A few weeks back the Guardian's Sunday paper, the Observer, published a long article titled Will California become America's first failed state? It was one of their most widely read and emailed articles that week, and generated a lot of responses. One of them was mine at Calitics.

The Guardian wanted a response to their article for their Comment is Free section of the website, and asked me to write it. The result is now available: From Golden State to failed state.

With a 700-word limit it was difficult to be more expansive than I could here at Calitics. But my article makes the basic points: the 20th century model of California, emphasizing sprawl and weighing government down with absurd, non-functional rules designed to protect that sprawl, have produced "a California that more closely resembles the world of Charles Dickens than that of the Beach Boys."

We need to craft a new vision of the California Dream for the 21st century. Go read the article to see what that would look like.

Just a few months into the 2009-10 fiscal year, and after three excruciatingly painful rounds of budget cuts (September 2008, February 2009, and July 2009) we learned today from John Chiang that California's budget is again in the red:

State revenue has already fallen more than $1 billion short of assumptions in the budget lawmakers passed less than three months ago, according to a new report from the state controller.

Disappointing income tax receipts are the main culprit, falling 11% below what lawmakers and Gov. Arnold Schwarzenegger expected when they agreed on a patchwork budget during the summer, halting the state’s issuance of IOUs. Sales and corporate taxes have also slid below projections.

"While there are encouraging signs that California's economy is preparing for a comeback, the recession continues to drag state revenues down,” said Controller John Chiang in a statement. He called the new figures “a major blow to a budget that is barely 10 weeks old.”

Even before the bad fiscal news, policymakers were bracing for a big budget deficit next year. The Department of Finance anticipates a $7.4-billion deficit in 2010-11. That’s a conservative estimate, because lawsuits have tied up or reversed some planned budget cuts.

As we've made quite clear here at Calitics, the previous budget deals did absolutely nothing to solve the state's economic and fiscal crisis. Despite those who would have us believe the problem is somehow caused by "overspending," we are actually seeing the effect of state budget cuts that have laid off thousands of workers, and caused them as well as those who remain to spend less money in the state. It was entirely predictable that the massive budget cuts would merely weaken the economy further and thereby exacerbate the cycle of decline in revenues.

But it should come as no surprise to us that such an outcome has taken place. At no time during the present recession have legislators and the governor given any thought to how they will produce economic recovery. The dominant impulse in Sacramento is to cut, to cut for its own sake, to cut when it costs money to do so, to cut when it is illegal to to do, to cut when it further weakens an already disastrous economy.

The last thing California needs are the further and deeper budget cuts that we're likely to hear suggested in the wake of this news. California instead desperately needs jobs, particularly unionized, well-paid and high-benefit government jobs.

Californians also need affordable health care. They need affordable transportation. They need also more educational options. As Paul Krugman pointed out today, the cuts to education are weakening our economy and will cause permanent damage:

For example, the Chronicle of Higher Education recently reported on the plight of California’s community college students. For generations, talented students from less affluent families have used those colleges as a stepping stone to the state’s public universities. But in the face of the state’s budget crisis those universities have been forced to slam the door on this year’s potential transfer students. One result, almost surely, will be lifetime damage to many students’ prospects — and a large, gratuitous waste of human potential.

Krugman calls for an emergency package of aid to state and local budgets, a call we at Calitics heartily second.

But we must also work hard to stop the 121 Herbert Hoovers in Sacramento from doing further harm to an already stressed state. We've tried Republicans' neo-Hooverite solution. Democrats have insisted we had no choice to go along with it, but they have instead caused untold suffering and pain to the people of California without gaining anything in return.

As we prepare for the next budget battle, we need to also prepare to demand that Democrats abandon neo-Hooverism and stop embracing policies and budget deals that merely make the economic and fiscal crisis worse.

Yes, our state has severe structural governance problems that make truly progressive solutions difficult. But the first step toward fixing those structural problems is to articulate a clear vision for a fairer, more prosperous, and more economically secure California. Only then will Californians be willing to dismantle the structural barriers that have strangled our state over these last 30 years.

Earlier today at Calitics David Dayen leveled his criticism of the Sacramento Democratic establishment for their apparent failure to produce an initiative to roll back the 2/3rds rule and start fixing California's broken government.

Here I want to offer a slightly different perspective on the issue of what we need to do to win the battle. This isn't a disagreement with David, but instead a discussion of something related - the question of how it is we win this battle.

My own views on this have evolved somewhat over the last 6 months. I very much think we need to be "making the argument" for majority rule, and that so far this hasn't yet been done.

And the way that has to be done is to place the 2/3rds rule into a broader effort to emphasize progressive values. This is a twofold approach that requires us to do two things:

1. Show Californians where progressives want to take them: Universal health care, free higher ed, eliminate traffic, create sustainable jobs, etc. Articulate our end goals and get people excited about them, since it's hard to excite people about procedural questions.



2. Show Californians how we want to get there. Go populist and hammer the shit out of the corporations and wealthy folks who benefit from the current tax structure, and push for sensible revenue solutions consonant with that populism that can achieve the promised goals.

I think that to emphasize the procedural problems (the 2/3rds rule) before emphasizing the fundamental injustice and inequality of our tax code is to put the cart before the horse. If we are going to reverse the polling and win this, we need to first mobilize Californians behind the notion that our state's economic problems and our inability to properly fund schools or healthcare or parks or transit is because we are letting those with the money escape their obligations.

