The ongoing budget crisis certainly highlights the need for the long term reform of our Government. Among those reforms needed are (1) a true budget cap, (2) a two year budget cycle, (3) costs benefit analysis for programs, and (4) zero based funding. Given that the California budget has more than doubled since the early 90s, under Democrat and Republican Governors alike, and grew over 40% over the last 5 years, it should be rather obvious to all involved that institutional reform is required – not just different personnel.
The budget crisis, however, can’t wait for the long term solution. It is so critical that it requires a short term answer as well. Even so, in addressing that situation, the mantra should be: First – Do No Harm. As I wrote about in my article: The California Tax Deal & Why It Won’t Work".
Most politicians believe that by simply passing a law that raises tax rates – that more tax revenue flows automatically. That simply is not the case. If it was, then Churchill would have been wrong when he said: “A nation trying to tax itself into prosperity is like a man standing in a bucket and trying to pull himself up by the handles.”
In short, a tax increase at this time would result in LESS revenue, not more. History has proven that fact over and over again – such as when taxes were raised by a Republican Governor in the early 1990s. Given that historical fact – why should our public policy be to do something that would result in less revenue not more?
Unfortunately, certain Democrat leaders refuse to accept the laws of economics in their rush to write laws for social welfare. The Republicans that have respected that economic fact are not insane – after all, Einstein defined insanity as: “doing the same thing over and over again and expecting different results.” It is the Democrats that are expecting different results at this time. The Republicans, on the other hand, rationally accept this lesson of history.
Beyond the economics of our crisis, it can’t seriously be argued that the Republicans have controlled Sacramento. The Democrats have had a majority in both houses of Sacramento for over a decade. Republicans are only consulted on the budget at the tail end of the process. As a result, year after year reform is an afterthought.
While, I quite agree that they need to do a better job at advocating reform, the simple fact of the matter is that the majority party in the legislature has never come to grips with the fact that government cannot grow at a rate of 10% per year. Until they do – or until they become the minority party – California will be imperiled.
Keep in mind that the state’s General Fund, at its peak in the 2005-2006 FY, was at about $102 billion. With the tax increases proposed over the weekend, Democrats are hoping to spend $96.3 billion. In other words, the Democrats are really fighting to raise taxes to preserve much of government spending at nearly the same level as it has been for the past couple of years.
In the meantime, rather than trying to fund a government that can’t be sustained at this time, the Democrats and Republicans should do what most every company and family in America is doing today: establishing their priorities, cutting costs to match income, and putting off luxurious spending until better times return.
If they do not, and this budget passes without necessary reform, we will be having this same discussion next year as well – and that would be insane.