As a former budget director for the Senate Republicans, I ask myself this question every time we face a deficit – Why not cut spending instead of raising taxes?
Today Governor Schwarzenegger called a special session of the Legislature to address an $11.2 billion shortfall in state General Fund revenues. This shortfall is so sudden and so severe that we have to act immediately, and we have to both cut spending and raise taxes.
When Governor Schwarzenegger came into office, General Fund spending was $78 billion. If all the cuts proposed by the Governor in the special session are adopted, we will spend $99 billion this year, which equates to a 4.77-percent annual increase. The amazing thing about that number is that it is actually a bit less than we would be allowed to spend if the Republican "hard spending cap" had been in effect when the Governor took office. Specifically, population and inflation growth over that time was 4.84 percent annually on average.
To be fair, our administration did allow growth in 2004-05 and 2005-06, which can be attributed to a litany of expiring gimmicks and inherited debt that caused those high rates of growth, but the fact is that only a tiny portion of the growth in those years was due to discretionary spending increases supported by the Schwarzenegger Administration. In any event, by holding growth to near zero over the last two years and by proposing to cut it even more in the special session, we have made up for those early years of growth.
I would be surprised if any legislator can seriously propose, let alone get votes for cuts that go even deeper than what the Governor is now proposing. Unfortunately, that leaves revenues. The Governor’s special session proposal is evenly balanced between cuts and tax increases. It is a tough but fair plan to address this unprecedented economic and fiscal crisis. The time for questioning is over. We need to act now!