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The Elephant in the Room

California's fiscal mess continues to worsen thanks to the anti-tax, anti-government policies of the GOP.

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How did it come to this?


It's cliché to say that conservatives are "tougher" than liberals. And yet over the past several decades, there's little doubt that the Right has steadfastly persevered with its anti-tax doctrine despite convincing evidence that its theories have worsened California's economic outlook. Meanwhile, the Left slowly abandoned its pro-government principles despite proof that its ideas helped the economy grow.

Indeed, even while Reagan caved to progressive fiscal ideals still dominant in the late-1960s, the core pro-corporate, anti-government message of his backers — a group of ultra-conservative auto dealers, real estate magnates, and oil tycoons — advanced over time, winning numerous legislative and electoral victories, lowering taxes and starving government of revenues. Liberals, by contrast, essentially stood by and allowed it to happen, historians and political observers note.

"No [Democratic] leader made the public case that these were tax cuts for the wealthy and the corporations, and that they were shifting the burden of taxation to homeowners and individual workers," noted Jeffery Lustig, a founding member of the California Studies Association, and professor of government at CSU Sacramento.

Instead, Democrats like Brown have retreated to a position that is to the right of the early Reagan. Party leaders now reflexively advance budget cuts, lacking the political will or — thanks to constitutional reforms sponsored by conservative activists — often lacking even the legal ability to progressively tax, prudently borrow, and consistently spend money on schools, housing, and medical care, to say nothing of creating jobs for California's working families.

It's a dynamic that author Chris Hedges has diagnosed as "the death of the liberal class." Leftist Democrats who used to serve as a counterbalance against the Right have all but disappeared from the halls of power, replaced by "centrist" and "fiscally responsible" neoliberal politicians resembling Bill Clinton.

California led this national political shift to the right on fiscal issues. Brechin believes that state Republicans have simply been more effective over the years in using propagandistic mass media to sell their message and mold the public discourse, thereby ensuring corporate control over the levers of government. It's an increasingly popular thesis, and some research has pointed out how resource-rich and focused the Right has been in funding ideological campaigns and media-savvy spokespersons — for example, through the recent investments by the billionaire Koch brothers in the Tea Party.

And yet one of the basic messages of the Right — that government spending is out of control — does not comport with the facts. "The facts in California are that spending has been cut by $15 billion in the last three years," said Jean Ross, director of the California Budget Project. "In the budget that the governor vetoed [last month], state general fund spending, the pot of money that pays for health care and education, and where the deficit exists, would be at its lowest level as a share of the economy since the mid-1970s."

The Brown administration's budget proposal released in May noted that general fund spending for the coming year would be "at its lowest level since 1972-73," the mid-point of the Reagan era in California when an average of 5 cents per every dollar of each resident's income funded state government. Reagan actually oversaw an increase in this ratio. By 1976, the state was spending 6 cents per every dollar of individual income. The first incarnation of Jerry Brown — the "Governor Moonbeam" who fought for some progressive policies — boosted this figure to a high of almost 7.5 cents until it was brought down to an average of about 6.5 cents under successive governors. In other words, any further reductions in tax revenues today would actually constitute a record gutting of the state government and bring us back to a pre-World War II version of California when there was far less public investment in education, infrastructure, and health.

Although there's truth to the charge that some public-employee compensation and retirement packages in California have become unsustainable over the past few decades, and that the costs of some state government programs have grown faster than inflation in years past, it's also true that politicians, especially California's, have been irresponsible with fiscal surpluses, historians and political observers note. Too often, extra revenues have been squandered with tax cuts and rebates that outlasted the booming economic times that produced them, leaving the state drained of funds and fiscally handicapped when conditions turned sour. In short, California's rainy day fund has been too small, while the political pressure to rebate taxes (thereby effectively shrinking government) in fat years has grown increasingly more powerful.

Fred Block, a UC Davis sociologist who has been studying California's economy for decades, argues that history shows that despite the Right's message about government spending hurting the economy, the facts, again, prove otherwise. State government has been pivotal, he noted, in fostering California's economic dynamism and prosperity by taxing progressively and making large investments in education and other services. This relationship is in opposition to the Right's notion that taxes and government spending harms the private sector. Block calls this the "Myth of the Vampire State."

"The truth is that — as in the past — higher taxes and higher public spending are the key to future prosperity," Block continued. "California's prosperity over the last three decades was rooted in the spectacular productivity of Silicon Valley, the earnings of the LA-based entertainment industry — movies, TV, music, and video games — and dramatic growth in biotechnology firms. All three of these growth centers were themselves extremely dependent on the state's investments, going back to the 1950s."

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