Ed Driscoll

Getting California Wrong

John Steele Gordon writes, “Sometimes you just have to wonder if there is sentient life on the opinion floor of the New York Times Building.”

Well, no, I think we have a pretty definitive answer on that, but read on, anyhow:

Yesterday, the Times ran an editorial called “The Sorry State of the States” that noted that many states have budget problems, thanks to the recession. State deficits over the next two years, according to the Times, will add up to $350 to $370 billion. The editors note, happily, that federal stimulus spending will take care of about forty percent of that but fail to notes that that merely transfers the deficit from the states to the federal government.

The problem, says the Times, is “a collapse in  tax revenues brought on by the recession.” That is indeed the problem, if you regard the world as having come into existence on, say, January 20th, 2009. But since it didn’t, there are other reasons that are more important. During the prosperity of the mid-Bush years, many states increased spending both markedly and irresponsibly. The ones that didn’t are the very states that, today, have the least problems dealing with the recession.

California, for instance, increased total spending by an astonishing forty percent just since 2003 and is now–surprise!–the state with the biggest budget problem. The Times thinks the blame lies with the people of California, with their “deeply anti-tax strain” dating back to 1978 when Proposition 13 limited property tax increases.  Of course, California had a string of balanced budgets and rapidly increasing prosperity beginning in that year because other referenda imposed strict spending restraints. It was only when those spending restraints were gutted in the late 1980’s that California’s budget roller-coaster ride began. Perhaps I missed it, but I’m pretty sure that the Times did not report Californians starving in the streets during that period.

Today, Paul Krugman chimes in, backing the Times party line that California’s budget travails stem principally from its inability to raise taxes easily. Again,  Krugman blames the people for acting in their sovereign capacity to limit the ability of their servants in Sacramento to tax. To be fair, Krugman, unlike the Times’s editors, does note the state’s “irresponsible policies that have doubled the state’s debt burden since Arnold Schwarzenegger became governor.” But, like the editorial, Krugman seems oblivious to the history of California’s public fisc.

When both taxes and spending were tightly controlled, the state prospered. When only taxes were constrained, things quickly began to spin out of control. Perhaps, just perhaps, the solution lies not in increasing taxation but in, once again, limiting the ability of the government to increase spending during prosperous years.

Indeed. But good luck with that happening in California or its outlying states, anytime soon.