I believe Gov. Jerry Brown’s proposal to eliminate California’s
looming $25 billion budget deficit by saving half in real spending
cuts and reducing the other half by tax increases is a plan that
could work. Unfortunately, I’m in the minority.
I believe Gov. Jerry Brown’s proposal to eliminate California’s looming $25 billion budget deficit by saving half in real spending cuts and reducing the other half by tax increases is a plan that could work. Unfortunately, I’m in the minority. Most vested interests have rejected the idea. Their objections fall into three categories: don’t cut me, don’t tax me, or the budget deficit doesn’t matter. An anonymous poster said the idea of reducing deficit spending was part of the right-wing agenda. Jerry Brown right wing? Things may have changed, but not that much. Â
It’s a strange world where I find myself defending “Governor Moonbeam” while those who campaigned and voted for him are now in the forefront of the groups rejecting his proposals. The state’s unmodified FY 2011-2012 budget forecasts $76 billion in after-debt income but includes $101 billion in spending resulting in a projected $25 billion deficit.
In March 2004, the state’s voters, 71 percent to 29 percent, adopted the California Balanced Budget Act, Proposition 58. It required the state legislature to pass a balanced budget every year. Since then the governors and the legislators of every political stripe have simply ignored the law but, at the same time, they have been quick to declare it a failure.
Like Social Security in federal budget, California’s budget has its sacred cows, most notably education funding. Under Proposition 98, a minimum percentage of the state budget must be spent on K-14 education; $34 billion in the unmodified budget proposal. Any deficit reduction must come out what’s left.
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Debt would never be a problem if it were free, but it’s not – you have to pay interest to borrow and pay both the principal and interest back. Those debt service payments cannot be used for other things. As debt piles up, the amount left over shrinks.
The Federal government has problems of its own. Debt as a percentage of the GDP – Gross Domestic Product – is the usual measure. The GDP is the value of all final goods and services produced within a country in a period of time, usually a year. America’s gross national debt as a percent of GDP has risen dramatically in the last few years.
By 1960, WWII’s gross federal debt dropped from 120 to 55 percent of GDP. It dipped further until the l980s then slowly climbed back to 69-percent by 2008. Then it jumped to 84 percent in 2009 and to 93-percent in 2010. Additionally, state and local debt rose also significantly during the same period. Unlike federal debt, state and local debts are not evenly distributed; they must be repaid by the states, agencies and local jurisdictions that owe it.
Sometimes we need public debt to finance the future, but it’s easy to let that get out of control. Limiting debt to a reasonable slice of income is good financial planning for individuals and political entities. What happens when you owe too much? Just look at all the foreclosures and the raft of personal bankruptcies for the answer.
The primary reasons for filing personal bankruptcy are unforeseen medical expenses, excessive credit card debt, loss of employment and divorce. The analogous causes that might apply to government are unexpected costs, the loss of income from lower tax revenues and increased debt due to deficit spending.
The deficit hawks have done us a favor, they have called the family to the kitchen table, taken out the credit card bills and said we have to change our ways. Most of all they have given some politicians the backbone to take on the issue and all the special interests involved. We should be thanking them instead of just chanting don’t cut me, don’t tax me.
Marty Richman is a Hollister resident.
