Friday, August 01, 2003
Insightful commentary: Well, you're not going to find it in the latest column by alleged economist Paul Krugman.
On a day when there is a bonanza of good economic news, (stocks up; economic growth up; inventories down, jobless claims down) Krugman decides to focus on the financial mess in California.
First Krugman puts in his two cents on the recall.
The recall isn't just a case of hardball politics. It's also a grand act of evasion: in the face of a severe fiscal crisis, voters are being invited to focus not on hard choices but on personality. Replacing Gray Davis with someone more likable isn't going to pay the bills.
Once again, Krugman's elitism shows through. "If those Californians knew what was good for them..." Gray Davis isn't facing a recall because he's not "likable." Krugman is either woefully misinformed or willfully disingenuous to make that argument. Davis is facing a recall because he's seen as a poor leader who has sold out the state to special interests.
And California's slide into irresponsibility, in which politicians refuse to acknowledge any connection between the government services the public demands and the taxes that pay for those services, is being replicated all across America.
Fair enough. People complain about wanting better schools, more freeways, subsidized day care, but don't want to pay for it. Unfortunately, this isn't anything new.
Thanks to the end of the tech boom and the bursting of the tech bubble — with an assist from energy price gouging — California's budget has plunged into deficit. State and local governments faced with deficits normally respond with a mix of spending cuts and tax increases. That's what Mayor Michael Bloomberg has done in New York, it's what Gov. Pete Wilson did in California's last fiscal crisis, in the early 1990's, and it's what Mr. Davis proposed earlier this year.
But California's Constitution requires that budgets be passed in the State Legislature by a two-thirds' margin — which gives the Republican minority blocking power. And that minority has refused either to vote for any tax increase, or to make realistic proposals for spending cuts.
It's almost amusing, that in California -- a state in which every statewide office is held by Democrats and Democrats hold large majorities in both houses of the legislature -- Krugman looks to assign blame for the state's fiscal crisis and finds two groups are to blame: residents and Republicans.
What are "realistic proposals for spending cuts" anyway? Realistic to Krugman? Democrats didn't want to cut spending. Republicans didn't want to raise taxes. Two valid political positions -- but the fault for a failure to bridge the gap lies solely with the minority Republicans?
You often hear claims that excessive spending is responsible for California's budget woes. True, budgets grew rapidly after the mid-1990's. But California began the 1990's by slashing outlays in response to a fiscal crisis, and most of the subsequent growth was simply a return to pre-crisis levels. As analysts at the nonpartisan California Budget Project point out, real state spending per capita was only 10 percent higher in 2002-03 than it was in 1989-90 — that is, most of the spending growth was simply a matter of keeping up with the population and inflation.
I'll leave analysis of the budget numbers to people like Don Luskin, but I'm wary of the "nonpartisan" California Budget Project which says it is: "Working to improve the economic and social well-being of low and middle income Californians through independent fiscal and policy analysis and public education." The CBP recieves foundation grants from such "nonpartisan" sources such as the Ford Foundation, the David and Lucile Packard Foundation and the Streisand Foundation (yes, that Streisand). Remember, the NAACP is nonpartisan too.
What is interesting about state spending are charts comparing the 2002-03 fiscal year (Page 3) spending to the 2003-04 fiscal year (Page 48). [both links require Adobe Acrobat Reader] There is only one category of funding that acutally increases in the midst of this budget crisis: "Youth & Adult Correctional." That's right, the outrageous contract with the prison guards union that Davis approved after they made a large contribution to his re-election campaign.
This week the stalemate was finally resolved, sort of. The budget that was passed contains one significant tax increase, a rise in the vehicle licensing fee — for technical reasons, this didn't require a vote. And it uses elaborate fiscal footwork to evade restrictions on state borrowing, passing the problem on until next year. It's better than no budget at all, but it's a monument to political irresponsibility.
Mark the date and time, this I do agree with Krugman -- the California budget is a joke. No politicians should be patting themselves on the back on this one.
If the federal government isn't in crisis, that's only because — unlike state governments — it isn't obliged to balance its budget each year. And so far bond markets have been willing to give the feds the benefit of the doubt.
But the people now running the country are every bit as irresponsible as those blocking a serious response to California's crisis. And sooner or later that irresponsibility will have the usual consequences. California, here we come.
According to Krugman, it's not the profligate spenders that are irresponsible, but those who oppose them.
The truth is that both sides are to blame, but in Krugman's world Democrats are always victims of the Republicans and their conspiracy.