The PPIC and Binder polls (the one from the May 19 election) have both shown the public is willing to support certain taxes to preserve important services. So the move should be to push hard for an oil severance tax to fund schools, or closing corporate tax loopholes to expand Healthy Families, or to jack up taxes on the wealthy (particularly taxing unearned income) to bring down higher ed tuition, or something to that effect.

Dems should plan to move these things in the next legislative session and spend several weeks beforehand making this argument. Back Republicans up against a wall, make them defend the unpopular tax breaks for the unpopular bandits that have ruined out economy. And when the Republicans predictably use the 2/3rds rule to block those revenue solutions, then we will be in a much better position to win public support for majority vote on revenue.


We will have the opportunity over the next 12 months to move on this strategy, especially as outrage builds over the existing cuts. That outrage is not about process, but about the basic values of this state being violated and cast aside in order to enable the wealthy to get tax breaks at the expense of everyone else.

There are some folks in Sacramento who seem to get this. Lt. Gov. and future Congressman John Garamendi has been calling for an oil severance tax to fund higher education.

I know that leads some to criticize "ballot box budgeting" and argue that dedicating specific taxes to specific services doesn't help the problems with the general fund. I have always been much less critical of ballot box budgeting than others, partly because I see it as a necessary holding action until we resolve Prop 13 itself.

But more fundamentally, we need to overturn 30 years of anti-tax rhetoric that has sank very deeply into the minds of many Californians, including those who otherwise call themselves progressive. One of the core tenets of the anti-tax mentality is the notion that government would just waste new revenues. Public hostility to dumping money into the general fund is significant.

So what we have to do is rehabilitate the notion of using taxes to provide services. Californians need to see the connection between low taxes and failing schools, jammed roads, a lack of health care, and a lack of jobs. And they need to see that it is Republicans that are blocking those things from getting done, by the 2/3rds rule.

The only reason anyone in America knows about "reconciliation" in the Senate, or the "mark-up" process, or even the "filibuster" is because those things stand in the way of key progressive goals. Those Senate procedures have screwed us and have needed to be eliminated for a long time, but only when they stood in the path of something people wanted did awareness rise.

In short, we are not going to win this if it is framed as a procedural problem, or even as a way to fix a broken state. We win the majority vote by enfolding it within a broader narrative and a broader campaign that uses progressive populism to beat the stuffing out of the large corporations and their allies in the Republican Party, in the service of clear goals that people actively and strongly desire.

Steve Wiegand of the Sacramento Bee telegraphed his intention yesterday to spread the right-wing myth that California has a spending problem. And sure enough, that's what we got from Wiegand today in an article with the stunning title of "State officials spread loot like Santa." That quote comes from Dave Doerr, head of the right-wing California Tax Association, and furthers the myth that California "overspends" and is, unfortunately, *not* a reference to the "two Santa Claus" theory.

Wiegand's article repeats many of the right-wing frames about state spending - yet at the same time it actually examines the structural revenue shortfall. The two are related, of course - Wiegand's study of the structural deficit is vague and lacking much detail, and is used to buttress the argument that California overspends. In short, Wiegand is taking as gospel the right-wing claim that our state budget mess is a product of overspending, when in fact it is a problem of undertaxing. Take this section of the article, for example:

Doerr's observation is borne out by a Bee analysis of California's spending and debt patterns compared to other states', which found California spends more per capita than the national average in every government program except highways and public welfare - but consistently runs budget deficits and takes on more and more debt.

Why would that necessarily be a bad thing? Most other states are penurious with their public spending, and have economic and social problems that reflect such miserly policies.

Doerr appears again:

Doerr's reference is to a penchant of lawmakers and governors over the past three decades to spend whatever money they have on hand - and promise even more - then let succeeding budget drafters fend for themselves.

This is in fact a core conservative frame. They believe that when it comes to budgets, you can spend whatever you take in, and nothing more. If you have $100 billion in revenues one year and $80 billion the next, then you just have to cut $20 billion in spending, no matter the effect.

A progressive budget frame is that it is government's job to see to it that certain tasks get done because they are inherently valuable or necessary. This might include keeping open 220 state parks, or ensuring children under age 10 learn in classrooms of no more than 20 students, or that our state's children and poor families have access to health care no matter the state of the economy.

Under that frame, the "overspending" claims are rendered even more absurd than the Wiegand article shows them to be, given its lack of explanation in most places for what actually caused the spending spikes. California needs to find the revenue to maintain core services, and to maintain and even expand government employment as a counter-cyclical recovery measure. The UCLA Anderson Forecast showed that budget cuts have worsened CA's recession - but none of that seems to have made it into Wiegand's article.

Given the dearth of media coverage of California politics, it's especially unfortunate that when a major paper chooses to devote so much time and space to examining the budget crisis, they have not only gotten it so deeply wrong, but have wound up reinforcing right-wing dogma in the process.

Anytime a member of the media says there are "inarguable facts" about the state's economic and financial crisis, that's usually a sign that you should be extra dubious of their claims. Steve Wiegand uses that phrase in his Sunday SacBee article to essentially make the Parsky Commission's case for it, in advance of whenever it is exactly that they're going to produce an actual final proposal. Wiegand's article essentially rehashes the basic center-right argument about state government: our taxes are too volatile, and combined with "reckless spending" and the severe economic crisis, that explains the state budget mess:

Three inarguable facts dominate California's system of financing state government:

• It's a mess.

