the governor's office Tuesday. The People's Day of Reckoning Coalition organized the protest.

The coalition sent a letter to Schwarzenegger in June, asking him to come up with a budget solution that includes new sources of income and not just cuts to services.

"We are calling for a budget solution that is based upon shared responsibility and shared sacrifice -- not a solution that falls squarely upon on the shoulders of children, people with disabilities, elders, the chronically ill, the unemployed and the impoverished," the letter said.

The People's Day of Reckoning Coalition represents human services, health care, community improvement and educational interest....

John Campbell, a caregiver, said claims of fraud are exaggerated, calling the governor's remarks "just a bit of political theater."

What I really love about this is the quote from John Campbell there at the end. It's like he's shrugging off Arnold's attacks as part of his typical BS. Clearly the protestors aren't scared - not of Arnold, not of the CHP, not of anyone.

This kind of sit-in is exactly what is needed to bring more attention to the actual impact of this crisis. Arnold wants to make it sound like it's about unions and fraud, but it's about real human beings, people who need care and those that provide it, and how they are getting the brunt of the budget cuts.

Their stories are the secrets Arnold has tried to keep from the public. But no longer.

There's a great diary up on the rec list at Daily Kos about the devastating impact of the Illinois budget crisis. Here in California, where we seem to have invented the budget crisis, we're facing a similar catastrophe. Because Governor Arnold Schwarzenegger and his Republican cronies blocked a solution to the state's looming cash crisis late last night, California is going to lose $7 to $8 billion in savings. And as a result of that, California's government is going to have to pay IOUs to those it owes for the first time in 17 years.   Read More »

Of the numerous disturbing and troubling aspects of Arnold Schwarzenegger's insane "let's destroy the safety net!" proposal is how the need to cut has become conventional wisdom in Sacramento. So says Darrell Steinberg:

Democrats realize they will have to agree to "painful" cuts and have vowed to comb through programs to find waste and inefficiencies, said Senate President Pro Tem Darrell Steinberg, D-Sacramento.

"But we must continue to find a way to invest in health care for children, invest in college opportunities and scholarships for young people, to continue to invest in helping people from assistance to work," Steinberg said. "So, we need to be surgical in the way we go about in cutting, *and cut we will.*" [emphasis mine]

Actually, Senator Steinberg, what you *will* be doing is ensuring California suffers a prolonged and deep Depression.

Cutting the safety net is an act of economic suicide. Given the reasons for the current downturn, cutting away the safety net will merely reinforce the recession and ensure that California experiences no near-term economic recovery. California's 121 Herbert Hoovers will drive the state into Depression the way Hoover himself did in 1930-31 by insisting on massive cuts to government spending.

Here's how it works. As Edward Harrison explained at Naked Capitalism yesterday the US economy likely faces a "balance sheet recession" caused by a massive increase in saving as people seek to purge debt:

Richard Koo goes further in his book “The Holy Grail of Macro Economics.” Here, he argues that the unwind of great bubbles suffers from what he labels a ‘balance sheet recession.’ In essence, companies go from maximizing profits, as they had done in normal times, to a post-bubble concern of reducing debt. Regardless of how much priming of the pump monetary authorities do, the psychology of debt reduction will limit the effectiveness of monetary policy as a policy tool.

In my view, the catalyst for this change of psychology is the ‘debt revulsion’ that ushers in the panic phase of an asset bubble collapse.... the household sector has gotten religion about debt reduction as the savings rate has increased dramatically since Lehman. In fact, I would argue that companies learned their lesson about debt from the aftermath of the tech bubble. It is the household sector in the U.S. (and the U.K.) which is heavily indebted. Therefore, if the psychology of a balance sheet recession does take form, it will be the household sector leading the charge.

In sum, the psychology after a major bubble is very different than the psychology before its collapse. The post-bubble emphasis becomes debt reduction and savings, making monetary policy ineffective, not because financial institutions are unwilling lenders but because companies and individuals are unwilling borrowers. These are forces to be reckoned with for some to come.

And sure enough, the saving rate is still on the increase as Americans, and Californians in particular, stop spending and use their incomes to pay down debt and put money in the bank for a rainy day.

It's that phenomenon which is acting like a scythe across the economic landscape. Nobody spends, so companies aren't making money. Unless consumers feel capable of spending again, there will be no economic recovery.

What Harrison doesn't examine is the importance of the safety net. If people feel confident that their basic needs - housing, food, health care - can be met if they lose their job, then the mania to save, save, save would be eased. However, if they do *not* feel confident that the safety net is there, they will save every penny they can, reasoning that they'll need it to live.

