When we were debating the May 19 statewide ballot measures here at CityBeat, the conversation centered on the consequences of rejecting Props. C, D and E, which would have trimmed the state budget deficit by $5.8 billion by permitting the state to borrow against the lottery and pilfer money earmarked for mental-health and early-childhood programs. In the end, we reasoned that a little bit of budget relief—by then, the deficit had ballooned to more than $21 million—wasn't worth endorsing bad policy. Now, amid continually sagging tax revenue, the deficit is $24 billion, so that $5.8 billion is looking increasingly insignificant.
Gov. Arnold Schwarzenegger has proposed a series of jaw-dropping measures to balance the budget, reducing funding for public education and (thankfully) prisons, cutting all funding for state parks and severely weakening the state's social safety net by eliminating or reducing funding for a list of health and welfare programs for children, the elderly and the poor that's too long to get into specifics here. The California Budget Project estimates that nearly 2 million residents will lose access to healthcare.
“Government doesn't provide services to rich people,” state Finance Director Mike Genest told reporters last week. “It doesn't even really provide services to the middle class.... You have to cut where the money is.” Indeed, notes the California Budget Project, nearly 73 percent of the state budget goes directly to local communities and individuals, as opposed to state operations and capital outlay.
Essentially, the state has reached a point of cutting whatever it can legally cut. Schwarzenegger has abandoned the revenue side of the ledger, interpreting the May 19 election results as a blanket repudiation of tax increases, even though a two-year extension of recent modest tax hikes was buried in a confusing tangle of ballot measures. True, Californians don't like taxes, but they also don't like cutting services to kids, old people and the poor.
We can talk on and on about how we arrived in this pickle—New York Times columnist Paul Krugman last week made a pretty good case, as have many others before him, that it's the result of a perfect storm of inequitable property-tax assessments, paralyzing budget and taxation restrictions and crippling recession. (Krugman also blames extremist Republicans in Sacramento who can hold the state hostage despite their minority status.)
And we certainly should keep talking about these causes, but we're in need of desperate emergency action because lots and lots of people struggling to hang on are about to fall through cracks that are turning into yawning chasms.In an address Tuesday to state lawmakers, Schwarzenegger said, “We are not Washington. We cannot print money. We cannot run up trillion-dollar deficits. We can only spend what we have.”
Of course, he's right. Last week, he let go of a proposed request that the U.S. government essentially co-sign on a $5.5 billion loan after federal lawmakers gave the proposal a chilly response and the California Legislative Analyst's office blasted it as poor fiscal policy.
But what about no-interest loans from the federal government to states that are in trouble? California is perhaps in the most dire straits—Krugman noted that California's housing bubble was bigger than most other places, and its unemployment rate is fifth highest in the nation—but Nevada, Arizona and Michigan are in trouble, too, as are most cities and counties across the country. As the governor notes, the federal government can and has run up trillion-dollar deficits through massive tax cuts, unnecessary foreign wars and bailouts of banks, insurance companies and automakers. Why not spend a few hundred billion dollars more patching up social safety nets from sea to shining sea? No, we're not huge fans of expanding the national debt. But tough times are when deficit spending is relatively OK.The state Legislative Analyst's office reports that about 60 percent of California's budget imbalance is attributable to the recession, so even if we don't want to reward the state for spending beyond its normal means, why wouldn't we be OK with a no-interest $15-billion loan to make up for the part of the deficit for which the state is not guilty?
Whether we're talking about direct state taxes, a federal bailout or the long-term effects on local governments after abandoning the poor, it's all our money, right? Whether we like it or not, we're all in this thing together.