Editore"s Note
Tilting at Windmills

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November 6, 2007
By: Kevin Drum

THANKS, ARNOLD....A couple of months ago Ezra Klein wrote a piece for us explaining why universal healthcare is a problem that can't be effectively addressed at the state level. California is now demonstrating just how right he was:

Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging deeply into the red — largely because of the troubled housing market.

....The news is a major setback for the governor's other policy initiatives. His proposals — to pass legislation this year that would bring healthcare to all Californians and address the state's water problems — were already faltering in the Legislature. News of a massive looming deficit will make the proposals, both of which would require billions of dollars of new spending, politically less palatable to lawmakers.

Why are we in trouble now? It's not just because of the housing crisis: "When the economy improved nationwide several years ago, most states erased chronic deficits and began building rainy day funds. California did not. It continued to spend more money than it brought in."

Four years ago Arnold Schwarzenegger took office in the midst of a massive budget crisis after promising voters that he would end our "crazy deficit spending." In true Republican fashion, he did this by immediately reducing the state auto licensing fee by $4 billion a year and then insisting that we all approve $15 billion in bonds to paper over a shortfall that was now even more desperate than the one he inherited. The hope, apparently, was that nothing bad would ever happen to the economy and eventually we'd squeeze out from under the rock we were under.

I opposed the bonds at the time, and I've never regretted that vote since. Defeating the bonds would have caused immense fiscal pain, but it would also have forced Schwarzenegger and the legislature to actually fix our underlying problem by increasing taxes and reducing spending. Our nonpartisan legislative analyst made it clear from the beginning that Arnold's plan had no long-term chance of success, but he just flashed that million-dollar smile and went ahead with it anyway.

But gravity still pulls downward and reducing taxes still creates bigger deficits, not smaller ones. Now California has a massive deficit and tens of billions of dollars worth of bonds for our kids to pay off. And $16 billion of it — and counting — is due to the demagogic tax decrease that Arnold used to win office. Nice work, governor.

Kevin Drum 1:16 AM Permalink | Trackbacks | Comments (22)

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Comments

Arnie is just Bush with a better grasp of English. These economic illiterates are all the same.

Posted by: craigie on November 6, 2007 at 1:23 AM | PERMALINK

Remember when he dropped an Oldsmobile from a crane at a campaign rally to symbolize how he was going to "crush" the "car tax"?

Posted by: Old Hat on November 6, 2007 at 1:24 AM | PERMALINK

In true Republican fashion, he did this by immediately reducing the state auto licensing fee by $4 billion a year

It still blows my mind that people are so stupid that they fell for that shit.

Posted by: Die Arnold Die on November 6, 2007 at 1:33 AM | PERMALINK

Those Democrats just want to "tax, tax, tax" said Arnold. "Tax, tax, tax!" He said it over and over. He would stop the "tax, tax, tax" and the mountain of the deficit at the same time.

We didn't vote for Schwarzenegger, really. We voted for Santa Claus.

Posted by: anonymous on November 6, 2007 at 1:47 AM | PERMALINK

AweNoel ShortenBegger

Posted by: Ya Know.... on November 6, 2007 at 2:07 AM | PERMALINK

Half of California's state revenue comes from the personal income tax, which is leveraged to capital gains and stock options and is notoriously unstable. On the average, the state budget number crunchers are only a few percent off when they try to project revenues 12 to 18 months in advance, but the standard deviation of the revenue estimates is huge -- 13.2%. That means there's only a 2/3rds chance that actuals will be somewhere within 13% of the budget estimates. You could make equally accurate predictions with a ouija board.

Posted by: Gwailo on November 6, 2007 at 3:43 AM | PERMALINK

I unfortunately have to disagree with Ezra here:

1. States, according to Ezra, can't sustain universal healthcare programs because they can't run a deficit. But they are allowed to sell bonds, which is essentially the same thing.

2. Apparently the willingness of voters to cut healthcare as soon as the economy turns worse is a deal-killer for states. But there's no reason why that wouldn't be as much of a problem for any federal plan.