I know that's true for me. I use one of my two monthly paychecks to pay bills, and the other goes straight into the savings account. I'd be a fool not to. As California is poised to eliminate its safety net, it would be irrational and reckless to not hoard every dollar that came in.

That's why Arnold's budget cuts are so economically stupid. They will reinforce the trend toward saving and ensure that we do not have an economic recovery.

There is one other pernicious aspect of Arnold's cuts. In some ways we can see the health care cuts in particular as a bailout of the private insurers. By ending state aid for children's health care - even though Arnold gives up 3 times as much federal money as CA would save - and ending other key health care services, Arnold will force families that need treatments to send money out of their own pocket to private corporations. That will help enrich a few wealthy executives, but it will do absolutely nothing to improve the balance sheets of already strapped households, and will merely reinforce the "save at any cost" attitude.

Other aspects of Arnold's budget are economically ruinous - the negative impact of park closures on tourist-dependent towns, the negative impact of mass state worker layoffs to the entire Sacramento region, the negative impact of mass teacher layoffs, etc.

If Arnold and the Democrats wanted to ensure California experienced a prolonged Depression, they could do no better than to follow the policies they have so far supported. Just as Keynes identified the future Great Depression in the flawed and punitive Treaty of Versailles, so to can we identify unending misery in the flawed and punitive 2009-10 budget.

We'd need a whole pod of whales to illustrate the FAIL that is Governor Arnold Schwarzenegger:

The Republican governor's Department of Finance has projected a budget gap of $15.4 billion if the May 19 special election ballot measures pass and $21.3 billion if they fail. The state would gain nearly $6 billion in solutions if Propositions 1C, 1D and 1E pass, including $5 billion in 1C's borrowing against the California Lottery.

Arnold took office promising to succeed where Gray Davis supposedly failed. Now Arnold has produced deficits FAR worse than anything Davis faced. Arnold is plowing ahead with his apparently illegal "May Revise" to scare voters. But as the SacBee article notes, Arnold can't actually propose that much in cuts without risking the stimulus:

The governor did not disclose his proposed solutions Monday. But he warned groups last week that he will consider borrowing $2 billion from cities and counties, releasing low-level offenders in state prisons and reducing school funding by $3.6 billion. The state also could eliminate its planned $2 billion reserve.

California faces limitations in how much it can cut without jeopardizing federal stimulus funding. For instance, the state cannot cut too much in higher education, K-14 schools or Medi-Cal eligibility without running afoul of federal stimulus guidelines.

Cities and counties will revolt before being pushed into bankruptcy by a raid on their already bare cupboards. Arnold is either going to have to declare default, or embrace some truly progressive solutions like majority vote budgets and taxes on the wealthy and corporations.

Instead of providing leadership, Arnold is merely trying to scare voters into giving him one last chance to ruin our state. Voters are rejecting his tactics, his propositions, and ultimately, Arnold himself.

Worst. Governor. Ever.

Yesterday California held its breath to see if the bond market had any interest in purchasing state bond offerings. The answer was a qualified yes:

State Treasurer Bill Lockyer's office reports that first-day retail sales for state bonds are brisk, with $3.04 billion of the $4 billion offering already sold through this morning. The Treasurer's Office is conducting an early order period for retail investors through Tuesday before opening up sales to large institutional investors Wednesday.

The activity comes after two major agencies last week downgraded California's general-obligation bonds to the lowest rating in the nation. That forced California to offer relatively high yields for its bonds -- ranging from 3.25 percent for a 2013 maturity date up to 6.00 percent for a 2036 maturity date. Retail investors must order through a broker and purchase a minimum of $5,000.

Jason Dickerson of the Legislative Analyst's Office said that high yields, along with investor confidence in municipal bonds and pent-up demand for California paper, contributed to the robust first-day sales. But he warned that California won't be in the clear until it can return to the market with consistent bond offerings because the state's bond needs remain much larger than $4 billion.

With the lowest bond rating in the nation it's no surprise that we're having to pay a premium for folks to purchase these bonds, but this is something of a sigh of relief, especially considering that our budget is still $8 billion in deficit even if the May 19 propositions pass, which is by no means a certainty.

Still, there are many projects that need this money, including high speed rail. As we've been covering over at the California High Speed Rail Blog, the California High Speed Rail Authority is in danger of running out of money immediately.