• It's currently a mess in large part due to the deepest and most pervasive global recession since the Great Depression of the 1930s.

• It's been a mess for much of the past three decades because the combination of an out-of date tax system, reckless spending and fickle voters has made state government extremely vulnerable to the ebbs and flows of the economy.

I'll grant Wiegand the first two points. Since 2007 California has had a total of about $60 billion in budget deficits. $47 billion of that is due to decline in taxes. But much of that decline is led by collapsing sales taxes. This recession is a balance sheet recession led by consumers working feverishly to pay down debt. Until the debt is purged and wages grow, the massive consumer spending binge of the last 20 years *is never coming back*.

That starts us down the path of realizing just how wrong Wiegand is in making his third point. Wiegand repeats the discredited "volatility" argument to infer that the reliance on personal income taxes is flawed:

Since California relies so heavily on those revenues – more than half of general fund income comes from income taxes – it makes state government extremely susceptible to swings in the economy.

"When the market tanks, those taxpayers sneeze," said H.D. Palmer, the veteran spokesman for the Department of Finance. "And when those taxpayers sneeze, the state budget catches pneumonia."

One of the reasons CA relies on that income is because Prop 13 has meant the state does not capture the wealth temporarily created by two massive real estate bubbles since 1978 (one in the 1980s and the other in the 2000s).

But Wiegand misses two other crucial points about income taxes. Both personal and corporate income taxes have held up better than sales taxes during this recession. This is an especially important point during this so-called economic "recovery" where those at the upper end of the income scale, along with large corporations, are weathering the storm pretty well. It is nutty to assume that they need their tax burden reduced.

Wiegand's entire embrace of the "volatility" argument is of course flawed from conception, since there is no government budget out there that I'm aware of that has been able to resist the stress of the economic downturn. Those states that haven't had significant budget crises, like North Dakota, also haven't been hit as hard by the recession. The underlying economy in California is volatile and has been since about 1980. It makes perfect sense that tax collections would reflect a boom-and-bust economy.

The rest of Wiegand's article focuses on the sales tax. As I argued above, any examination of state tax policy that does not examine the collapse of consumer spending, likely to be a long-term trend, is probably not going to be a very useful guide to what's actually happening. After mentioning in passing the notion of modernizing the sales tax, he quickly shifts to a trip down memory lane, to the widely-mocked 1991 "snack tax" that Pete Wilson and the Legislature used in their solution to the budget deficit that year. The "snack tax" was repealed at the ballot box in 1992, and Wiegand uses it to argue that California voters are reluctant to extend taxes to untaxed goods and services.

But is still actually the case? Polls from 2009 suggest voters are willing to raise taxes to protect existing state services. Taxing accounting services, for example, in order to keep teachers in classrooms or taxing soda and junk food to keep parks open may well be more popular today than it was 17 years ago.

Wiegand closes his article by letting David Doerr of the right-wing California Tax Association repeat the totally unverified and undefended claim that the other element in our state's fiscal crisis is "overspending":

"The tax structure has been pretty consistent in providing income," Doerr continued. "It's spending. They (elected officials) just can't say no."

This claim isn't supported by any evidence in the article, and as it's the very last sentence in the article, it is not rebutted. California's media takes it as a given - an "inarguable fact" as Wiegand said at the outset - that we have "reckless spending." They believe this is so self-evident that they don't actually have to prove it or explain it or justify the claim.

In fact, California's spending over the last 6 or 7 years has been flat. The largest amounts of spending have actually gone to tax cuts, with Arnold Schwarzenegger's $6 billion per year backfilling of the VLF cuts in 2003 being the most obvious example.

When will California's major media outlets start questioning the "reckless spending" myth? As long as they treat that myth as an "inarguable fact," it's not something I'm going to hold my breath to see.

I don't know about you, but I can't find anything in the outcome of the May 19 election that justifies, say, ending welfare entirely, or denying AIDS patients life-saving medicines, or throwing a million kids off of health care, or closing the state park system, or eliminating affordable access to higher education. Can you?

In fact, even though polls show voters emphatically *reject* that kind of budgeting Arnold Schwarzenegger has gone ahead and proposed it anyway. In his best effort to play the role of a modern-day Herbert Hoover he has decided to interpret the election as a mandate to push through the radical attack on government he has always wanted to lead.

In recent hearings in the Legislature - which in themselves prove the value of an open budget process - the scope of the cuts has become clear, and even legislators who were just last week speaking of the need for cuts are starting to have second thoughts, as Anthony Wright reported:

Some members, like Senator Denise Ducheny, asked whether some of these cuts would not create more costs, as people end up in emergency rooms or elsewhere, even within the budget year. "What makes you think this doesn't create a cost shift?... Will people just die and we won't have to take care of them?" she asked.

Senator Mark Leno talked about how the AIDS Drug Assistance Program "literally keeps people alive," and asked for information about the increased cost of ermegency room visits as a result of the cut. Senator Alan Lowenthal asked if there was a "longitudinal" analysis, and asked for the "long-range implications" of these cuts.

Assemblywoman Noreen Evans was alarmed when she noted that dialysis would be cut for some patients, exclaiming that her father was going through such treatment, and was not optional. She also noted that some cuts, like the elimination of HIV Testing, would have public health impacts. Assemblyman Kevin DeLeon pointed out the cuts to community clinics, arguing that for many Californians, "this is the only safety-net they have."

