Editore"s Note
Tilting at Windmills

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January 22, 2008
By: Kevin Drum

GRAY DAVIS'S STOCKHOLM SYNDROME....Former California governor Gray Davis, who was taken out to the woodshed and beaten bloody five years ago during our last fiscal crisis, takes to the pages of the LA Times today to make nice with the folks who were doing the beating:

So why is California suddenly faced with a $14-billion budget shortfall? Is it because the governor (or the Legislature) did something terribly wrong?

No, the governor of a nation-size state like California can affect the economy, but only on its margins. The reason this deficit is looming is because no one can repeal the business cycle....Believe me, Gov. Arnold Schwarzenegger doesn't want to close 48 parks, reduce education funding or release prisoners. Like all governors, however, he is required to bring expenditures in line with revenues.

For chrissake. No wonder Davis got so much sand kicked in his face back in 2003.

Look: I'll concede the obvious. California's last budget crisis was partly (though not entirely) the result of a Democratic legislature that refused to rein in spending and a Democratic governor who went along with it. And yes, the business cycle is responsible for a substantial drop in revenue this year, just as it was five years ago.

But absolving Schwarzenegger of blame for our latest budget crisis? Is this some kind of Stockholm Syndrome, or what? When Arnold came into office after demonizing Davis's attempt to be an adult by restoring the vehicle license fee to its 1998 level (it had been temporarily reduced thanks to good economic times during the dotcom boom), he immediately cut the VLF and then issued an enormous bond to make up the resulting shortfall. Today, the combination of the reduced VLF revenue plus payments on the bond is about $7 billion a year. Depending on whose numbers you believe, this accounts for somewhere between two-thirds and 90% of next year's projected deficit.

Are Arnold and the California GOP to blame for this? Who else? Nobody put a gun to their heads and forced them to respond to our last crisis with nothing but a toxic combination of demagoguery and tax-cut jihadism. They did it all on their own. I understand the desire to roll up our sleeves and stop sniping about the past, but let's not actively rewrite history to pretend that our latest crisis "just happened." It didn't. Arnold and his party, despite plenty of warnings from nonpartisan budget analysts about what they were doing, deliberately bequeathed it to us.

Kevin Drum 12:57 PM Permalink | Trackbacks | Comments (33)

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With WHO ELSE? and Sommersby's WHEN SPOUSES ATTACK; today is a very good day on blog punditry.

Posted by: Raoul on January 22, 2008 at 1:03 PM | PERMALINK

No, no, Kevin--Not only did Reagan prove that deficits don't matter, but he also proved that Republicans cannot possibly be responsible for any bad things, ever.

Today, the rules of causality have been completely rewritten. Bush I helped get that started when he blamed his recession on Jimmy Carter. Now, 15 years later, when California is facing fiscal disaster because of excessive borrowing and excessive tax cutting under a Republican governor and Republican legislators, it's OBVIOUSLY either an act of God or the Democrats' fault. Just as we see that, nationally, after 12 years of Republican control of Congress and 8 years of a Republican president, all the bad things now facing us are the fault of Nancy Pelosi and Harry Reid.

Posted by: Derelict on January 22, 2008 at 1:11 PM | PERMALINK

"Sand kicking" -- Does Davis really think that making nice helps with bullies? What's with these people?

Posted by: tw on January 22, 2008 at 1:11 PM | PERMALINK

Good post, Kevin.

Posted by: Gore/Edwards 08 on January 22, 2008 at 1:13 PM | PERMALINK

What Kevin said. Seriously, we are never going to get past our problems until the media starts repeatedly asking uncomfortable questions to Republicans about their opposition to tax increases.

Posted by: Dilan Esper on January 22, 2008 at 1:14 PM | PERMALINK

Let's also not forget that the big anti-Grey Davis talking point was that he had mismanaged California's energy crisis by going after Enron and the other big players. Gov. Davis had the California Attorney General file a civil suit against Enron and the other energy pirates, which Gov. Schwarzenegger settled. Getting beaten in that recall election seems to have taught Gov. Davis a lesson in what not to say in public if you want to stay employed...

Posted by: RepubAnon on January 22, 2008 at 1:21 PM | PERMALINK

Tax cuts are in fact cost items in a government budget. If you enact them, you better either find the revenue to account for them, or else rein in spending accordingly.

Instead, the GOP treats tax cuts as free money, and gives lip service to the concept of fiscal discipline. As John Dean opines, Republicans have collective become inherently unfit to govern.

Posted by: Donald from Hawaii on January 22, 2008 at 1:22 PM | PERMALINK

The business cycle is just that, a cycle. Over the cycle, the budget should balance, it never does.

Posted by: Matt on January 22, 2008 at 1:25 PM | PERMALINK

In a sense, there are 3 parties: the Democrats, the Republicans, and the Pols. Gray Davis and Arnold Schwartzenegger belong to the same party.

The same principle applies to earmarks, where both parties' pols support each other in giving away our money to their friends.