3. Ezra is correct that the rest of the Western world proves that national healthcare can work. But that's true about sub-national entities as well: Canada's universal healthcare began with a 20 year "experiment" in the province of Saskatchewan, which other provinces started emulating.

If we want universal healthcare in the USA, we have to use make it clear to state governments that healthcare cuts are off the table, even during recessions.

Posted by: Vasi on November 6, 2007 at 4:40 AM | PERMALINK

And Grey Davis can expect his apology in the mail?

Posted by: jimbo on November 6, 2007 at 6:27 AM | PERMALINK

I think Ezra Klein is full of crap, and you're following him to crapdom by swallowing his argument... There is no reason Pelosi and a Dem Congress could not pass a veto-proof law saying it is in the interest of the national government to support experiments in health care provision at the state level, and offer to cover the costs of free-riders that move in from out of state or lend the state it's credit rating for covering budget fluctuations. And if you think California would not be hemmoraging more jobs and revenue if Arnold had raised taxes you must be a Gray Davis groupie.

Posted by: minion on November 6, 2007 at 7:04 AM | PERMALINK

Guess I should read to the bottom of the comments thread before I opine...looks like the last two entries made my same point independently.

Posted by: minion on November 6, 2007 at 7:07 AM | PERMALINK

universal healthcare is a problem that can't be effectively addressed at the state level

That's a convenient excuse for the failure of UHC in California. An alternative conclusion would be that UHC can't be effectively addressed in the United States. Even though UHC works OK in some other countries, I think it won't work well here, because:

1. Efficiency would require that all the other healthcare programs be discontinued and merged in a single system. But, the special interests won't give up the parts that they have.

2. Our tort liability system will defeat efforts to restrain the cost of a healthcare system.

If we must move toward UHC, it would be far better for various states to experiment, so we could see what did or didn't work. If we foist someone's Grand Design on the whole country, there could be a disaster that would be very difficult to repair.

Posted by: ex-liberal on November 6, 2007 at 10:05 AM | PERMALINK

"There is no reason Pelosi and a Dem Congress could not pass a veto-proof law saying it is in the interest of the national government to support experiments in health care provision at the state level"

Well, if you ignore Republican intransigence and a Bush veto. "Socialized medicine," remember? Bush is against it and Congressional Republicans will back him up.

"And if you think California would not be hemmoraging more jobs and revenue if Arnold had raised taxes you must be a Gray Davis groupie."

ROFLMAO.... My goodness, but you really have swallowed the Kool-Aid, haven't you? For the record, there is no real evidence that reducing or raising taxes, within reasonable limits, has any effect at all on jobs. There is real evidence, on the other hand, that massive deficits do cause economic harm.

Posted by: PaulB on November 6, 2007 at 11:34 AM | PERMALINK

"An alternative conclusion would be that UHC can't be effectively addressed in the United States."

Since that "conclusion" is demonstrably false (see, for example, Medicare), I'm afraid that, once again, you simply don't have a point.

"Even though UHC works OK in some other countries, I think it won't work well here, because:"

Yes, dear, we know what you think, but since you're a partisan moron, we don't really take any notice of it.

"1. Efficiency would require that all the other healthcare programs be discontinued and merged in a single system."

Actually, that's not even remotely true and we have examples both here and in other countries that demonstrate just that.

"But, the special interests won't give up the parts that they have."

Dear heart, if Congress passes legislation and it's signed by the President and it's demanded by both businesses and the people, those "special interests" won't have a choice.

"2. Our tort liability system will defeat efforts to restrain the cost of a healthcare system."

ROFL.... Dear heart, since our "tort liability system" has no appreciable effect on the cost of health care today, I'm afraid that once again, and as usual, you don't have a point.

"If we must move toward UHC, it would be far better for various states to experiment, so we could see what did or didn't work."

Dear heart, that's what we have other countries for. We already know what will and will not work.

Nice work, dear. Not one fact in the entire post. Just mindless partisan drivel.