As the Sac Bee reports, even some Republicans acknowledge that there is such a thing as a successful government program:

Assemblyman Danny Gilmore, R-Hanford, wrote an opinion piece this month for the Bakersfield Californian telling constituents how to apply to Healthy Families and touting it as a program that works "especially well."

Of course, the Zombie Death Cult still has its adherents, like Chuck DeVore:

But Assemblyman Chuck DeVore, R-Irvine, said the state must scale back because it cannot afford the benefits it provides. DeVore asserted that overregulation and high taxes have stifled businesses and led to layoffs, while California has compounded the problem with too much public aid.

"When you have an unemployment rate as high as it is in this state, it should be a signal to people to look for jobs in other states with more jobs and a lower cost of living," DeVore said. "We have had policies subsidizing poverty in this state for years, and we can't keep doing that."

And this guy wants to be in the US Senate! The irony is that even his own constituents disagree with him. Orange County residents don't want their parents to lose dialysis treatment. They don't want their kids to lose Cal Grants. They don't want to be barred from going to the nearby beach.

As we have been explaining for months now, these kinds of cuts are suicidal. They will make the budget picture worse by costing more money than the cuts would save. They will certainly make the economic crisis FAR worse by forcing consumers to pull back even further on spending in order to replace the lost state aid. Arnold Schwarzenegger is demanding a Depression.

Unfortunately the legislative leadership has woefully unprepared themselves to respond. Instead of spending the months leading up to the May 19 election talking about protecting Californians against horrific cuts, the Democratic leadership instead went along with Arnold's scare tactics and made a cuts-only budget sound inevitable - and then doubled down the day after the election.

It's time for legislators to "just say no" to these cuts. And not say it in order to accept lesser but similarly damaging cuts, but say "no" in order to walk through the wide open door that leads out of the Jarvis nightmare scenario. We have a golden opportunity to bury 30 years of anti-tax nonsense - Californians understand that taxes are necessary to prevent people from dying and to provide economic recovery. There is widespread support for raising taxes on the wealthy, closing the loopholes, and ending a failed prisons policy that costs us billions.

It's time for legislators to move beyond outrage and to start showing real leadership against this madness. If they want to restore their reputations with voters, the best way to do so is to show that the Legislature still understands common sense and can give the people what they want - a fair tax system that will stop these cuts in their entirety.

In the aftermath of last week's delivery of layoff notices to 26,000 teachers and news that the budget is already $8 billion in the hole it makes sense to continue to look at serious revenue solutions to close a 30-year shortfall. Unless, of course, you are a Republican:

Assembly GOP leader Mike Villines of Clovis (Fresno County), one of three Assembly Republicans who voted for taxes in the latest budget package, said taxes to close additional budget shortfalls can't be on the table.

Sen. Dennis Hollingsworth, R-Murietta (Riverside County), who became the Senate minority leader last month after a coup during the marathon budget session, said passing any more taxes or fees "would add insult to injury to California taxpayers."

It seems highly unlikely that Republicans will support new taxes without a major public movement to demand that they do so. And if Californians understand that new revenues are the only way to protect schools and health care services from even more crippling cuts then they might be willing to make those demands.

As reported by the SF Chronicle several Democratic legislators have proposed various measures to raise revenues, most of which are very sensible:

AB87 (Davis)/SB531 (DeSaulnier): Fees for shoppers who use plastic bags.

AB89 (Torlakson)/SB600 (Padilla): Increases the cigarette tax.

AB390 (Ammiano): $50-an-ounce tax on marijuana, which would be legalized for recreational use.

AB462 (Price): 1 percent income tax for individuals who earn more than $1 million a year, to fund public schools and universities.

AB656 (Torrico): Oil severance tax to help fund the state's community colleges and universities.

AB1019 (Beall)/SB558 (DeSaulnier): Tax or fee on alcohol.

AB1082 (Torrico): Sales tax on pornography.

AB1342 (Evans): Cities and counties would be allowed to raise income taxes and vehicle license fees.

SB96 (Ducheny): Increases the income tax rate on the state's wealthiest residents while lowering the rate for some middle-class taxpayers.

California remains one of the few oil-producing states that does not tax companies for taking that oil out of the ground, and Torrico's bill would change that. Ducheny and Price are on the right track with their tax-the-rich proposals, probably the best way to quickly raise a significant amount of money to help close the budget gap. Tom Ammiano's marijuana proposal is interesting and deserves serious consideration.

Of particular importance is Noreen Evans's bill to give local governments more of their own tax power. Republicans, who generally loathe democracy when it comes to government finances, do not want to give Los Angeles and San Francisco the power to raise their own taxes in such a broad way, even though many cities (like New York) possess that power and even though it could help ease the state's own financial burdens by letting localities make up some of the difference. This is a bill that definitely ought to pass.

I also think Democrats would be wise to get behind efforts to tax the wealthy. That dovetails nicely with President Obama's own federal tax proposals, and is probably one of the revenue answers that Californians can rally behind at this time. Doing so would help expose Republican obstruction for what it is - a naked defense of wealth and power. And if Democrats are to be serious about building a long-term movement to break anti-tax politics in this state, higher taxes on the rich are a necessary starting point.

Darrell Steinberg, after the brutal February budget battle, doesn't seem inclined to make that fight:

"Frankly, our focus ought to shift to tax reform," he said. "That means seriously addressing the volatility in our tax system. That means realigning the relationship between state government, local government and school districts. Whoever is providing the service ought to be able to raise revenue."

