Schwarzenegger’s Budget: Ever Deeper Into Mississippification
By Peter Schrag
If you watched Gov. Arnold d Schwarzenegger’s presentation of his budget proposal last Friday, you’d have learned (again) that the state’s chronic fiscal problems are everybody’s fault but his.
It’s the legislature’s fault for not making the cuts he asked for in January (even though Schwarzenegger vetoed some of the cuts it did make).
It’s the fault of the federal judges who ruled that some of the cuts enacted last year violated federal law and struck them down.
It’s the fault of an income tax structure too dependent on high income taxpayers and the stock dividends they get in good times and don’t get in lean years.
It’s the unions and the other “special interests” who dominate Sacramento.
It’s the recession. He even made allusions to Greece and Spain.
Nowhere was there any mention of the governor’s first major act on his first day in office in 2003, when he slashed the vehicle license fee, a cut that cost the state about $6 billion a year until the fee was raised a little last year. Nowhere was there mention of the governor’s child care initiative, passed in 2002, that cost the state about $500 million a year, or his strong endorsement of the stem-cell research bonds that cost another $200 to $300 million, much less the borrowing in his prior budget “solutions” that’s added a few billion more to the state’s indebtedness.
And of course, even as the governor talks about how his heart bleeds for the people who are getting hit in this years budget – poor children and their parents, the old, the sick – all of whom will get hit even more in the year to come, he is determined to preserve the $2.1 billion in corporate tax cuts enacted as part of last year’s budget deal. Nor was there any mention of the billions in corporate tax loopholes that have crept into the tax code in the years before.
Bring on Bobby Jindal the governor of Louisiana, or maybe Haley Barbour, the yahoo governor of Mississippi. They know how to run backward states with regressive tax systems and third world programs. They know how to screw the poor.
At his budget briefing Friday, Schwarzenegger was asked if he was really serious in proposing the elimination of CalWORKS, the state’s welfare-to-work program that serves about 1.4 million poor people, most of them children, with monthly grants, job training and child care to enable parents to become self-supporting. Is he serious about eliminating most state-funded child care and food stamps, or slashing in-home care for some 430,000 elderly or disabled people?
The real answer to the question, as his buck-passing about the causes of the larger fiscal mess indicates, is that he’s kicking the responsibility back to the Democrats in the legislature, who will now begin a summer-long process of struggling to save part of those programs.
In effect, Schwarzenegger, who came to office after the recall of Gray Davis, is abdicating from everything except the mythic belief (or maybe pretense) that we’re overtaxed and that any tax increase will kill the chances of economic recovery. The two Republicans who hope to succeed him promise yet more tax cuts and more Mississippification.
In fact the unemployment rate in low tax states like Mississippi (11.5 percent), South Carolina (12.2) and Florida (12.3) is almost as high as it is in California (12.6). In Nevada it’s 13.4. And contrary to myth, as a percentage of personal income, California ranks 19th in the nation in state and local taxes. Also contrary to the pervasive mythology California’s lowest income families pay the largest share of their incomes in state and local taxes; the richest pay the smallest share.
Of course, the rich pay much more of the total share: They have the highest incomes many times over. But their burden is lower.
The governor is right, as he said again Friday, that the state’s public employee pension system badly needs reform. Ever since the passage of Proposition 13 in 1978, fiscally strapped governments have settled with unions with promises of generous pensions and retiree health benefits, commitments that in most cases wouldn’t come due for years and that, when they were made, seemed cheap. Given the current costs, pension systems can’t be sustained unless new hires get pensions based on contributions rather than guaranteed benefits.
He’s also right that the tax system badly needs fixing, but not with the regressive quasi-flat tax scheme that his tax commission proposed and that he cited again the other day.
Ironically enough, in his call for reform Friday, logic also failed him. Not counting fund shifts and federal money, he said, total tax revenues this year were $76 billion, the same amount as “when I came into office in 2003...The GDP then was $1.3 trillion. The GDP now is $1.85 trillion. So look at that increase over the last few years. But not when it comes to our revenues. So there is something wrong with our system. This is what I'm trying to tell people. This is the evil.”
But the evil seems to lie in a tax system that takes less as a percentage of GDP than it did seven years ago. If taxes generated revenues at the same proportions, the state would be collecting $108 billion.
But the state’s leadership continues to be stuck in the pervasive mythology that we’re overtaxed and in the process marching steadily, if reluctantly, behind Schwarzenegger ever further down the road to Mississippification. Is there anyone willing to tell us that this is crazy?
Peter Schrag, whose exclusive weekly column appears every Monday in the California Progress Report, is the former editorial page editor and columnist of the Sacramento Bee. He is the author of Paradise Lost: California’s Experience, America’s Future and California: America’s High Stakes Experiment. His new book, Not Fit for Our Society: Immigration and Nativism in America is now on sale.