Editore"s Note
Tilting at Windmills

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January 24, 2005
By: Kevin Drum

MANUFACTURING CRISIS....The LA Times has a story this morning about the Great California Budget Debacle. Today's angle is that Arnold Schwarzenegger wants to slash spending on the poor but refuses to consider closing tax loopholes used by the rich:

One of the only tax breaks the governor is considering scaling back is a renters' credit for low-income seniors. Under Schwarzenegger's plan, the credit would be eliminated for elderly Californians earning more than $13,000 per year.

That proposal would save the state $100 million annually.

But the governor's plan would leave intact the mortgage deduction that the wealthy enjoy on million-dollar vacation homes. The nonpartisan Legislative Analyst's Office has suggested that removing the deduction could save the state several times the amount gained by the renters' credit cut.

Another of the governor's proposals would cut payments to caretakers for the disabled and frail elderly from more than $10 an hour to minimum wage, $6.75. The move would save the state $195 million.

Yet high-end hotels in downtown San Francisco could continue to claim tax credits from an "enterprise zone" that was intended for economically depressed neighborhoods but has now grown to include wealthy urban areas. Studies suggest the state is losing at least $50 million per year on the credits.

This is fine as far as it goes, but what strikes me as perverse is that all these stories about the GCBD (which are legion in California papers) overlook the biggest elephant in the room: the fact that Schwarzenegger actively created a huge part of the budget crisis himself. Just as George Bush seems to hope that tax cuts will create an artificial crisis atmosphere that allows him pursue pet projects like Social Security privatization, Schwarzenegger campaigned on a pledge to cut the auto license fee. This slashed $3-4 billion in revenue, an amount that would go a very long way toward eliminating California's problem. Like Bush, Schwarzenegger seems to actively like the idea of cutting taxes in order to create an ongoing crisis that provides him with a pretext to pursue his real agenda.

For non-Californians who aren't up on all this, the details make it even worse. The license fee in California was reduced by Democratic governor Gray Davis in 1998, but with the proviso that it would return to its original rate if the state faced a funding shortfall. In 2003 Davis raised the fee back to its original level and was demonized in the recall election with ads in which a young woman with a Valley Girl twang whined memorably that "it's ridiculous, nobody can afford that." Of course, the fact that everyone had paid "that" a mere five years earlier meant nothing. Davis went down to a crushing defeat.

So what's Schwarzenegger up to? He campaigned on a promise never to cut education funding and went back on his word almost immediately. He campaigned on a promise to end "crazy deficit spending," but adopted Gray Davis's deficit spending plans almost verbatim within months. He's made some interesting proposals, and has demonstrated some genuine charisma and political talent, but in the end his only real tactic seems to be the same one George Bush loves so much: convincing the public that everything is a crisis and he's the only one who can deal with it.

We've now made the leap from the "permanent campaign" to the "permanent crisis." I suspect we're not going to be very happy about that evolution a decade from now.

Kevin Drum 12:47 PM Permalink | Trackbacks

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