Budget fecklessness

As readers outside the Golden State may not have noticed, California is facing a budget deficit of about $16b this year, more than 12% of the total. This is about $432 per person. The state’s per capita income in 2007 was about $41,000, so the money needed is about 1% of the state’s personal income. $432 is not a bagatelle, but we can easily afford this bite to have a functional government. The way to get it is to raise taxes, about 1% (of income, not 1% more taxes); the state income tax is steeply graduated, so this means a lot less for poor people and a lot more for our very rich rich.

How can grownups screw up something this big this badly? The moving parts go back to the state constitution’s requirement of a 2/3 legislative majority to tax, and to Proposition 13, when local governments couldn’t cut property tax rates fast enough and voters were sold a bottle of snake oil that permanently ruined local public finance. Then the state Supreme Court moved school financing to the state level, and removed the major incentive for citizens to let their local governments tax them, a well-intentioned tragedy of the commons. It hasn’t helped that the legislature voted itself safe districts all around, or that the voters enacted term limits assuring that the legislature, including its leadership, would forever be novices.

But politics is different from the content of laws and rules. The politics of this is that California Republicans have collapsed to a permanent minority mainly representing people rich and stupid enough to think they don’t need government, and heartless enough to sleep at night as they deny it to those who do. There are just enough of them in the legislature to do their one trick, which is to contract that if any one of them ever votes for any tax, the party will run an opponent in the next primary and defeat him.

Arnold Schwarzenegger is a Republican, but a Republican who doesn’t need his job or the salary that goes with it. Of course, like any governor, he’s surrounded by people to whom it is very important that he keep his job, and I have little sense that he does a lot of his own thinking. He got himself elected bleating about how terribly overtaxed we are, catnip to an electorate with little experience hearing the truth and famously prone to romantic magical thinking. Unlike his predecessor, who was never anything but the next job he was angling for, he has been well positioned to make up for this with two big things, but he’s never got around to them. The first is to tell Californians at every opportunity that the world allows a high-tax, high-service government or a low-tax, low-service one, but that low-tax, high-service doesn’t exist and they have to choose from the real options. The second is to stand up to his own party and demand they stop hiding in their gated communities and act like citizens.

Instead he is floating a classically irresponsible idea, selling three years’ worth of lottery profits to fix this year’s shortfall (never mind the heartless and economically suicidal cuts to social services, transit, and education he’s proposing). His backup is a 15% increase in our most regressive tax, the sales tax.

I’m appalled.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.