Wall of Debt

Loren Kaye
President of the California Foundation for Commerce and Education

Governor Brown unveiled a new theme on Monday to sell his budget solution: the Wall of Debt.

This approach targets Republicans and other voters skeptical of the need for tax extensions.

  • The Governor specifically calls out the nearly $35 billion in borrowing and gimmicks devised by previous Administrations and Legislatures to paper over earlier deficits. The subliminal message: “Never again.”
  • The debt retirement theme provides a landing zone for Republican legislators who might agree to tax extensions in return for a spending cap, where any revenues above the cap could be used to retire budgetary borrowing. The Governor expressed his support yesterday for an undefined spending cap.
  • Raising the debt issue also provides a platform from which the Governor could insist on aggressive reforms in state and local pension obligations. Actuaries peg the unfunded liabilities of the two big state pension systems north of $150 billion. This off-budget debt was recently noted by Standard and Poor’s as a further threat to California’s anemic credit rating.
  • Finally, the overall capacity of the government to take on debt will be front and center as the Congress debates whether and how to raise the federal government’s debt ceiling.

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