Author: Joel Fox

The newly formed state tax commission – formally, the Commission on the 21st Century Economy – got off to a lively start at its first meeting on the UC San Diego campus yesterday. Commissioners couldn’t agree on the commission’s mandate.

The chief disagreement occurred over whether the commissioners are supposed to recommend a tax system that is revenue neutral or not.

Former Assembly member Fred Keeley, referring to the governor’s executive order creating the commission, said the commission was not charged with bringing in a program that was revenue neutral. Commission Chairman Gerald Parsky agreed that the text of the order did not speak of revenue neutrality but he insisted that the governor, Assembly Speaker and Senate President Pro Tem indicated at the press conference announcing the formation of the commission that revenue neutrality was a clear objective.

Keeley responded that the governor had an opportunity to call for revenue neutrality in his order and didn’t do it so that need not be a guiding principle of the commission.

The new president took the oath of office this morning promising a "New Era of Responsibility." Within that responsibility he included government saying that the question is not whether government is too big or too small but whether it works. If it works he intends to move forward, if the answer is no, he said, programs will end. This view of government is one that should be pursued at all levels and one that has frustrated many who have tried. I wish our new president good luck in pursuing the goal of government accountability.

The president also spoke of the building block of our country the "risk takers, doers, and maker of things" who create our prosperity. He praised the faith and determination of the American people and the individuals who must take up responsibility for themselves and the nation. This emphasis on the individual is a good sign. For it is these individuals who make up the risk takers and doers he praised.

Barack Obama has made it clear that he admires Abraham Lincoln. He followed the same train route into Washington Lincoln used for his first inaugural; he plans to take the oath of office on Lincoln’s bible; he has read Lincoln biographies and writings searching for guidance on leadership.

Franklin Roosevelt is another president identified by Obama’s transition team as a president to study. FDR took office in 1933 in the midst of a horrendous economy much like Obama faces today.

However, a third president who should share the spotlight during Obama’s historic inauguration is Thomas Jefferson. In fact, Jefferson’s first inaugural address mirrored the goal Obama established as a core value of his presidential run – to overcome harsh political dissension and bring the country together.

Following one of the more bitter campaigns in American presidential history, Jefferson attempted with his inaugural address to bridge the political schism in the country. Jefferson famously said, “But every difference of opinion is not a difference of principle. We have called by different names brethren of the same principle. We are all Republicans, we are all Federalists.”

Is California in a “civil war”? In his state of the state speech, the governor said, “I think you would agree that in recent years California’s legislature has been engaged in civil war.”

Have the two sides gone to war over their ideologies? Dictionary.com defines “civil war” as a war between political factions or regions within the same country. How can you not argue that we are witnessing a war between political factions, as long as we define war in this instance as intractable rhetorical battles sans bloodshed?

Yet, the term troubles me. It conjures up images of America’s Civil War and the battlefields I have visited where blood soaked the ground and seeped into America’s soul. Differences were settled not by diplomacy but by battle. Perhaps, with the issue of slavery that was inevitable.

But, is war necessary over budget issues? Diplomacy has been found wanting in the budget debate, as well. It has been tried. There have been countless meetings over the three special sessions called by the governor to settle the budget crisis. No “negotiated” settlement has come about as yet.

One public employee group wants the governor impeached for suggesting two day a month furloughs for public sector workers. The furloughs amount to a 10% pay cut for the workers. I don’t remember the thousands upon thousands of private sector workers who lost their jobs calling for the governor’s head. When my consulting business suffered a more than ten percent loss a few months back, I didn’t start a recall petition on the governor. What is it with the public employees?

Loren Kaye on this site did an excellent job of pointing out how California’s public sector employees are reacting quite differently from private sector employees to the difficult economic times. Democratic elected constitutional officers, who declared they would not furlough their workers, aided the public employees’ stance. I hope those elected officers sent out notes of sympathy to fired private sector workers who lost their jobs as quickly as they objected to the governor’s orders to furlough their employees for a couple of days a month.

Piecing together bits of information and whispers in the capitol hallways gives one the impression there could be a deal to be had to end the state budget stalemate.

Republicans have held fast on any tax increase proposals. But, the feeling is short of closing down some government functions the budget gap will not be closed without some tax increases.

Democrats have denied the need for spending controls. But, it is understood that reforms must be put in place to prevent the repetitive rollercoaster ride that the budget has become over the last decade.

A number of tax increase ideas have been floated from the legislators and the governor. Taxing oil, alcohol, cigarettes, and top earners is asking a portion of the taxpayers to take care of the problem that afflicts us all. If taxes are on the table, its reasonable to expect they should be broad based. If reducing the budget deficit is supposed to be painful for all of us, then everyone will be asked to sacrifice.

Is Mac Taylor on to something? The Legislative Analyst suggested yesterday that if the legislature and the governor can’t solve the budget problem, hand the mess off to the voters and let them clear it up. Taylor proposed an April special election to deal not only with the measures all ready qualified for voter approval but also to put some budget and tax questions on the ballot as well.

Last year’s budget resolution – if you can call it that without laughing – included provisions on borrowing against future lottery profits and creating a rainy day fund, which need voter approval.

In addition, Taylor suggested some of the budget and revenue items discussed by the legislature such as the recent tax increase proposals and redirecting money from previously passed initiatives also be put up for voter approval.

When you consider that four initiatives* would be altered under Taylor’s plan to help the general fund you realize that the voters are already making budget decisions.

One of the main reasons Governor Arnold Schwarzenegger vetoed the Democratic budget bills yesterday was that the bills did not create the economic stimulus the governor was seeking. He is right in taking a hard line position on creating jobs and stimulating the economy. Economic history is clear that the greatest revenue boosts for the state government have come with economic growth not from tax increases.

One way to create jobs and get pubic infrastructure projects rolling is to expedite the environmental review process and the permitting process for projects already in the pipeline. The legislature balked at this request from the governor. But, if legislators are concerned about job creation, expediting the process is an important step to take. Not only will it get money flowing through the system, it will get important projects completed faster.

After the 1994 Northridge earthquake, Governor Pete Wilson led the effort to expedite the rebuilding of the freeways by waiving standard operating procedures. California got back to business in record time. That is a model that should be implemented to a degree now.

If you thought 2008 was an interesting year in California politics consider what 2009 may offer.

Something is bound to break in the battle over the budget. And one action will undoubtedly lead to a reaction raising the stakes. In fact, it will be like those long paragraphs in the bible when the term “begat” is used over and over.

Will the governor and the Democratic majority agree to a budget solution that will use creative definitions on taxes and fees to raise revenue with a simple majority vote? The guess here is they will.

Signing the revenue legislation will begat both a referendum on the fee increase portion of the package, as well as a lawsuit challenging the constitutionality of the revenue bill.

If courts find the revenue raising mechanism legal, that will probably begat an initiative requiring future fee increases to pass with a two-thirds vote.