December 28, 2007

California Spendin’: WSJ Notes, Rest of Media Ignore

A hard-hitting subscription-only editorial in the Wall Street Journal today needs some reinforcement.

That’s because Californians relying on Old Media for their news about the Golden State’s dire financial situation are being conditioned to believe that only a tax increase will solve the state’s problems.

The latest offering in that regard is a Field poll covered at the San Jose Mercury News and the San Francisco Chronicle, headlined “Many voters think deficit fix will require higher taxes” and “Voters resigned to higher taxes to solve budget crisis,” respectively. Those headlines conveniently obscure the fact that the margin of those believing that tax increases are necessary vs. those who think that the answer is totally in spending cuts is only 48%-43%.

Here is some of what the Journal had to say:

Let’s start with the culture of overspending in Sacramento. State outlays have nearly tripled to $142 billion this year from $51 billion in the early 1990s. After the technology bubble burst in 2001, the state’s deficit swelled to $20 billion. Voters recalled Gray Davis from the Governor’s mansion in favor of Mr. Schwarzenegger, who promised to “cut up the state’s credit card.” In Arnold’s first year, the budget was held in check, but the state still issued $9 billion in “revenue bonds” rather than shrink the size of government.

What really rescued the state was the national economic expansion, including the housing boom and the cut in capital gains and dividend taxes that helped the state’s technology industry. Tax receipts rose 40% over the last four years, but Sacramento returned to spending as usual. Expenditures rose by 44%, and billions of dollars of new school and road bonds were issued. After getting trounced by labor unions in state referendums, Mr. Schwarzenegger gave up trying to change any of this.

Even with the new deficit estimates, the Governor and legislature are promoting a new government health-care plan at a cost, coincidentally, of $14 billion.

….. “Our tax policies practically invite Californians to pack up their bags and leave the state,” says Assembly Minority Leader Mike Villines. “We can’t possibly balance our budget with new taxes.” Ah, but Democrats are willing to give it a try. Assembly Speaker Fabian Núñez wants to institute a new tax on Internet sales, increase corporate taxes, and double the state’s hated car registration tax.

Mr. Schwarzenegger is again preaching spending restraint, which is long overdue. The tragedy is that he and his Sacramento running mates wouldn’t be facing this current fiscal mess had they done more to improve the state’s policies during the last one.

That California’s politicians need to get a grip on spending is illustrated in this table (the spending amounts come from the editorial, the population numbers from the Census Bureau, and the inflation adjustments came from relevant December-ending figures at the Bureau of Labor Statistics):


The state is spending over 58% more per person in real terms now compared to 12 years ago, and over 12% more in real terms compared to just two years ago. Additionally, I have been told by several residents over the years that the state has pushed a lot of spending down to the counties and cities over the years, increasing the overall tax burden in the state by even more than would be indicated above. Commenter confirmation of that contention would be welcome.

The idea that tax increases are part of the remedy in California is patently absurd, but don’t even expect the state’s Old Media to tell you that.

Cross-posted at


1 Comment

  1. Arnold is pushing four propositions in February: 94, 95,96, 97 which give expanded gaming and little oversight to the tribes.
    There are plenty of tribes that haven’t received their compacts for casino, yet the Gov is giving those 4 tribes a sweetheart deal.
    The Pechanga Band of Luiseno Mission Indians do not deserve the reward of more machines. Their Chairman, Mark Macarro, stood up on television and told the people of California that this would help all native americans. Meanwhile he and his conspirators, have eliminated 25% of their tribe, in order to gain financially. They are now making $32,500 per month, while elders have been kicked to the curb.
    Pechanga did not follow their own tribal law in eliminating their members, nor in keeping OUT rightful members via and unlawful moratorium.
    I URGE all Californians to take a look at my blog and others to learn WHY these deals are no good.
    Why would the tribes have to spend $45 MILLION trying to convince us they are good for us? Shouldn’t it be apparent?

    It’s not and it isn’t good for California. IF Peechanga can cheat its own people, ya think they won’t cheat California?

    Comment by Original Pechanga — December 28, 2007 @ 6:07 pm

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