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September
13, 2002, 9:15 a.m. |
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overnor
Gray Davis and the California state legislature recently agreed to a budget,
compromising on modest spending reductions, several budgetary gimmicks,
and a $2.4 billion tax hike. Despite this quick-fix — a band-aid
solution to the state's budget woes — even the top Democrat in the
legislature has publicly admitted that fiscal storm clouds still loom
large over California as double-digit budget deficits are predicted for
the next five years.
Over-reliance on capital-gains revenues generated by the now-burst tech bubble, Gov. Davis's extraordinarily inept arrangement of long-term energy contracts at prices drastically higher than current market prices, and massive increases in state spending are among the causes. But failed leadership in Sacramento is the root cause.
As revenues began flowing into its coffers at a record pace during the mid-1990s, Sacramento began spending like a sailor on shore leave. This trend dramatically worsened with the election of Gray Davis.
According to the California Taxpayers Association, between fiscal year 1993-94 and fiscal year 2001-02, total state spending nearly doubled. During Gov. Davis's short tenure, spending has increased by a whopping 37%. Even California's own Legislative Analyst's Office admits that real per-capita spending — which adjusts for both inflation and population growth — has increased by 26% since fiscal year 1992-93.
Such fiscal promiscuity is almost unprecedented and earned California an "F" from the Cato Institute's Fiscal Policy Report Card on America's Governors 2000 — making Davis one of only three governors in the entire country to receive such a dubious distinction. According to Cato, "[t]he mediocre fiscal record of Pete Wilson has given way to the extraordinarily bad fiscal performance of Gray Davis."
Meanwhile, the Small Business Survival Committee recently ranked California the 46th worst state for small businesses.
Such massive increases in government spending are the second-worst thing government can do during times of weak economic performance. The more capital that government sucks out of the private sector to spend itself, the less that is left for entrepreneurs to invest and create jobs.
The only action more economically obtuse than massive increases in spending during an economic slowdown would be to raise taxes. Unfortunately for Californians, that's exactly what their elected officials have done. While the compromise reduced the size of what are euphemistically referred to as "revenue enhancements" — as if their constituents are too stupid to recognize a tax hike when they see one — the economic effects will still be staggering.
Even old-fashioned, liberal, Keynesian economists realize it's a horrible idea to raise taxes during economic slowdowns. The last thing that'll get the economy going is to take more money out of the pockets of the folks that fuel the economy (hard-working taxpayers — not government bureaucrats).
Apparently the folks in Sacramento can't comprehend what every California family already understands — when economic times are tight you reduce expenses, and make short-term sacrifices for long term-benefits.
California has spent itself into a hole and the only way out is through fiscal moderation. Not through a tax increase, not through budgetary gimmicks. Fiscal moderation, which means — Heaven forbid — spending reductions. Actions have consequences and Gov. Davis and his allies in the state legislature are now suffering the consequences of their unadulterated spending spree. While they have done everything in their power to weasel their way out of this predicament — especially in an election year — the long-term answer is to bite the bullet and do what's right.
Given the lack of courage being displayed in Sacramento recently, perhaps Californians should ask their next governor (whether it be Davis again or Republican Bill Simon) for an insurance policy against further fiscal insanity. They should demand the governor propose a constitutional amendment limiting spending increases to the rate of inflation and population growth unless the electorate agrees to more.
Colorado passed just such a provision in 1992 to cries of outrage from the Left. Yet in the last ten years, nearly $2 billion has been returned to Colorado's taxpayers, children and old folks aren't "starving in the streets," the state is one of a few in America not currently facing a budget crisis, and Gov. Bill Owens is on his way to an easy re-election (California's "Gann Limit" adopted in 1979 contained many elements that would have functioned like those in Colorado's law, but the law has been effectively gutted over the years). Clearly, California would have benefited from such provisions during the 1990s.
Ultimately, if the politicians won't commit to protecting the state's fiscal and economic well being, then the voters should force it upon them with an initiative measure of their own. In the meantime, without a change in leadership, the forecast calls for lingering gray clouds with taxpayers continuing to get soaked. Perhaps November's elections will change that projection.
— Eric V. Schlecht is director of congressional relations for the National Taxpayers Union.