Last month's passage of the $12.5 billion tax package as part of the budget "was an exception to the rule because of the magnitude of the problem," Steinberg said.

I think he ought to be more supportive of exploring the wealth taxes, but he is clearly indicating support for the kind of ideas Noreen Evans is talking about - giving local governments the power to help fix their own problems. If a local school district wants to impose an income tax to support schools, why not let them do so?

That's a question we ought to force Republicans to answer publicly and often.

As Arnold Schwarzenegger starts the campaign for the May 19 special election ballot measures, the Legislative Analyst's Office points out that the budget deal will come up short by $8 billion and that it hasn't solved our structural revenue shortfall problems:

"Unfortunately, the state's economic and revenue outlook continues to deteriorate," the Legislative Analyst's Office (LAO) said in a review of the package, which covered the remainder of this fiscal year and all of the next.

"Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the Legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance."

Taylor had some more bad news for the state's political leaders. Because so many of the "solutions" adopted last month are temporary, "without corrective actions, the state's huge operating deficits will reappear in future years - growing from $12.6 billion in 2010-11 to $26 billion in 2013-14."

The full LAO report in fact makes some assumptions I would consider rosy, such as a recovery in employment and personal income in 2009, when many economists do not expect this to occur until the second half of 2010 at best.

What this means is that the budget situation is still a total mess, and that improvement is far away. The May 19 election will have little meaningful impact on the state's financial health, although a spending cap would ensure that services will continue to be gutted. Republicans and Arnold Schwarzenegger are likely to use the deficit projections as an argument for Prop 1A, when all that will accomplish is an even worse destruction of core services, such as schools which could face larger cuts than what we're seeing now, a truly frightening thing to consider.

This also means political leaders who deny the need to find tax solutions, like Jerry Brown, are not being realistic. Fundamental change is necessary, and perhaps a constitutional convention alongside the elimination of the 2/3 rule conservative veto can help get us there.

One thing is certain - if anyone thinks California can remain a competitive place to do business and attract jobs and employees with the worst school system in the nation and no ability to address our water, transportation, or health care crises, they are deeply deluded.

Today's LA Times contains a "news analysis" by Evan Halper that seeks to explain why taxpayers seem to be getting less for their tax dollars. But the most obvious point goes almost totally ignored - that tax cuts have reduced the ability of government to provide for basic services. Since that isn't part of this article, the effect is to mislead readers into thinking government is misusing tax dollars, and thus winds up reinforcing right-wing frames.

Reporting from Sacramento -- Middle-class Californians have long griped about paying more taxes than they might pay elsewhere, but for decades this state could boast that it gave them quite a bit in return. Now that contract is in doubt.

A modern freeway system, easy access to superior universities and progressive health programs used to be part of the compact. Even local schools plagued with financial problems continued to offer small classes, innovative after-school programs and advanced arts and music curricula.

These opening paragraphs set the tone for a flawed article. That "social compact" has not really functioned as Halper suggests since 1978. Our freeway system was largely in place by that time. Additional freeways were mostly paid for by higher taxes - even Orange County has voted to tax itself twice since 1990 to build and expand freeways. The "innovative after school programs" were created by ballot-box budgeting. Advanced arts and music curricula have been absent from most districts in the state since the 1980s.

In short, Halper starts from a flawed premise.

But at a time when taxes are about to rise substantially, the services that have long set this state apart are deteriorating. The latest budget cuts hit public programs prized by California's middle class particularly hard -- in some cases at the expense of preserving a tattered safety net for the poor -- following years of what analysts characterize as under-investment....

"Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California," said Joel Kotkin, a presidential fellow in urban futures at Chapman University in Orange. "Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California's government and the middle class is constantly being renegotiated to the disadvantage of the middle class."

And here you see the right-wing framing - in some cases made explicit, that programs benefiting the middle-class have been cut to "preserve a tattered safety net for the poor." Kotkin, a high-profile conservative think tank figure who has blamed "greens" for the state's current crisis is never going to explain how tax cuts have caused California to fall behind in maintaining its once-great systems of education and health care.

The closest Halper gets to acknowledging the true nature of the problem is here:

The reasons are varied. The cost of services continues to outpace inflation. Programs are being squeezed out by things the government was not providing in the halcyon 1950s and early 1960s, including Medi-Cal and some welfare programs. And the state has been reluctant to embrace new ways of funding services while holding back state money to plug other holes in the budget.

In fact Medi-Cal's earliest origins lie in the 1959 legislative session, as do some welfare programs. Halper gingerly discusses a state "reluctant to embrace new ways of funding services" but this is the closest his article will ever get to the truth, which is that the conservative veto has prevented California from raising taxes to keep the services flowing to the middle class. Even Ronald Reagan did this in 1967 but you would never know it from Halper's article.

Nor does Halper explain, anywhere, the billions in tax cuts that have been made since 1978 - a structural revenue shortfall that costs California at least $12 billion a year. Halper does a good job of showing how our basic services are underfunded but totally fails to explain the reasons why. As a result he closes his article with comments from conservatives like Mitt Romney and Joel Kotkin that not only go unanswered by any progressive voices, but go unanswered by reality:

Former presidential candidate Mitt Romney spoke to the frustrations of many California parents during a speech at last weekend's state GOP convention in Sacramento. Pointing out all the taxes Californians are now paying, he asked, according to the Sacramento Bee: "With all that money, how are your schools?"

