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How Exactly is a $20 Billion Deficit Good For Schwarzenegger?

By Robert Cruickshank

In November 2002, after winning a close re-election battle against Republican Bill Simon, Gray Davis announced to Californians that the budget deficit had swelled to $35 billion. In response the state's media denounced Davis as having caused the crisis and hiding the real facts from voters. In this atmosphere the recall effort that began in early 2003 caught on like wildfire, as the deficit was blamed on Davis, instead of on Tom McClintock's tax cuts or the economic downturn.

Six years later we find ourselves in a similar place. The economy is in a downturn and state revenues are being hammered. Arnold Schwarzenegger is now warning that the deficit could be as large as $20 billion. So how does the media react?

Well, if you're the San Francisco Chronicle's Matthew Yi, you talk about how this might help the governor and his proposed budget reforms:

“The new deficit figure - 30 percent higher than the latest estimates by lawmakers - reflects a deepening fiscal crisis that has polarized the budget debate in the state Legislature, with Republicans vowing to fight tax increases and Democrats saying they won't settle for cuts only.

“Schwarzenegger, while maintaining he won't support raising taxes, also wants to make fundamental changes in California's budget process, and experts said today that the governor's deficit estimate this week could help his campaign for budget reform.

“The governor's ideas include imposing a cap on spending, setting aside a so-called "rainy day fund" for lean budget years and giving him authority to impose automatic spending cuts in years when the state faces a fiscal crisis.

“His proposal has gotten little traction in the state Legislature as Democrats, who control both houses, are balking at the governor's ideas. But the widening budget deficit highlights the need for a structural change in how the state budget is worked out each year, said Larry Gerston, a political science professor at San Jose State University.”

The article goes on to discuss the various reform proposals, and has a good quote from Steve Maviglio emphasizing the need to focus on immediate solutions instead of pointless "rainy day funds" and the like (when your roof is leaking, you need to fix it, not plan for the next rainstorm).

Nowhere in the article is any criticism leveled at Arnold for having created this mess. Gray Davis, victimized by a severe economic downturn, was held responsible by virtually the entire state media corps for the budget deficit. Arnold gets a pass, even though his role in creating this deficit was far more direct. Let's review:

• Arnold refused to consider new taxes to close the last budget deficit. Instead he floated billions in bonds, leaving the state with a debt service load of $3-$4 billion each year.

• As his very first act in office, Arnold issued an executive order repealing the VLF fee increase. At the time it cost the state $4 billion a year; recent numbers from the California Budget Project suggest the current figure is $6.1 billion.

• When the first warnings of a looming budget deficit were sounded last summer, Arnold offered no leadership whatsoever to help right the state's finances. A few tax increases in 2007 would have helped improve the state's fiscal picture and given us a smaller, more manageable deficit today. Instead Arnold enabled the Yacht Party's two-month hissy fit and line-itemed $700 million in health care cuts and $1.3 billion in public transit cuts from the 2007-08 budget.

The first two points suggest that Arnold is directly responsible for around $9 billion - half the projected deficit. Gray Davis had the bad luck to be elected governor in 1998. Arnold helped force Davis' early exit from that office in 2003 on a promise to permanently fix the state's budget. Apparently that promise is as forgotten by the media as Arnold's role in creating the current deficit.

Madness. Simply madness.

Robert Cruickshank is a historian, activist, and teacher living in Monterey. He is a contributing editor at Calitics.com and works for the Courage Campaign, in addition to teaching political science at Monterey Peninsula College. Currently he is completing his Ph.D. dissertation in US history, on progressive politics in San Francisco in the 1960s and 1970s. A native Californian, he was raised in Orange County and educated at UC Berkeley.

Posted on April 30, 2008

Comments

yes !!! arnold is the biggest joke of calif !!!
but the taxspayers still cannt see it let ??/

Posted by: delang at April 30, 2008 07:54 AM

Son of Comrade Cavala,

Funny, Arnold is more liberal than conservative yet you libs beat him up whenever it suits your politics.

Nowhere do you mention the LEGISLATURES responsibility in ANY of the budget debacles; either on Davis or Arnolds watch. Could it be because the legislature has been a majority institution of democrats in both cases? Committee chairs and all?

