"Live Within Our Means" initiative is not "real fiscal reform"


From a scholar at that bastion of tax-and-spend liberal thought, the Cato Institute — writing in a rag that might as well be an organ of the Democratic Party.

Real fiscal reform? Not this initiative
The governor has blown a big opportunity to get the state's house in order
(Orange County Register ) With Gov. Schwarzenegger's announcement last night that California will have a special election this fall on several high-profile initiatives, we can expect his controversial proposals on redistricting and changing teacher tenure to continue to get more attention than his fiscal reform plan. This is unfortunate. For while his "Live Within Our Means Act" is a well-intentioned effort to minimize the severity of the next budgetary shortfall, it fails to place effective curbs on spending necessary for long-term fiscal solvency. ...

This proposal would limit how much government could expand during times of prosperity. However, the sizeable reserve would provide legislators with very little incentive to economize or downsize during recessions. Furthermore, legislators might be even less likely to cut taxes since any revenue declines would directly result in immediate budgetary cuts.

So while this proposal may reduce the size of the next budget shortfall, it fails to remedy the high spending, high taxes and sluggish economic growth that currently plague the Golden State.


The author doesn't mention that the measure is a mad power-grab by the Governor's office and that it rolls back constitutional protections on education spending. He also doesn't mention that Schwarzenegger ran on a platform of fiscal responsibility and hasn't accomplished anything in the direction of solving California's fiscal crisis, so that it is unclear why we should believe him this time .

The author does goes on to put in a bizarre plug for the flat tax as a panacea for California's budget woes — no data or even analysis about why this would work, or why it would work for long if it worked at all. (I imagine the argument would go something like this: High-wage workers pay a higher proportion of taxes, and the volatility in high-wage jobs during the late 90's led the state first to have lots of money to spend and then suddenly to have none; the implication being that if we flattened out the tax rates, the influence of high-wage volatility on state revenues would be smaller. I'd buy this argument with prior knowledge that the dot-com bubble was going to repeat itself once every ten years, and if I didn't think that flat taxes were regressive.)

I point that out mainly to draw attention to what side of the street he's approaching the issue from — i.e., the Governor is going to be drawing some criticism from the very right-wing ideologues whose support he'd like to have as he whips the likes of Orange County into a froth.

Posted: Thu - June 16, 2005 at 07:55 AM   | Category:     |   |   | |


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