Schrag: A Modest Proposal to Balance California’s Budget With No Tax Increases

Proposition 4 was such a clumsy piece of legislation, based on unrealistic formulas, that it was finally revised beyond all recognition. (Howard Jarvis, the father of Proposition 13, thinking his microphone was off at the end of a radio program, described it with what used to be called "a barnyard epithet.") The most lasting legacy of Proposition 4 is Proposition 98, the state's minimum school funding formula, which the California Teachers Association narrowly managed to pass in 1988 after Gov. George Deukmejian, invoking the Proposition 4 cap, had returned $1 billion to the taxpayers. Much of that money would have gone to schools. One budgetary knot enacted by initiative had twisted into another.

California badly needs a powerful economic stimulus, as do most other states, but it will have to come from Washington – and come quickly – as part of a broader economic recovery program. Substantially reducing state spending is the very opposite of a stimulus: Teachers, university professors, cops, prison guards, nurses, physicians all contribute to the economy, both in what they spend and in the services they provide.

Most state tax increases would likewise take money out of the economy. If those taxes are temporary and directed at high incomes – including, of course, the highly paid school and university administrators, and the Sacramento bureaucrats that we all love to hate – they're more likely to hit saving than spending. But the ironic slasher scenario still makes it clear that the state can't simply cut its way out of its deficit.

Either way, the terrible choice makes a real federal stimulus program – deficit spending in the classic Keynesian sense – urgent. "The question for the stimulus package," as Mark Paul of the New American Foundation recently wrote, "isn't, as the media shorthand puts it, whether to 'bail out' the states. It's whether Washington will stand idly aside and watch the states, forced to balance their budgets, take fiscal actions sure to make the recession deeper and longer."

Yet no federal money, however generous, will close California's deficit or reform the tangled budget process that California has tied itself into – much of it through the acts of the voters themselves. Politicians often encouraged them, both by backing initiatives that take large bites of the budget and through chronic borrowing and fudging, by fostering the illusion that we could have it all at no additional cost.

The system is almost perfectly designed to be dysfunctional, allowing elected officials to conceal responsibility and undermine effective citizenship. Which, of course, is why the deficit reduction plan outlined above, for all its irony, deserves attention. It might finally bring home to Californians the real choices they face, and the political posturing and buck-passing they've encouraged all these years.

Peter Schrag is the former editorial page editor of the Sacramento Bee. This article is published with his permission.