Posted by: ex-liberal on January 22, 2008 at 1:37 PM | PERMALINK

Let's just cut the budget. Cut spending! I am positively sure that every conservative who writes in here will say specifically what can be cut, and that it will be politically possible.

The list is so long I can't even begin!

It's so easy! Cut, you silly liberals. Nobody wants that government crap! Cut it. Republicans cut budgets. That's why they are in power.

Posted by: Free Lover of Freedom and Free Liberty on January 22, 2008 at 1:39 PM | PERMALINK

Ahnold "covered" the debt shortfall caused by rescinding the vehicle tax by heavy borrowing. It's like bragging that you paid off your Visa bill by putting it on your American Express.

Wait 'til the country gets the bill for the Iraq War. Chimpy has been charging that one since the first bombs dropped.

They whine about Dems being "tax and spend". It makes a helluva lot more sense than "cut taxes and spend more".

Posted by: Joshua Norton on January 22, 2008 at 1:44 PM | PERMALINK

Free whatever you call yourself. The only thing the republicans cut was the gray matter out of your head. Balancing a budget not just cutting out programs is the most responsible thing to do. Have you ever been to Central America? All that the rebubs have been doing here is trying to turn this country into a banana republic.

Posted by: Gandalf on January 22, 2008 at 1:49 PM | PERMALINK

Today, the combination of the reduced VLF revenue plus payments on the bond is about $7 billion a year. Depending on whose numbers you believe, this accounts for somewhere between two-thirds and 90% of next year's projected deficit.

Wow. I hope somebody on Barbara Boxer's staff is paying attention. Could come in handy when Arnie takes his shot at her Senate seat in 2010.

Posted by: Model 62 on January 22, 2008 at 1:51 PM | PERMALINK

Back in the day I actually thought Schwarzenegger was going to make the tough decisions and blame the suffering on Davis. I also thought he was a smart guy for trying to take over the state shortly after it hit bottom. I figured whoever was in charge (Davis or Schwarzenegger), they could take credit for the turn around.

Well. . . I guess it was no tough choices and no dramatic turn-around in state finances. Probably still blaming it on Davis though.

Posted by: B on January 22, 2008 at 1:59 PM | PERMALINK

Funny. I was sure the blatant manipulation of the electricity trading markets and diversion of energy supplies away from California had something to do with the budget crisis that Davis faced. Has Enron been forgotten already?

Posted by: kiweagle on January 22, 2008 at 2:18 PM | PERMALINK

Oh yeah, and those damn big-spending liberals and their need for big government. If only they were like Bush and the GOP! Oh, that's right...

Posted by: kiweagle on January 22, 2008 at 2:20 PM | PERMALINK

Let all politicians take a lesson: "temporary" tax cuts due to "good times" quickly become permanent and cannot be let to lapse without the accusation of raising taxes.

True, the pause in the VLF and the Bush "tax cuts" were temporary for different reasons, but the result is the same.

So when your state (or your federal government) has excess revenues in "good times," THAT's the time to put that money into long overdue infrastructure repair and into forward looking infrastructure improvements.

Why the US of A not have universal high-speed internet like almost every other country in the modern world? THIS is why.

When times are good, people won't pay tax to pay for it, and when times are bad, people need tax paid back to them to "stimulate" the economy.

Typical American mindset of wanting something for nothing.

Posted by: Cal Gal on January 22, 2008 at 2:25 PM | PERMALINK


Posted by: mhr on January 22, 2008 at 2:39 PM | PERMALINK

I think some of the Obama-style may have rubbed of on Gray.

Posted by: Bush Lover on January 22, 2008 at 2:53 PM | PERMALINK

Part of the reason why Gray Davis lost his job was because he didn't really have a base, at least no one I knew (and most of my friends are diehard Democrats) had any real enthusiasm for Davis. Now we know why there weren't any real Gray Davis supporters out there.

Posted by: Guscat on January 22, 2008 at 3:36 PM | PERMALINK

A big part of the problem is the all too human response to a windfall. The 90's dotcom bubble created lots of capgains revenues, as the mid 2000's produced gains from the real estate bubble. The problem is that people are inclined to think that such windfall streams will continue (and often that they are entitled to them). The way around this is to identify windfalls as something which probably will not continue. If one makes a rule that windfalls are not spendable, but revenues from investing them are, then these sorts of cycles can be averaged out.

Posted by: bigTom on January 22, 2008 at 4:09 PM | PERMALINK

Good heavens! Gray Davis is a Schwarzenegger fanboy. Who knew?

Posted by: parrot on January 22, 2008 at 4:14 PM | PERMALINK

Great post, Kevin.

Posted by: BombIranForChrist on January 22, 2008 at 4:15 PM | PERMALINK

If you want to know what happened to Gray Davis, go rent "Enron: The Smartest Guys in the Room". It's a very engaging movie and eye-opening. Seriously. You'll be glad you did.