The simple answer is: Not what they used to be. And now the state is cutting billions more out of them, including money set aside to keep classes small and to fund arts and music electives.

"The social compact is: I pay taxes and good things happen," Kotkin said. "But I pay a lot of taxes and can't send my kid to our local public schools because they are terrible."

Conservatives broke that social compact by telling Californians "you can pay less taxes and good things will happen." It's wrong for conservatives to turn around and say "oh gee the system's screwed up" when they are responsible for the mess.

And it's inexcusable for the LA Times to reinforce such right-wing sentiments with such an article that refuses to point out what actually went wrong, and who is responsible for it.

Yesterday's Media News Group papers, including the Monterey Herald, ran an article purporting to provide "the answer to where California's tax dollars went" - why we're in a budget crisis. Their answer: California overspent.

A MediaNews analysis of state spending since Republican Gov. Arnold Schwarzenegger took office in late 2003 found that he and the Democratic-controlled Legislature have spent money well beyond the rate of inflation and California's population growth -- $10.2 billion more.

Yet the programs that received most of that money are priorities that Californians broadly support or have demanded at the ballot box: tougher prison sentences for criminals, health care for uninsured children and an aging population, and a cut in the "car tax" that they pay every year to register their vehicles.

The problem, according to a report last week from the state auditor, is that Republican and Democratic politicians in Sacramento have shirked their responsibility for the past decade, papering over shortfalls that started after the dot-com bubble popped in 2001.

Like homeowners paying off one credit card with another, they used accounting gimmicks and more debt, rather than raising taxes or cutting spending, to balance the books.

It's a classic case of journalistic truthiness - some facts and accurate analysis wrapped inside a totally misleading frame. But in making this analysis, and emphasizing that the growth in state spending came from core programs - education, health care, and prisons - they have actually reinforced the argument I made nearly a year ago that we have a structural revenue shortfall. As I explained it:

The real problem is that since 1978 this state has cut nearly $12 billion in taxes. This was done during economically prosperous periods, particularly the 1990s. And that lack of revenue has piled up over the years - the state has fallen further and further behind to the point now that our state's governor is seriously proposing ending public education as we know it.

The MNG story is framed as one of "foolish politicians recklessly overspent our money! if only they'd been more careful!" But within the story itself the truth does emerge:

Schwarzenegger's first act as governor, signing an executive order to cut the vehicle license fee by two-thirds, blew a large hole in the state budget. It saved the average motorist about $200 a year but would have devastated the cities and counties that had been receiving the money. So Schwarzenegger agreed to repay them every year with state funds. That promise now costs the state $6 billion a year, or $2 billion more than the rate of inflation and population growth since early 2003.

MNG claims there was $10.6 billion in "overspending" - but $6 billion of it, or more than half, was Arnold's idiotic VLF cut. The article, which conveniently stops its history at November 2003, doesn't include the other $6 billion in tax cuts that have been implemented since 1993 - cuts that would have allowed state services to be funded at the bare-bones levels we've seen during Arnold's reign.   Read More »

Today's Paul Krugman column exploring the apparent end of Republican racial backlash politics has been getting some excellent commentary across the blogosphere, including friend of Calitics thereisnospoon's excellent take at Daily Kos:

For the longest time, the progressive economic agenda was held hostage to vaguely economically progressive but socially retrograde racist Dixiecrats in the South. When truly progressive economics required that all our nation's people have equal opportunity to share in the nation's wealth, those erstwhile allies became strained or broken. But today Democrats are no longer dependent on the likes of Zell Miller and his Dixiecratic friends to enact a progressive economic agenda. The Republicans have painted themselves into a corner as the Party of the South, and Democrats have largely cleaned our own house of the racists.

All that leaves for us is the question of whether enough of our Democratic officials will recover from their Battered Wife Syndrome and the reject the temptations of corporate corruption to truly herald the advent of a 2nd New Deal.

Krugman and spoon's points are especially applicable to California, where the Republican politics of backlash was born and perfected. From Reagan's 1966 campaign that took many white working class voters from Pat Brown and the Dems, to Howard Jarvis' 1978 Prop 13 campaign to cut taxes he argued were being misspent on people of color, to Pete Wilson's 1994 campaign won by scapegoating immigrants (also true of Arnold Schwarzenegger's 2003 recall campaign, to a lesser extent) California Republican ideologies and political success have been built on exploiting white voters' resentments. As both Krugman and spoon point out, the base wanted the Great Society undone, and the /real/ power in the Republican Party wanted to undo the New Deal.

As the state of California enters the most serious fiscal crisis in its 150-year history, it's worth looking at how the collapse of Republican backlash politics may provide the necessary opening to fix this state and move beyond 40 years of destructive and failed conservative ideology.

The short version of what I'm going to explain below is this: the collapse of the backlash is due to a more diverse electorate and to an economic crisis that is now consuming the white middle-class, eliminating previous economic privileges they turned to conservatives to defend.

