Congratulations to Abel Maldonado for helping to break the logjam in California’s (latest) budget crisis. The budget crisis, which now seems to be an annual event, was especially bad this time, both fiscally and politically. The “gap” in the budget amounted to $41bn. The political situation is not much better.
The classic argument seems to be between the Democrats, who want to close the gap by raising taxes, and the Republicans, who want to close the gap by cutting spending. Of course, things are more complicated than this, but that’s essentially it. The problem is that the situation is so politicized — and so polarized — that nobody can find any common ground, and so progress is extremely difficult. The California Senate was locked in its chambers two nights in a row, and only after that was one senator (Maldonado) bribed enough to cross party lines to support the budget.
When I say “bribed” I don’t literally mean that they paid him off. The Democrats made a number of concessions to win his vote. Most notably they agreed to support open primaries, and they agreed to drop the proposed 12c/gallon gas tax from the budget. The Republicans are not likely to look kindly on Maldonado’s move. After all, earlier in they week, they ousted minority leader Dave Cogdill and replaced him with “anti-tax hard-liner” Dennis Hollingsworth. The reason for Cogdill’s ouster? Because he cooperated with the Democrats in putting together the current proposal! So Maldonado is likely to be viewed as a traitor. They’d draw him and quarter him if they could get away with it.
It’s a risk, but of course there’s something in it for Maldonado. Crossing party lines is likely to put him in jeopardy with the Republican party machine. But if there’s an open primary, he can get Democratic voters to vote for him. After all, he’s the hero who helped save the budget, right? Also, he earned a lot of publicity. Who had heard of Maldonado before the budget vote? Probably nobody outside his district. With the press coverage he’s getting now, it would set him up for another run for a statewide office. (He ran unsuccessfully for state controllers in 2006.)
Unfortunately, at least one of the concessions to get his vote is terrible. I don’t really care that much about open primaries, but removing the gas tax (in preference to leaving the sales tax increase) is a mistake. With the current economic situation, raising the general sales tax is exactly the wrong thing to do. If you’re going to raise any tax, the gas tax is the one to raise. When gas was over $4/gallon last year, people really did change their behavior. They drove less, took public transit more, and stopped buying gigantic SUVs. Yes, it’s painful, but high gas prices will help improve air quality and reduce our dependence on foreign oil. So that’s why the California legislature made a move to keep gas cheap. Wonderful.
Unfortunately, it’s quite common for the legislature to do things that don’t make sense. The usual analysis of the oft-recurring budget problems concludes that the root causes of budget problems lie in Proposition 13 (from 1978) and the requirement of having a two-thirds majority in the legislature to pass a budget. I think these are indeed problems, but the analysis kind of misses the point. The real problem is that the legislature doesn’t know how to save money for the future. Remember the idea of saving money for a rainy day? It means, don’t spend it all when the sun is shining. But when the economy is booming and tax revenues are up, the legislature says “Great, we have all this money, let’s spend it on all those pet projects we’ve always wanted to do!” When the bust comes and tax revenues fall, we get a huge budget gap. I am slightly sympathetic to the Republicans when they say we don’t have a revenue problem, we have a spending problem. But I don’t hear them — or anyone — saying that we should save money (i.e., run a budget surplus) when times are good, so that we won’t have a problem when times are bad.
It’s politically difficult to do this, I know. But as Rahm Emanuel said recently, “You never want a serious crisis to go to waste.” What California needs to learn from this crisis is how to save money.