Schwarzenegger Sinks to New Low

Arnold's executive order laying off 10,000 state employees -- and slashing another 200,000 paychecks to the federal minimum wage -- is not just insulting because he's punishing people for the actions of others. It's that the budget crisis we're in is largely his fault, and the Governor refuses to take responsibility. Starting with Schwarzenegger's first day in office when he repealed the Vehicle License Fee, Arnold has played one game of fiscal gymnastics after another -- leaving us with today's budget deficit of $17 billion. With right-wing Republicans in the state legislature still playing their usual game of obstructionism, Arnold has shown no leadership of reining them in -- and now says that state workers have to suffer. When Newt Gingrich did this to federal employees in 1995, he paid a heavy political price for it. Will the press let Arnold off the hook again?

Imagine you're a nurse in a state hospital, or a lawyer in the Attorney General's Office -- and your boss says you now have to work for $6.55/hour. That's what Arnold calls a needed stopgap measure for a state budget that is six weeks past due. It's easy to blame the legislature's Republican minority - who every year refuse to pass a budget with any tax increase whatsoever, and can hold it hostage because the state requires a 2/3 majority. But we've come to expect irresponsible obstructionism from these right-wingers -- who still won't say how they'll come up with a solution. Schwarzenegger's supposed to be a "post-partisan" moderate Republican, and it's his job to bring them in line.

The Governor admitted last week that laying off temporary workers and cutting everyone else's salaries down to minimum wage won't resolve anything. But Arnold has nobody to blame but himself for the fiscal mess we're in today -- because for five years, he has repeatedly played a game of "borrow, borrow, borrow" to put off one budget crisis after another. And inevitably, the chickens have come home to roost.

In 2003, on his first day in office, Arnold Schwarzenegger repealed the Vehicle License Fee. This modest tax had been around since 1935 -- where car owners paid 1.5% on the purchase of a new automobile. Governor Earl Warren raised it to 2% in 1948, but the state temporarily lowered it in 1998 because of excess revenues (understanding that it would be restored when the state hit hard times.) In one fell swoop in 2003, the state lost $5 billion in revenue for the first year - with increasing losses each successive years.

We already had an $11 billion deficit when Arnold repealed the so-called "car tax" -- but never mind. Schwarzenegger then placed a $15 billion bond measure on the March 2004 ballot, called it the "California Recovery Act" and convinced voters that we needed it to bring our fiscal house in order. The trouble with bonds is that they have to be paid back with interest -- and paying off one year's deficit is now costing the state $1 billion a year.

If it had never been repealed, the Vehicle License Fee would net the state $6.5 billion this year. Add the $1 billion we currently owe for interest on the 2004 Bond, and the Governor is single-handedly responsible for a $7.5 billion hole in this year's budget alone -- or almost half the deficit. So what's Arnold's solution for this year's budget, since he balks at raising taxes? Another bond measure -- borrowed against future lottery revenues.

When you're already in a hole, it's a good idea to stop digging. "What about next year," asked a frustrated Assemblyman Mark Leno. "Are we going to bond against future income taxes? Are we going to bond against future property taxes? This is like an addict desperate for the next fix. We need to be honest with the people of California, and admit that the state has a revenue problem. And the way you get out of it is through taxes."

The Democrats in the legislature have a compromise to plug the state's $17 billion deficit -- which involve a painful set of budget cuts coupled with reasonable tax increases. $5.6 billion could be achieved by asking Californians who make more than $272,000 a year to pay an extra 1% on their state income tax (from 9 to 10%.) This increase was originally placed in the '60s by Governor Ronald Reagan, repealed by George Deukmeijan and then restored temporarily by Pete Wilson. So it's the Reagan-Wilson tax rate for the wealthy.

Another $1.1 billion could be raised by nixing a tax break that businesses use when they have a net operating loss one year. "In a year when we're asking the blind, disabled and elderly not to take a cost-of-living adjustment," explained Leno, "it's fair to also ask businesses not to benefit from an accounting allowance." Another $1.5 billion could be realized by temporarily lifting a fine that people who owe back taxes must pay -- which would actively encourage scofflaws to pay up, bringing the state more revenue.

But Republicans in the legislature -- whose votes are needed to get a 2/3 majority to pass the budget - simply refuse to acknowledge we have a revenue problem. All 15 GOP State Senators and 31 of their 32 Assembly members have signed the infamous Grover Norquist pledge to "oppose and vote against any and all efforts to increase taxes." Schwarzenegger refuses to bring them in line -- and now wants to punish state workers with layoffs and pay cuts.