Recall (pun intended) that the voters placed Arnold in there to end an outrageous VLF TAX (fee is mere camoflauge). So the VOTERS got rid of being too heavily taxed by electing Arnold. It was such a black and white picture even the lethargic California voters saw it for what it was. A tax for folks to drive their cars to work, school, the doctors office. to purchase food and to generally stimulate the economy by their participating in it via their cars!

Lesson: The VOTERS don't want more taxes. Are the voters wrong here? Yet you phrase it as all "lost revenue" to the government.

Democrats don't want to make cuts as they made promises to those who get money or services from the state...promises made with other peoples money; taxpayers.

Show me a democrat that hasn't supported a bond issue...and to the detriment of the state budget as well.

Propaganda skills do run in the family...

Posted by: Jay Gould at April 30, 2008 08:42 AM

Say what you want to.. we know what Arnold promised us ? was a balance budget and I don't see one!! Do you !!!
so it's okay taking it out on schoolkids right
and it's okay to take it out on disability people!!

But let's give the fire Department a pay raise behind closed doors what a joke!!! That's just why California is in the shape it is on ..
and I suppose the lawmakers did that to?

Posted by: demc at April 30, 2008 12:53 PM

demc,

Just WHO gave the fire department (which one by the way?) a pay raise behind closed doors? If true and with the details behind your claims, I'm with you!

Now I'm in favor, and so should you be, in REDUCING the pay of ALL LEGISLATORS, regardless of party affiliation NOW. Why? For non-performance of their duties in getting things done, including the budget, in a timely OR accurate manner. Plus, government times are tough and cuts must be made...

Recall when democratic Pro Tem Perata asked "just enough" legislators stay in Sacramento over a 4 day weekend to be a "quorum" so they ALL, ALL OF THEM could cash in on the $179 per day tax deferred per diem?

How can any "Progressive" or Democrat defend such personal selfishness? Answer: They can't. Lets get rid of ALL and ANY politician, regardless of party, who behaves this way with OUR TAX DOLLARS!

Posted by: Jay Gould at April 30, 2008 09:53 PM

jay !
This claim that I am making has been on the news for days now Channel 3 and Channel 13 local news
and the news channels really made a big deal of of them getting a raise with our budget as bad as it is ..and they said it was done behind closed doors!! check the news and you will see
this is not first thing do behind closed doors so the public doesn't know ?? It's done all the time!! After taking away from our schools and people on disability has to suffer and all the programs being cut.. and then we find out about behind closed doors pay raises.. well that's not fair.. and I do not think Arnold's fear about anything.. and I do know that Arnold has not kept his promises to this state of California. Or the people of California .. please check this with the news Channel see for yourself thank you very much

Posted by: demc at May 1, 2008 11:32 AM

jay gould
I finded the report channl 13 reported by R.E. GRASWICH go to the SCOOP AND YOU CAN READ THE REPORT 10 PERCENT RAISE OVER TWO YEARS AND ALOT OF THEM WILL GET 17 OR 19 PERCENT DEPENDING ON THEIR DUTIES AND BEHIND CLOSED DOORS PLEASE READ IT

Posted by: demc at May 1, 2008 05:20 PM

demc,

I like your passion and agree, in concept with what you state here. Nothing is good OR appropriate when done behind closed doors as you allude to.

However, I don't know where "local" channels 3 & 13 are nor which fire department(s) are in question here. If they are STATE entities, then their pay should be frozen along with ALL state employees, including legislators, until a viable budget situation is in place.

Posted by: Jay Gould at May 1, 2008 06:47 PM

jay
go to http://cbs13.com//thescoop/the.scoopfirefghters.2.711713.html
or go www.cbs13.com in the scoop you will find it?
It is Sacramento fire Department that got these pay raises for the next two years contract signed by the mayor of Sacramento.. and you no Arnold knows about it.. because it's his job to know what's going on in Sacramento cut the poor cut the schoolkids cut the disability people but let's give a raise to the fire Department of Sacramento as I said before .. what a joke

Posted by: demc at May 2, 2008 07:47 AM

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