Through no fault of their own, the state budget crisis and the state's inability to sell the Prop 1A bonds has left the CHSRA $29.1 million short of funds between now and June 30. The Authority has been hiring consultants to do much of the project work, but they have been unpaid for some time. And as crucial design and engineering work, along with preparation of various EIR/EIS statements is required at this time for the project to receive federal stimulus money, the cash crisis is causing a severe problem.

This would be a perfect area for Arnold Schwarzenegger to exert some leadership, to ensure that a tiny amount of the money raised in yesterday's sale went to the CHSRA - $29.1 million - to help this project survive. Instead Arnold, as he always does, plays a governor on TV. On Sunday he went on Meet The Press to sing the praises of high speed rail - but back in Sacramento he refuses to assert leadership.

The state's financial crisis is about to take a turn for the worse - much worse. California is about to run out of money next week and payments will be delayed - or paid with an IOU.

Why is this happening? Because Arnold Schwarzenegger has failed to produce a budget. When Democrats offered a balance of new revenues and spending cuts Arnold vetoed the plan. Arnold was elected in 2003 to fix our budget problems, but now Californians are likely to receive IOUs instead of the tax refunds and financial aid they deserve.

We call these IOUs "Arnoldbucks". And we are determined to get the word out about them and their effect on Californians. We created this video exploring what might happen if someone tried to use these Arnoldbucks as actual money:



We also created some actual Arnoldbucks for you to download and share with your friends.

How would you use your Arnoldbucks to show how completely our governor has failed to manage the state's finances? Tell us how you'd use your Arnoldbucks and help spread the word about the governor's responsibility for this crisis.

As the economic crisis deepens, Moody's has issued a warning that California's credit rating is about to be cut:

Moody's on Wednesday placed the state's ratings for various bonds on its watch list, warning the state that it could suffer a downgrade if it does not enact real solutions for its budget problem. Such a move would increase borrowing costs for California.

The credit ratings service said it will be "acutely focused on liquidity" in the next few weeks as the Legislature attempts to find a solution before the state runs out of cash. Moody's said in a release that it anticipates its review of California's bond rating to finish by the middle of April...

"Although the legislative and executive branch continue to debate fiscal and cash measures, and the Legislature is required to come up with solutions by February 3, we do not yet know whether solutions will actually be passed, or whether they will be workable, reasonable, and of a sufficient magnitude to achieve a degree of credit stabilization consistent with the current rating level," Moody's said in its release.

As the LA Times notes California's bond rating has always been low. However, that was masked by the easy credit and generally lax attitude toward risk of the last 30 years. No longer. In a tight credit market risk managers are now paying very close attention to things like bond ratings, and many money managers are avoiding California issuances altogether.

Which is all the more reason why a new PPIC study is so well-timed. Pointing out that the need for infrastructure investment "far exceeds" our ability to pay for it with debt, and that we must innovate 21st century methods - from eliminating the 2/3 rule (this is becoming a common theme!) to raising the gas tax to greater use of public-private partnerships. While I'm skeptical on the value of the latter point, their first two recommendations are spot on.

This isn't to say bond debt is bad - but we cannot rely on it alone to meet our infrastructure and stimulus needs. New taxes are necessary to make up the difference.

Meanwhile, Jon Coupal of the Howard Jarvis Association makes the absurd claim "there is no budget crisis", that it's just being conjured up by a bunch of big bad Sacramento politicians who are trying to scare Californians into paying more taxes. Coupal assumes that most Californians will do just fine if the government goes broke - that massive public worker layoffs and reduction of pensions will balance the budget with no cost to the state economy.

But such layoffs and impoverishment of the elderly - which is what pension cuts are, there's no way around it - will actually reduce economic activity in California, which reduces tax income, which creates another budget crisis. It is likely Moody's considered that in their warning, even if Coupal did not.

Of course, we should ask why anyone would listen to Coupal. His organization has had the run of the state for the last 30 years. They won the Prop 13 battle and have won numerous subsequent battles to cut taxes and spending. We got the California they wanted. And it's broke. If it's Coupal's ideas that are merely bankrupt, so be it, but he should not drag the state down with him.

One of the most pernicious aspects of Arnold's budget proposal, which despite some long overdue moves toward new revenue still relies on way too many cuts, is its impact on public schools. As I explained on New Year's Day, Arnold's budget proposal includes this devastating proposal:

The governor has proposed to ease the pain, in part, by accounting transfers involving state transportation funds and by deferring $2.8 billion in school payments from April to July. Wells said the state, by deferring payments for three months, would place an "awful" new burden on school districts to secure short-term loans.

