While California teeters on the edge of bankruptcy, the Golden State will feature the nation's most expensive gubernatorial race between former eBay CEO Meg Whitman and Attorney General Jerry Brown. Will desperate Californians be beguiled by Whitman's multi-million dollar advertising blitz?
California has a $20 billion budget shortfall and its bond rating has been downrated to below that of Kazakhstan. As usual, the governor, Arnold Schwarzenegger, and the legislature can't agree what to do. California's unemployment rate is 11 percent and recent budget cuts have caused sharp curtailments in state services ranging from layoffs of public safety employees to diminution of highway maintenance.
In theory, Schwarzenegger was well positioned to deal with California's budget woes. A self-declared centrist Republican, he appeared to occupy a halfway position between the Democrats who control the state legislature and the über-conservative Republicans who constantly fight them tooth and nail. (California is one of only three states that require a 2/3rds vote to pass a state budget.) Unfortunately, the "governator" morphed into an erratic wimp, managing to irritate both parties and, ultimately, the electorate.
As a consequence, California has a horrendous budget crisis and no clear path to resolution. Enter Whitman and Brown.
It's pretty clear why Jerry Brown is running for Governor. He's a career Democratic politician; he'd been termed out as Attorney General; he'd already been Governor from 1975-83; and no other major Democrat wanted the job.
It's less clear why Meg Whitman is running. As CEO of eBay, Whitman took the company public and became a billionaire. Some suggest she's emulating former Massachusetts' Governor Mitt Romney, another billionaire who used the state house as a route to Republican political prominence.
Whatever Whitman's motivation may be, it's clear that she's willing to spend millions to win the governor's race. To capture the Republican primary, she expended $76 per voter, roughly $80 million. (In contrast, Jerry Brown spent 50 cents per voter to win the Democratic contest.)
Whitman 's campaign emphasizes her CEO credentials. Unfortunately, the experience Whitman describes - "At eBay, Meg learned how technology and decentralization can be harnessed to deliver powerful results" -has little to do with fixing California. Instead of thoughtful proposals, she offers grandiosity. With one hand, Whitman promises to beat the legislature into shape, while with the other she proposes to balance the budget by simultaneously cutting taxes and reducing state payrolls by $15 billion.
One of the lessons successful CEO's immediately learn is the necessity to balance a budget. In California, that doesn't mean cutting services, they've already been cut to the bone. It means sensible tax increases; for example, a severance tax on oil producers. But Whitman, as a conservative Republican, is dogmatically opposed to any tax increase no matter how fiscally responsible.
In fact, Whitman wants to eliminate state capital gains taxes, which are primarily paid by the wealthy. In 2006, 61 percent of capital gains taxes were paid by individuals with adjusted gross income in excess of $1 million. Eliminating California's capital gains tax would primarily benefit Whitman and her rich pals.
Whitman's solution to working with a Democratically controlled legislature is to reduce their effectiveness: "Meg will support a constitutional amendment that would turn California's full-time legislature into a part-time legislature with a greatly reduced salary." That's a terrible idea; it would guarantee that only the wealthy could afford to be legislators.
Managing California isn't like running eBay. California has the eighth largest economy in the world and - considered as a nation state - has responsibilities that corporations don't have. When times get tough, corporations can lay off their workers. But California can't responsibly lay off public safety workers and teachers. When times get tough, corporations can gut their employee benefits. But California can't responsibly cut life support for the elderly and infirm or for children.
In contrast to Whitman's pomposity, Jerry Brown comes across as stolid. Whereas Whitman touts her experience as a corporate CEO, Brown notes his experience working in state government: "insider's knowledge, outsider's mind." And Brown was an effective mayor of Oakland, a deeply troubled city.
Brown and Whitman have major points of agreement: no new taxes, downsize the state bureaucracy, and push some responsibilities to counties and cities. The difference between them is process. Whitman is confrontational, I will bend the legislature to my will. Brown is collaborative, I know how to work with the legislature to get things done .
Ultimately the contest will come down to money and voter turnout. Whitman will pour more millions into her campaign, outspend Brown by at least two to one. But Brown has the advantage of running as a Democrat in a state where 44.6 percent of voters identify as Dems versus 30.8 percent who favor Republicans.
Is Brown exciting enough to bring out Democrats and capture enough Independent votes? Will Whitman's money overcome her deficiencies? Will either candidate be able to prevent California's slide into bankruptcy? Will Golden Staters live happily ever after? Stay tuned.