Posted by: PaulB on November 6, 2007 at 11:38 AM | PERMALINK

*

Posted by: mhr on November 6, 2007 at 11:55 AM | PERMALINK

Arnold's Hoovernomics.

Posted by: Neil B. on November 6, 2007 at 12:13 PM | PERMALINK

I agree but the 2/3 requirement for any tax increase dooms the effort. I can think of no current Republican in the State Legislature that would do what their sainted Ronnie did in 1967 - solve a budget criss by raising the sales tax. So we will muddle along until Wall St. decides that they've swolled enough paper from thje deadbeats in CA and turn off the spigot. Then the howls will come in! We are dysfunctional. Hell! We give dysfunction a bad name!

Posted by: richard locicero on November 6, 2007 at 2:06 PM | PERMALINK

mhr: "Democrats should campaign in California to reverse Propostition 13- that would be a real winner for the tax and spend gang."

California has developed a very unhealthy reliance on bond issues to cover its annual operating shortfalls, when such bonds should instead be used properly and solely for state and local capital improvement projects.

As a result, most of California's taxpaying citizens have become patently delusional regarding the true cost of providing basic and necessary government services. Further, they are painfully oblivious to the fact that the accumulation of such crippling debt will inevitably preclude the respective abilities of both their state and local governments to improve and / or develop the necessary infrastructure to keep California functioning economically and optimally in the future, let alone maintain the timely provision of such vital government services at their current levels.

Therefore, regarding its actual daily operations, it makes far more sense economically for a government to pay as it goes, than to mindlessly mortgage its own citizens into a potentially ruinous future.

Think of it in terms of how a responsible person would manage his or her family finances. You don't blow your income on personal indulgences, expensive vacations and other such questionable discretionary spending, and then take out bank loans to pay for your groceries, rent, health care coverage and utility bills.

Hell, why am I explaining such things to you as I would my own children? You speak with all the certainty and bravado of someone who's still living with his parents. How come they haven't instilled in you the basic tenets of responsible economic stewardship?

Posted by: Donald from Hawaii on November 6, 2007 at 2:59 PM | PERMALINK

I don't get how the r/e bust can have affected taxes so much in California. Didn't Prop 13 limit raises to assessed values to something ridiculous like 1%/year? I would imagine that the assessed values are still well below market values.

What's going on?

Posted by: jussumbody on November 6, 2007 at 7:58 PM | PERMALINK

Aside from using their current behavior to rape America there is also a residual effect. They want to leave the country in bankruptcy, so Democrats can't create any new programs such as Universal Health Care. It's a political move as much as anything.

Thus, Hillary's idea of replicating the Clinton policy of balancing the budget would be somewhat effective and responsible, but wouldn't really challenge the Republicans for the long run.

Instead, we have to create Universal Health Care and increase mileage standards on cars and require cleaner skies and fix the immigration policy, world trade and a lot of other big things which Republicans want to put their own stamp on. They want to shut us out, so we have to use one or two terms to really govern large and put a major Progressive stamp on everything.

Now is the time. There can be no waiting.


John Edwards -- Leadership for America!

Posted by: MarkH on November 6, 2007 at 10:08 PM | PERMALINK

there could be a disaster that would be very difficult to repair.

Oohh, yeah, not at all like what we have now.

Posted by: craigie on November 7, 2007 at 1:04 AM | PERMALINK

I was in CA for school at the time and was amazed at Arnold. I was amazed because right after he took office it became clear he sold snake oil and he was just a foolish shill for the people that helped install him.

He talked tough on the campaign trail about "making the hard decisions" Gray Davis wouldn't do. That of course implied that he would, yes, raise taxes or cut spending.

Instead, this is what he did:
1. Got rid of the illegal alien DL law.
2. Cut taxes
3. Stiffed the University of California, forcing it to raise its fees/tuition 50% in 2 years.
4. Did nothing to fix the structural problems with California's budget.
5. Made no hard decisions and instead just issued more debt.

What a tool.

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Posted by: Meredith on March 23, 2010 at 9:47 AM | PERMALINK
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