Prop 1A: The Taxpayers’ Paradox
When King Henry VII faced an insurmountable budget deficit, his advisor John Morton devised an ingenious, albeit paradoxical solution. British subjects, who could afford to pay higher taxes, would be forced to pay higher taxes.
His tax affordability test classified people into two categories, those who spent and those who saved. Anyone who spent money proved their means because they had extra money to spend. Alternatively, those who saved money could also pay higher taxes because they had extra money saved.
Morton’s Fork forced everyone to pay higher taxes.
Governor Schwarzenegger and state legislators have resurrected Morton’s tortured logic and unfair tax paradox in crafting Proposition 1A, a phony spending cap that raises taxes by $16 billion. Voters have been told that we have just two choices in the May 19th Special Election. We can take an immediate tax increase in exchange for a long-term spending cap. Or, we can allow Sacramento‚s spending to continue unabated and inevitably pay for the spending with higher taxes.
Prop 1A is the real deal
Opponents of Proposition 1A need to stop watching Saturday morning cartoons long enough to read a copy of the ballot measure. The budget reform on the May special election ballot is not Proposition 58 redux; it is in fact the fix to Prop 58 that the Legislature refused to enact in 2004 – but which Republicans insisted as their price for agreeing to this year’s budget solution.
Proposition 58 did not place a limit on spending. Proposition 1A caps revenue growth to the average growth of revenues over the past 10 years – which will provide an effective damper on state spending increases. Don’t take my word for it, ask the California Budget Project, a liberal think tank, which recently reported that “the revenue forecast established by Proposition 1A, which limits spending from the state’s existing tax base, would be significantly below the Governor’s ‘baseline’ spending forecast.” Any revenues that exceed that trend are automatically deposited into the rainy-day fund.
If You Want to Blame Someone for 6 Special Election Measures, Look In the Mirror
Reading Mayor Riordan’s piece denouncing Gov. Schwarzenegger and the special election ballot measures, my first thought was: they need to decaffeinate the coffee at the Original Pantry in downtown LA (For you NorCal types, that’s the mayor’s greasy spoon on Fig). It’s hard not to think that some of this is personal. Riordan, after all, was gearing up to run for governor in 2003 when Schwarzenegger, without telling the mayor, threw his hat in the ring, and Riordan’s stint as Schwarzenegger’s education secretary didn’t end well.
My second thought was: It’s time for Californians to swallow hard and realize that they deserve these six measures.
Yes, as Riordan points out, the measures shouldn’t please liberals or conservatives or moderates or Greens or Hamas, for that matter. Chief among their flaws is one that Riordan hints at: the new spending in these measures — particularly the educating funding in Prop 1B — won’t kick in until after Schwarzenegger leaves office at the end of 2010. But the budget benefits — givebacks from health programs, new money from lottery securitization — would help him with the budget right way.
New ‘Rules of the Game’ to Regulate Systemic Financial Risk
The parade of new, bombshell financial plans included a new one Thursday, from ultra-busy, Treasury Secty. Geithner. Leaving no doubt as to the breadth and scope of these proposed reforms, Geithner explained in testimony Thursday before the House Financial Services Committee, that this is “comprehensive reform. Not modest repairs at the margin, but new rules of the game.” Wall Street groaned.
Geithner’s bold new plan would require registration with the SEC for hedge fund, venture capital fund, and private equity fund advisors. Then, confidentially, these advisors would have to share information with the SEC about their borrowings, the leverage involved in their investments, and, hitherto sacrosanct, information on their trading partners and investors.
This would enable the SEC, hopefully, to provide enough information for a yet another new czar, called a “Systemic Risk Regulator,” who would be able (again, hopefully) to guide our financial system like a lighthouse guides ships on dark nights tossed on stormy seas away from running aground on the rocky shores.