The underlying economic and demographic rationale for Republican anti-tax backlash politics in California is now gone, making multiracial coalitional politics based on expanding government in order to provide badly needed services and jobs a very real possibility, and likely the seed of a new political framework in California. More services and more spending, not less taxes, are now the overriding concern of California voters. Our politicians will have to catch up to be viable.   Read More »

After watching the little "Christmas Card video" it is apparent that this site is by the state employees and for the state employees. Taxes cannot and should not be raised. All of the cuts in spending are justified, especially now when the states revenues are at the lowest. This website is an example of the impact of larger than necessary government. A group that is not a majority, but also large, tries to influence the majority by suggesting that loss of state jobs during a budget crisis automatically results in loss of NEEDED services. Schools, it they close, will be closed because they are not needed. Many state employees may be facing cuts in hours and/or benefits. JOIN THE REST OF THE WORLD. Where did this confused notion come from that government employees are more important that private sector employees. I don't believe the I have seen any websites suggesting that large private companies that are laying people off by the truckload should find a way to tax the public to retain those jobs.

If you look at the history of taxation in this state, the budget has risen steadily over the last 30 years at a rate 2 1/2 to 3 times the growth of the GSP. If you look at an egg, you have a pretty good idea of the size of the yoke relative to the white. Government in its present form is the yoke getting larger and larger while the taxpayer available dollars,(the white) does not. How long can this go on.

Many of the great thinkers in history (including Plato and Aristotle) supported small government and realized the danger of allowing the government to grow to a point where those that fear for their givernment jobs could influence those who pay for those jobs.

Don't buy into this absurd argument. If you ask a state employee how much money is enough, they could not answer this question. There is never enough. Government is a giany consumer and it's the taxpayer that needs to determine how much is enough. If everyone else is tightening their belts, so should the state.

Several States that have much smaller education budgets (per student), for example, are out-performing california. Our problems are complex and throwing more money at them will not improve the state government and it definitely won't improve the lives of already strapped taxpayers.

Yesterday's San Diego Union-Tribune has a long article on the failure of Proposition A, a $52 parcel tax for all of San Diego County that would have funded a regional fire authority and help provide badly needed additional resources at local fire departments. Interestingly, it was the most fire-prone areas of San Diego County - towns like Ramona, which nearly burned down in the 2003 fire - that turned in the strongest No votes. Why would they vote against protecting their own property?

"I think the people don't believe the government," said Peter Jorgenson, a Ramona resident who voted for the tax. "They don't believe that they're actually going to do anything with the money."...

It did not win the support of Mary Eaker, 59, a clerk at a Circle K in Ramona.

"With the economy so bad, everybody's voting against anything with taxes," Eaker said. "Nobody wants more taxes. Forget it."

The article describes many other possible reasons for Prop A's failure, including poor leadership from San Diego County Supervisors, but the distrust of government does seem to be at the core of the problem.

Of course, this isn't just some random development. Conservatives have had as a primary focus creating and capitalizing on distrust of government. Conservative politicians, activists, and editorial pages like those at the U-T (which did endorse Prop A) have frequently accused government of being wasteful and reckless with tax money as a way to ensure voters never do support a tax increase. They cried wolf so often that when the wolf finally appeared in the form of a catastrophic firestorm, the good people of San Diego County did what they had been trained to do - be skeptical of government and vote against a tax for services they desperately need.

It dates back to 1978:

Proposition 13 reduced property tax revenue to governments throughout California, leaving fire districts with revenue shortfalls as high as 80 percent.

It's not likely we'll ever see a conservative question Prop 13. But as we saw last year conservative criticism has extended to fire departments themselves. Firefighters in Orange County were frequent targets of right-wing criticism, with the OC Register accusing them of being wasteful and taxpayers as being "weak" for giving fire departments more money.

One of the primary reasons for California's ongoing budget crisis is because conservatives have successfully created and exploited this distrust of government. If we're going to solve the fire crisis or the budget crisis, we need to restore public trust in government.

Showing Californians the consequences of conservative policies is a good way to do that. Just as conservative anti-government policies left New Orleans vulnerable to a hurricane and left the city's residents stranded when that hurricane finally arrived, so too has conservative policy and framing left Californians vulnerable to a similar disaster.

With the latest figures about the state budget deficit - $28 billion over the next 2 years - it seems beyond all doubt that Arnold Schwarzenegger is a failure as governor. The sole reason he took office in 2003 was to replace Gray Davis, who faced a similarly large budget deficit. Arnold promised to end this, and it is clear he has failed to deliver. Instead the state of California stands on the precipice of bankruptcy and crippling service cuts that will dramatically worsen the economic downturn.

And it is clear this is primarily Arnold's fault. His first act as governor was to roll back the VLF, blowing a $6 billion annual hole in the state budget (roughly half the annual deficit - remember that the $28 billion figure is for two years). That act of irresponsibility was compounded by using borrowing to close the rest of the 2003-04 deficit. As the budget deficit returned in 2007 Arnold stubbornly refused to admit the need for new revenues.

He has also refused to engage in the necessary lobbying to produce a budget solution - instead he wishes and hopes Republicans will see the light despite years of evidence suggesting they instead see a budget crisis as an opportunity to ram through far-right ideas that nobody really wants.

The Legislative Analyst Office, under its new leader Mac Taylor, directly calls for taxes as the solution to the budget deficit. The report is a bit too favorable to Arnold's plan and suggests too many cuts, but it makes this all-important point about spending cuts:

The state's main options for addressing its budget dilemma--cutting expenditures and/or raising revenues--would both have adverse effects on the economy. Either type of option would reduce money held by or received by individuals or businesses that otherwise could be used for consumption or investment purposes. Because the state's economy totals more than $1.7 trillion in economic activity each year, however, spending reductions or tax increases totaling between $20 billion and $30 billion would have a relatively small impact on the overall economy.