For years, I've assumed that -- beyond the 2/3 requirement -- the culprit for this gridlock is the state's ultra-partisan redistricting. After the 2000 U.S. Census, the Democrats and Republicans in the legislature drew the lines in such a way that each district was virtually guaranteed to elect a member of one party or another. The result is that Republicans who go to Sacramento are extremely conservative - and come from districts whose electorate is more likely to punish an incumbent for being "too moderate" than "too extreme."

But that's no longer the case. In a recent statewide poll of registered Republican, 65% said the state legislature should pass a budget (even if it means more taxes) -- whereas only 29% said "no new taxes" (even if it means gridlock.) These G.O.P. legislators are out of touch with their own constituents - and it's time for them to join the Democrats and support some very modest revenue measures.

Moreover, the media needs to shame Arnold for passing the buck on state employees -- as opposed to all the other times they've let him off the hook. People who work for the state don't deserve that kind of abuse, and the Governor's as bad as Newt Gingrich for taking this move.

Paul Hogarth is the Managing Editor of BeyondChron, San Francisco's Alternative Online Daily, where this piece first appeared.

Comments

[fourex]

Arnold had a corporate mandate when elected, reduce taxes for the wealthy and shift the tax burden to others. He has been successful.

[demfriend]

I worked in a state hospital in California at a time when we recieved IOU's from the state instead of paychecks. IOU's don't pay bills and they don't pay for food and gas etc either. The insanity Arnold has done to the state workers this time is something no employer should be able to get away with. I am hoping there is a court challenge and it sits him on his big arse with a nail on the board he falls on! How can anyone in the present economy be expected to survive with gas and food bills and etc when the paycheck is sliced like he has done? Are they supposed to live on credit cards with high interest? Not eat? Not drive? No vacation? No kids clothes for school? No money for the private school or vouchers? Arnie just might have lost all of the "charm" he had left over and he will have his movie career only left to fall back on. He has enough money invested and in the bank to pay the salaries and he I hope will be eating the paper he signed to make this crap happen! Not right and not fair!!

[moongal6]

California used to be a great state. I retired from the state of CA in 2002, moved to Oregon. I remember the IOU'S, you're right, they're wrong. Every time we had a Republican governor, the state suffered. It has NEVER recovered from Ronald Reagan, hell the nation has never recovered from RR and his economics. When CA had Democratic governors, there was almost always a surplus.

[LeftRight]

Wait, isn't the minimum wage in CA higher than the federal minimum? Wouldn't that make it ILLEGAL for ahhhhnold to pay state workers at the FEDERAL minimum wage?

[RobinSeattle]

Republicans and deficits go together like wet and water. The first deficits in California in my lifetime (and I was born in the 1950's) were under Pete Wilson, who jacked up state university tuition fees as much as he could, essentially putting the burden for his fiscal mismanagement of the state budge on the backs of college students.

The "caveman caucus," that is, Republican Assembly and Senate members from Orange County, see Schwarzenegger as a liberal and he has zero fiscal credibility with them.

For the above reason alone, voters in California need to realize Arnold is little more than a glorified placeholder and should be tossed out.

[SamThornton]

Given the high cost of living in California, state employees obviously can't possibly survive on minimum wage, even if they took to living in their cars. I'd be surprised if the state employee unions don't call for a work stoppage, strike or some similar job action. If California were an independent country, the Governor's loony action would pinpoint the day it became a failed state.

[bgregs]

Wait! You're saying that a govt should have to actually TAX those who live in the jurisdiction of the govt to ensure that they are able to provide the services that govts provide???? Don't you know that's insanity!!

[BADEN]

If ANYone had ANY doubts about this shill, this should wake them up big time.

UNION members who voted REPUBLICAN.....there ya go, folks. The outcome of voting AGAINST your economic interests.

I assume the security around the "Schwartz" is high.

What an idiot. Who cleans his office and bathrooms? Who services his transportation? Who wipes up after him in his little "cigar kasbah" on the taxpayer's dime?

If I were him, he'd best have one big ol' bubble around him, or take a loooooonnnnnnnng trip out of Sacramento until the "locals" calm down.

Again. What an idiot.

[stormwater]

Ahnold is as good a governor as he was an actor.