My Interview with ‘The Can’
Every time a new budget agreement is passed, there’s a lot of talk about “Kicking the Can Down the Road.” I’ve long wondered: who exactly is The Can? And which road?
After considerable street-level reporting, I caught up with The Can at a gas station just off I-10 near the Arizona border. A transcript of our conversation follows.
Q: It’s a pleasure to meet you. How are you doing?
THE CAN: How do you think I’m doing? It’s hot here, man. And you may have noticed I’m a can and I’m made of metal. So you take this summer heat, and combine it with $1 billion in accelerated tax withholding and $1.7 billion in education spending deferrals, and you’ll forgive me if I’m feeling pretty beat up.
Q: Well, you know it’s bad times everywhere.
World Series or Super Bowl?
We’re still waiting for the details, but the only real
question about this budget deal is exactly how short its shelf life will be.
Or to put it another way: Will
state leaders be negotiating another budget by the World Series (late October)
or by the Super Bowl (early February)?
No
one knows. But the economic collapse of California continues. If tax revenues
continue their decline (and the decline has outpaced nearly all estimates),
we’ll need another set of budget "solutions" and soon.
It’s
already plain that this budget doesn’t really balance. There’s no political
constituency for that kind of honesty. So we get billions in gimmicks – and
gimmicks make some sense in a recession; if you’re going to do deficit spending
in disguise, this is the time. But it would have made more economic sense to
limit some revenue cuts (particularly in programs that put cash in the hands of
citizens quickly, and thus stimulate the economy) and fill those budget holes
with sin taxes.
The Three-Month Budget
My favorite reform proposal is California Forward’s suggestion of a two-year budget for the state. I find this idea hysterically funny because it’s so out of step with fiscal reality. California no longer even has a one-year budget.
We’ve moved to a four-month budget.
The legislature negotiated a budget in September, another budget in February, and is negotiating one now. For all the angst about the July budget, I wonder how much it really matters. For all the rhetoric about balancing the budget for real this time, it’s clear that the $24 billion or $26 billion of “solutions” that will be part of any deal will be made up of borrowing, gimmicks and other fictions. It’s a safe bet that – barring an unexpected reversal in the world’s economic fortunes — in another four to six months, the legislature and governor will have to come back and negotiate another budget.
Don’t Give Up On Tax Commission Yet
Recent reports on the recent internal battles at the Commission on the 21st Century Economy have been greatly exaggerated (and in many cases, inaccurate). You would think, by reading the pessimistic commentary of Joel Fox and Dan Walters, that the commission has broken apart and is unlikely to produce anything of value. That’s pure nonsense.
Yes, there are ideological divisions among the group. Yes, commissioner Fred Keeley has been advancing an alternative plan after consultation with Democrats. And yes, two commissioners – Anaheim Mayor Curt Pringle and economist Michael Boskin – recently emailed their frustrations about Keeley’s activities.
But I’ve just re-read all the internal email and correspondence of the commission, which are posted on the panel’s web site. (Whatever you think of the commission, it has been great on open records). And what’s striking is how much the various commissioners seem to agree on the direction of tax reform. When you consider how divided Californians and their legislators are on such questions, it’s a remarkable level of consensus.
The Language of Budget Deal Optimism
All sides continue to report progress in budget talks in
Sacramento. But don’t get too excited. Nothing they’ve said indicates that a
deal is close.
Here,
drawn from reporter’s experience, is a handy language guide for the real
meaning of politicians predicting when a budget will be done.
– "A
deal could come within a few days" (which is what Democratic legislative
leaders predicted this weekend). TRANSLATION: "We don’t have a deal and we have
no idea when we’ll reach one."
– "Tomorrow."
TRANSLATION: Within a few days.
– "Could
be something later today." TRANSLATION: "There is real progress. Tomorrow."
– "The
press conference is in at noon." TRANSLATION: "Call your wife and kids and tell
them you’ll be home late. We’ll announce a tentative deal this evening."
The Strange Logic Behind Prop 13 and Prop 98
Last week, Prop 98 author John Mockler and state Supt. of
Public Instruction Jack O’Connell conducted a press conference on the threat to
the state posed by another suspension of the education funding guarantee. And
it got sort of kinky. Mockler described Prop 98 as having been "bended,"
"folded," "mutilated" (and a few other adjectives) by the Schwarzenegger
administration.
O’Connell
and Mockler talked about how California ranks low in state support for education.