Here again I think the new LAO is being too moderate. The report notes that much of the upward pressure on spending is coming from increased usage of Medi-Cal, for example, suggesting that government services are becoming more necessary in a recession. It's the safety net at work - and cutting the safety net is the last thing we ought to be doing.

Republicans like Mike Villines might be peddling books by Arthur Laffer, but as the California Budget Project explains the evidence proves that tax increases are the best way to provide a budget fix that doesn't hurt the economy.

And of course, spending cuts and tax increases hit different Californians. Spending cuts hit working and middle-class people particularly hard, especially the truly insane proposals to increase student fees for higher ed. But a return to the pre-1998 tax levels would hit the wealthy while providing the working and middle classes with the safety net and economic opportunities they need.

That we have to face such choices at all is a testament to how epic a failure Arnold Schwarzenegger has been for California. The LAO's report is damning:

The state's revenue collapse is so dramatic and the underlying economic factors are so weak that we forecast huge budget shortfalls through 2013-14 absent corrective action. From 2010-11 through 2013-14, we project annual shortfalls that are consistently in the range of $22 billion, as shown below.

Those are shocking figures, and they should indicate to every progressive and Democrat just how important it is to push out our own fairer, sensible, long-term solutions.

One of the most important but so far overlooked narratives of this election cycle is the return of taxes as a major political issue. The recession is hitting government budgets just as that same downturn, combined with soaring gas prices and global warming is creating demand for new spending.

Against this backdrop conservatives are now convinced that their way out of an ugly election cycle is to rally the public behind their rabid anti-tax politics. Constant attacks on Obama as a tax-raiser are partly to blame for McCain's recent rise in the polls.

And here in the states Republicans are again turning to the tax revolt, their bread and butter for 30 years. Republican intransigence on the California budget is best seen as part of this national strategy to break Democrats on the tax rack.   Read More »

It's 1995 all over again, as Republican-induced government shutdowns are all the rage. Congressional Republicans are planning a shutdown in September if they don't get their way on drilling, which looks to be their core electoral strategy going into November.

Here in California the possibility looms as Republicans show no sign of budging on the budget. Saturday is the deadline for adding propositions to the November ballot, and as most budget solutions proposed have involved going to voters - whether it's Arnold's lottery bonds, his sales tax plan, or the Republicans' spending cap demands, the deadline becomes all-important:   Read More »

A few months late and several billion dollars short, Arnold has finally gotten around to making a serious revenue proposal - a 1 cent increase in the sales tax for a duration of three years. The SacBee reports this is expected to raise around $4 to $5 billion.

Not one to offer a solution without strings, Arnold insists that this would only happen in exchange for "long-term budget fixes" such as a rainy-day fund. A rainy day fund is a good idea but that needs to come AFTER we fix the structural revenue shortfall.   Read More »

Today's LA Times has an interesting series of op-eds by historians and authors examining how past governors dealt with budget crises. It's an interesting look not only at how those governors all helped build the prosperous state that we're living off of today, but also how the real problem with the budget isn't a lack of pragmatism or deal-making, but ideology. And since the articles were commissioned by California Forward they are particularly important in shaping how we will respond to this crisis.   Read More »

I know, I know, it's too easy. But what better headline can one come up with to assess the ridiculous and ineffective solutions proposed by Leon Panetta's high-powered, high cost group of high Broderists to solve the budget crisis?

George Skelton's column provides some of their early recommendations:   Read More »

The AP has gotten a hold of the governor's May Revise speech and therefore the major budget proposals that are to be unveiled later today. The key elements are described below and over the flip I provide some analysis of each proposal.

• Arnold will float bonds using the state lottery as security. $15 billion over 3 years will be raised but $10 billion goes into "rainy day fund"



• If that fails, 1% sales tax hike to last no more than 3 years



• Prop 98 suspension abandoned; instead COLA will not be paid



• State parks closures abandoned; instead fees to rise $1 to $2



• $6 billion still left to cut or balance out somehow."

Overall thoughts: Here we go again. Arnold Schwarzenegger came to office in the recall of Gray Davis in 2003 promising to solve our state's budget problems once and for all. Instead he immediately blew a $6 billion hole in the budget with the Vehicle License Fee cut and then borrowed to close the rest of the gap - costing the state around $3 billion in annual debt service.

Now that Arnold's solution has predictably failed, he is predictably offering more of the same. Borrowing against the lottery is a problematic concept for many reasons, the main one being it avoids the core issues of our budget. It's yet another one-time fix that does nothing to solve the structural revenue shortfall that has plagued our state for 30 years.

It is significant that Arnold seems to be backing away from his most significant cuts - especially the K-12 cuts. Obviously the details released tomorrow will be key, and we should fully expect higher ed to take another crippling blow. But this does indicate that the activism many of us have launched against the primary schools cuts has had an impact.

And of course, there's still $6 billion left over - $6 billion that the Yacht Party will insist come in the form of destructive cuts that damage the economy, $6 billion that Democrats will - we hope - insist come in the form of wise, long-term revenue solutions.

Finally, Arnold seems to be gambling that the economy will make a quick recovery and that the current woes are just a dip and not the opening stages of a deeper recession. That, I think, is a major and probably reckless gamble to make.   Read More »