Tuesday, May 19, 2009

Decision Day

As another day of decision arrives, between what California has been and should be again (a vibrant and prosperous state that attracts people to it in droves, or an over-taxed, over-regulated, slowly dying on-the-vine region that has more people leaving than arriving) here is an editorial from the Wall Street Journal worthy of a read.

An excerpt.

“Californians head to the polls Tuesday to decide the fate of six ballot initiatives, all of which are ostensibly designed to combat the Golden State's budget crisis. If the polls are right, all but one of these measures will crash and burn -- and by wide margins. A reckoning for liberal tax and spend governance may finally be arriving.

“We have some sympathy for Governor Arnold Schwarzenegger, who was elected to fix this mess six years ago. His original mistake was to accept a token bipartisan fix when he was most popular, and once the unions crushed his reform initiatives in 2005 he had little leverage over the Democrats who run the legislature. So he's now decided to settle for the lowest common denominator reform that both parties can agree to, which isn't nearly enough considering the magnitude of the state's fiscal and economic problems.

“By far the most consequential initiative is Proposition 1A, which is favored by most of the Sacramento political class. Prop 1A creates a rainy day fund of up to 12.5% of the budget and imposes a new annual spending cap. It would divert 3% of revenues during economic boom years into the rainy day fund that can only be spent during recessions. Mr. Schwarzenegger is correct that this is a sensible reform, because for 40 years the state has endured revenue booms and busts.

“Alas, the cap is far weaker than the Gann Amendment that passed with 74% of the vote in 1979, as the sister initiative to Proposition 13, and helped usher in a decade of budget surpluses. The Gann Amendment -- until public unions neutered it in the early 1990s -- imposed a ceiling on spending at the level of population growth plus inflation; when revenues exceeded that limit, the money was returned to taxpayers.”