At the time I predicted this would have an extremely negative impact on schools. And now we're starting to see it, beginning in San Luis Obispo County:

Three San Luis Obispo County school districts may face funding shortfalls through 2011 if Gov. Arnold Schwarzen-egger's latest round of budget cuts pass, a move the county's top educator said will result in "extensive" layoffs of teachers and staff.

"I would say it's one step short of an emergency," county Superintendent of Schools Julian Crocker said Friday, noting the affected districts are Lucia Mar, Atascadero and Shandon.

Despite a double-dose of statewide funding reductions hitting schools at the beginning of the fiscal year and again in midyear cuts, the state requires that districts maintain a pool of reserve money. How much depends on how many students are enrolled.

What Arnold is doing is raiding school districts' savings accounts. The delayed payment means they'll have to dip into reserves. The ongoing funding cuts mean they will have a difficult time building the reserves back up. That will require laying off teachers and compromising educational quality. And in an NCLB environment that is a recipe for catastrophe, as schools will lose funding and Arnold can accomplish privatization through the back door.

The numbers:

The governor's proposals would further reduce school funding countywide by a minimum of $14.2 million by the end of June 2010, Crocker said -- resulting in a $48.5 million loss over the two years.

The countywide reduction represents a loss of approximately $34,000 per classroom, or about 15 percent of total district revenue.

Lucia Mar will lose an estimated additional $4.3 million, Atascadero will lose an additional $2 million and Shandon is projected to lose an additional $126,000 in ongoing revenue sources.

Shandon, a small town east of Paso Robles on Highway 46, is already proposing cutting bus service - imposing a huge burden on a rural population dependent on that service. And as most of SLO County districts are expecting to run into similar problems, soon educational quality is going to be impacted countywide - and statewide, as SLO County schools' problems are almost certainly being experienced around the state.

It's hard not to read this as a deliberate attack on public schools by a right-wing governor whose privatization crusade seems to extend now to our schools. IOUs and schools may just be what Californians need to wake up and start getting angry about this budget mess.

SLO County residents are especially well positioned to act. Their state legislators - Assemblymember Sam Blakeslee and Senator Abel Maldonado - are among the most important Republicans for us to target in getting to a 2/3rds vote on a sensible budget deal. SLO County parents ought to pay Blakeslee and Maldonado a visit and ask them why they're willing to jeopardize their children's future to fulfill a promise to Grover Norquist.

While Arnold Schwarzenegger is making claims to want "economic stimulus" with his demands for gutting environmental and labor laws, he is also undermining one of the core means of economic stimulus and recovery - higher education.

When the economy is in recession many laid-off workers take the time to return to school and finish a degree, or get new forms of training and expertise. This helps keep the workforce skilled and up-to-date on the latest innovations and insights, thereby keeping California workers globally competitive. And it can create jobs at the colleges to meet the demand. At the local community college enrollment is *soaring* - instructors are finding long waiting lists to get into their classes, which they haven't seen for a long time.

For all this to work, of course, those students need financial aid, since in a recession they have a difficult time affording a return to school out of pocket. Which is why Arnold's plan to slash Cal Grant funding is so reckless:

Gov. Arnold Schwarzenegger is proposing major cuts in Cal Grants, the state's main financial aid programfor college students. The most significant change would involve abandoning the state's commitment to cover any rise in tuition for grant recipients, and it comes as officials at both the University of California and California State University are gearing up for 10% fee increases in response to the yawning state budget gap....

A spokeswoman for the governor said he "understands how difficult these cuts will be" but is responsible for leading the state through the economic crisis. "The governor doesn't want to cut programs and he doesn't want to raise taxes, but in the face of a $42-billion budget deficit and with the Legislature's failure to pass a comprehensive solution, we're simply running out of options," she said.

Which is the typical BS being put out by the governor's office these days, quotes not worth the paper on which they're printed. The Legislature DID pass a comprehensive solution and Arnold vetoed it. Arnold has been completely unable to get a single Republican vote for his budgets over the last few years, yet continues to insist against all available evidence that the two parties in the Legislature try and work out some agreement, which is impossible as long as Republicans refuse to play.

Cal Grant cuts combined with yet another UC and CSU fee increase will put higher ed out of reach for thousands of qualified students and workers looking to remain competitive. California as a whole will suffer - but perhaps that's the point, the endgame of Arnold's term in office: destroying what remains of our shared prosperity so his friends in the elite can grab what is left over.