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Wednesday, January 05, 2005

Governor Narcissus Battles the Budget Monster 

It’s California Budget time again, which means that Professor Tax will have to defer for a while any more theorizing about tax cheating by rich folk. The Golden Shark will just have to wait while we deconstruct the latest broadcast appeal from Governor Narcissus to the People. Sigh! It’s not an entirely pleasant task, digging through the misconceptions and hypocrisies of California state finance, but someone has to do it so that the underlying comedy won’t be lost. As Chief Justice Marshall should have said: “The power to tax is the power to amuse.”

It’s all so predictable. The relentless dumbing down of public issues, the limited vocabulary carefully castrated of all words longer then two syllables, the macho posturing, like a capon on steroids. The meaningless rhetoric, the stereotyped thinking, the guttural Austrian accent, all appealing to the lowest common denominator among the voting audience. The overwhelming display of personal vanity. And it's that vanity that compels a continuing refusal to accept responsibility for the State deficit – even tho this year’s $8.1 billion dollar hole is roughly equal to the cumulative revenue that Arnold gave away by not letting the vehicle license tax revert to its normal historical level. Note, incidently, that the loss of car tax revenue is scored as state spending, since California is obliged to reimburse local governments for the forgone revenue from a property tax on autos. How amusing that Governor Humvee attacks state spending, when his first act in office was to increase it by $4 billion per year.

Enough prologue. Now let’s go watch the speech.

Well! The People of California certainly enjoy being told how honest, wise and wonderful they are. They also seem to enjoy the opportunity to legislate by popular vote on matters of which they know very little. California's initiative process has become a form of plebiscitory democracy, where voters are manipulated into favoring or oppose interest group legislation through expensive television advertising based on anecdotes and sentimental stereotypes. The process is tailormade for charismatic leaders like Governor Narcissus. By defining the issues on the ballot he can advance the agenda of the corporate Republican business interests for whom he fronts while at the same time promoting his personal ambition for re-election. The four constitutional amendments he proposes to place before the voters are the result. (The proposals will first be offered to a special session of the legislature in an obvious attempt to make the majority Democrats embarrass themselves by appearing to oppose "reforms".)

First, the budget amendment. Rather than deal honestly with the state budget, der Governor will "reform the process." There's no mention of his spending $4 billion a year on car tax relief. No, the problem is caused by mysterious "budget formulas":

"Last year, we had $78 billion in revenues coming in. The great news is that this year, we have $83 billion coming in, over $5 billion more than last year. Now that is terrific. However, various budget formulas require us to spend over $10 billion more. Do the math. Our revenue increases by more than 5 billion but our spending increases by over 10 billion. We don't have a revenue problem. We have a spending problem. In fact, the way the formulas now work, we will never catch up. No matter how well we do, the current system is programmed to spend even more."
No one in the media will challenge him. They won't be able to figure out what "formulas" Narcissus is talking about, because he himself evidently has no idea. A recent report by the nonpartisan Legislative Analyst explained that half of that $10 billion increase is "an anomaly related to one-time savings in 2004-05 that temporarily depress General Fund expenditures in that year." In other words, the budget tricks that ex-Finance Director Donna Arduin used last year are clawing back. Medical cost inflation raises Health/Human Services by $2 billion to a total of $27 billion, while increased debt service on der Governor's bailout bonds eats up an additional $500 million. Only $2.6 billion is due to the formula that links spending on schools and community colleges to the level of state revenues.

Arnold's ignorance of how budget formulas actually work led him to assert that raising taxes would only widen the gap:
"We could raise taxes by billions but that would only further drive up spending by billions of dollars. California would never come out ahead."

Ignorance, it must be ignorance, frightening though that is in a head of state government, for a knowing lie that large would qualify him for the lead in the next remake of Pinocchio.

But where did these mysterious formulas come from? Why is California hamstrung by arbitrary spending formulas? Was this the work of corrupt legislators dancing to the tunes played by those shadowy special interests, who der Governor blames for all ills that plague the public? Er -- no. Actually, Proposition 98, which accounts for almost half the budget and for 3/4ths of all state public education funding, was passed by voter initiative in 1988. And surely Arnold has not forgotten proposition 49, the mandatory afterschool program spending initiative in 2002 that he used to translate his movie charisma into political fame. Indeed, proposition 98 itself was a delayed reaction to the primal manifestation of plebiscatory politics back in 1978 when state voters enacted proposition 13, freezing property taxes and gutting the school system which those taxes had financed.

There seems to be a pattern here. The initiative process is probably the worst possible way to arrive at a government budget. The voters have no say in defining the issues -- their only role is to mark the big circle "Ja" (or risk a "nein" in the little circle). The process favors those who can afford the massive amount of sophisticated advertising needed to manufacture public sentiment. There is no place in the process for evaluating specific programs or for making the concessions and political trade-offs that are essential in legislative budgeting. (Naturally, there is "waste" in government. A program cost that is a vital interest of one constituency may be useless in the eyes of a second constituency, which has its own preferred funding priorities. The legislative compromise that builds a majority including representatives from each constituency will be a budget that each will view as somewhat wasteful. They disagree, of course, as to which portion of the compromise is the useless part, and typically fail to recognize that what they call "waste" is a politically necessary component of the spending they regard as vital.)

Der Governor's proposal #1 reflects exquisite political calculation, but it is logically absurd. If the state budget system has been broken as a result of trying to allocate resources and legislate tax reductions by popular vote, then one more plebiscite is hardly a solution. "Mandatory spending cuts across the board" sounds macho on TV or in a ballot book ad -- but which bondholders will the state Treasurer stiff, and which prisoners will be sprung free when the state can't pay the jailers?

There's a better way. Any budget can be balanced. Just have the voters decree that 2+2 = 3 or 5 or whatever. And how about an initiative to make math easier for kids in school by setting pi equal to 3?

Coming next: a look at proposed Constitutional Amendments 2, 3 and 4.





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