They argued persuasively that our schools need better funding. I agree. But, in the next breath, they
talked about the need to protect Prop 98. That’s where they lost me.
The
logical problem with the argument for protecting Prop 98 is a mirror image of
the logical problem with the argument for protecting the 2/3 vote for tax
increases that was part of Prop 13. To review: conservatives tell us that
California is a mess of over-taxation and over-spending. Then they tell us that
without the 2/3 vote and Prop 13, California would be a mess of over-taxation
and over-spending. Which is it, guys? Prop 13 has been in place for 30 years,
so if you believe that the states taxes and spends too much, it seems safe to
conclude that the 2/3 vote doesn’t really prevent higher taxes and high
spending. It’d be far more logical to assume that the 2/3 vote is part of the
problem.
Democrats For a Flat Tax?
The below story about the Commission on the 21st Century Economy — California’s tax reform commission — appeared Saturday in the Wall Street Journal. As I reported it, I began to wonder how the approach that many of the commissioners seem to favor (a simpler and flatter income tax, combined with a business net receipts tax) might be sold to skeptical liberals, who are already starting to fight it. (If you want to learn more, go to this page and read some of the PDF files, which show the efforts by some Democratic appointees on the commission to change the package to attract the support of progressives).
The answer? Link adoption of the tax commission recommendations to an elimination in the requirement of a 2/3 vote to raise taxes or pass the budget.
Why? Polling shows that there’s little chance that voters will eliminate the 2/3 requirement. But Democrats could change the conversation by approaching 2/3 at the same time they are pushing tax commission changes that could very easily be sold as a tax decrease. (Income taxes would be reduced for some, and corporation and state sales taxes would be reduced or eliminated under packages being considered). Legislative Democrats would be wise to put the tax commission recommendations up for a vote but make sure the legislation is linked to voters changing 2/3 next year. That is, the tax commission recommendations go into effect only if 2/3 is eliminated.
Federal Receivership of California Is Already Here, In Slow Motion
The harder I look for a way out of California’s current predicament, the more paths I see that seem to end at the same destination: federal receivership.
Slowly but surely, we’re already getting there. The federal courts have been in control of our prison system (or at least have the legal authority—control is elusive in a world that includes the California Correctional Peace Officers Assn.) for years. And on Monday, in this story, the Los Angeles Times reports that as many as six state parks that include U.S. lands could revert to federal control as a consequence of the governor’s plan to close them.
State parks spokesman Roy Stearns is quoted as saying: "It’s important to note that nobody is proposing to close these parks permanently. This is a temporary suspension until budget times are better. We have no intention of giving them away or selling them. There’s an interest in finding a way to preserve and protect them. It could be temporary federal control. We would hope they can come back to state parks. We are all wondering what’s next." (italics mine).
It Takes a Fighter
I interviewed former Gov. Pete Wilson Monday night during a Zocalo Public Square forum at RAND. He talked in detail about budgets, taxes, the economy, prisons, immigration, and education – both in his time as governor and in our current times. But what struck me most was not what he said but how he said it.
Wilson recounted stories about difficult times and old fights with real enthusiasm. He’s someone who clearly relishes fights and hard times. That’s not necessarily an attractive trait in politicians (we like our politicians to sound soothing and talk like diplomats), but I think the ability to fight – and win fights – is an essential skill. His willingness to pick fights – even unpopular fights – helped him turn a record budget deficit into a surplus. But more and more, Americans vote for politicians who are, above all else, likable. Likability is overrated. We need more fighters and more know-how.
California’s New Homegrown Majority
Here’s a link to a recent report from USC researchers on the demographics of California. The headline is that California’s population is becoming more settled and homegrown. Today, more than 70 percent of Californians ages 15 to 24 were born and raised here. In 1990, barely half of that group — 53 percent — were born and raised here.
The report’s authors, including Dowell Myers, write that such figures suggest a new narrative for the stat — the “surprising transformation” of California from a “migration magnet” to a “more self-contained society that depends on its present members.” This new narrative suggests a different approach in policy — the new generation of homegrown Californians wants greater public services and is willing pay more in taxes.
We need more of a debate about this transformation. As a Californian, I’m not sure a more stable, homegrown state population is a welcome development. What makes California special is that it’s always been a destination for people from around the world and around the country — America’s America. Do we want to adapt this transformation that the USC study outlines, or should we attempt to reverse it?