Posted by: JoeBob on January 22, 2008 at 4:50 PM | PERMALINK

Are Arnold and the California GOP to blame for this? Who else? Nobody put a gun to their heads and forced them to respond to our last crisis with nothing but a toxic combination of demagoguery and tax-cut jihadism.

Who else? How about the pebiscitarians that were gung ho enough to kick out the governor for raising taxes but not gung ho enough to break the back of the public sector unions for raising expenditures?

Posted by: Senescent on January 22, 2008 at 4:57 PM | PERMALINK

The "real" problem is not the gropenator, nor is it Davis...Kevin, the real problem here in California is that all the assholes who punch holes in the lil tickey think they can get all the above for nothing out of their pocket.
Essentially, the essence of it all boils down to this...
I want: Firemen to put out fires, Policemen to catch the bad guys, Park rangers to show me their parks, Road crews to pave the roads, Beaches that look pretty, Librarys and librarians to show me where the book is to explain how I can ask for more tax cuts.

Thats right, the problem is us, the California citizen who wants it all for free, and damn the SoB who dares mention the truth about "Ain't nut'n for free sunshine. It's taxes or it's nut'n. Take yer pick!"
So, we're gett'n nut'n, because essentially, we're getting what we're willing to pay for.
If Californian's don't want to pay for anything, then they shouldn't complain when they get nothing.

Posted by: sheerahkahn on January 22, 2008 at 5:35 PM | PERMALINK

Damn straight, Kevin. However, let me put a finer point on it:

The financial problems in California are because of the gross fiscal mismanagment of a Republican governor, just like the financial woes of the United States are because of the reckless, irresponsible fiscal mismanagement of George W. Bush.

There. Now it's time to hold these criminals accountable, people!!!

Posted by: The Conservative Deflator on January 22, 2008 at 10:25 PM | PERMALINK

Hey Kev,
as an adult-long progressive democrat I had come to hate and abhorr Gray Davis at the point that the recall was launched. I rejoiced in his ouster! I wasn't THAT worried in that a Kennedy in-law possibly could replace him. I have NO regrets. Davis made my blood boil.

Posted by: John Crandell on January 23, 2008 at 1:53 AM | PERMALINK

Gee, alot of it had to do with brown-outs brought on by Energy Crisis Bushie and his big oil buddies with their power grid tampering.

Posted by: me-again on January 23, 2008 at 4:11 AM | PERMALINK

Are Arnold and the California GOP to blame for this?

Sure they are, and so are the voters of California. This is the result of their ballot box budgeting, through the initiative process, coming home to bite them in the ass. I say this as a native Californian.

Enjoy! You elected Davis and the Governator. You passed all those initiatives increasing spending, allocating spending, limiting taxes, demanding longer prison sentences and generally scrwing everything up. Good luck. I love California.

Posted by: Pug on January 23, 2008 at 9:33 AM | PERMALINK

I went to school in California and it really was amazing how mismanaged that state is. The instruments of direct democracy put into the state constitution, like initiatives/propositions and recall, have been completely co-opted by interest groups and big business. Proposition 13 has starved the state and helped turn the school system into shit (I think it went from being the top system in the country to now, 46 or 47). Yet no one has the balls to even talk about it, like Arnold saying he would make Warren Buffet (someone who actually knows a little about money) do push-ups if he mentioned rescinding it again. Arnold claimed he would make the tough decisions Davis was too scared to make, but once he got into office he realized who his masters were and did an even worse job than Davis.

It's funny, too, because Republicans in the state are even nuttier than the rest of the country. California is ground zero for crazed wingnuts, which has poisoned the state.

California is a gorgeous, rich, varied state being ruined by poor governance and crazed political actors. So sad.

Posted by: Joshua on January 23, 2008 at 10:23 AM | PERMALINK

Gray Davis is once again demonstrating why when the recall happened, the Democratic establishment did not rise up and defend him. The man has an amazing ability to undermine the people he needs for support while supporting those who only want to do him and his agenda harm. Even doing simple things to support fellow Democrats seemed to be painful to him- as he was leaving office, there were countless politically appointed positions left unfilled because he took forever to appoint anyone to anything.

And yeah, the way the budget process is set up right now is completely disfunctional. People need to get a clue that if they want public services they need to pay for them.

Posted by: Baaaa on January 23, 2008 at 11:44 AM | PERMALINK

Why has California's budget bursting at the seams? A quick glance at the following charts provides all the answers one requires. In summary, revenues peak as a percent of personal income during the blowoff peak of the stockmarket bubble, then decline significantly. Spending also came down a bit, but not quite enough, thus leading to the budget troubles of Mr. Davis. Since about 2002 trough, taxes as a percent of personal income have advanced quite a lot but, unfortunately, spending has outstripped it. Now, I realize people like Kevin like to blame nearly all of this on Schwarzenegger and evil Republicans, but the fact is that Democrats have controlled the legislature in California during all of Schwarzenegger's term, and then some. Both are to blame- let's just agree on that.

Posted by: Yancey Ward on January 23, 2008 at 2:21 PM | PERMALINK



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