Monday, December 12, 2011

Responding to Jerry Brown's "Open Letter"

Last week, Governor Jerry Brown emerged from his fortress of solitude with an "open letter to the people". We haven't written about it until now because, frankly, it seemed silly to us. Still, in the spirit of Steven Greenhut's takedown of the letter at Reason, we thought we'd review it, and clear up any points of confusion for our readers.

What we do every time we parse Jerry Brown's version of English.
Brown's letter to the people opens by noting that he came into office facing a $26.6 billion budget deficit, and began in January by proposing "a budget that combined deep cuts with a temporary extension of some existing taxes." We would quibble with the description of his planned cuts as "deep," in proportion to the depth of California's overspending problem. One sign of how serious this problem is: nowadays, everyone is talking about the dreaded "trigger cuts," with tax revenues $1 billion short of projections; yet isn't the real story the fact that the Golden State has already overshot its budgeted spending by $2 billion this year?

Unfortunately, the Moonbeam starts to strain the rails almost immediately after that. "I asked the legislature to enact this plan and to allow you, the people of California, to vote on it. . . I don’t know how you would have voted, but we will never know." And then he delivers this awful paragraph:
Forced to act alone, Democrats went ahead and enacted massive cuts and the first honest on-time budget in a decade. But without the tax extensions, it was simply not possible to eliminate the state’s structural deficit.
Where we do we start with this? As far as not knowing how Californians would've voted on his tax plan, Brown's argument is muddied by the opinion polls that showed, repeatedly, that voters were ready to shoot his plan down at the ballot. What's worse, though, is that the Governor seems to have forgotten a few empirical facts. For one, his May revise called for the Legislature to impose his tax increases without voter approval (are we really the only people in California that remember the "bridge tax"?). For another, California's budget was not on time: does Brown really not remember vetoing the Legislature's first budget and costing lawmakers their pay? As far as his characterization of the budget as "honest," we'll leave you to ponder the $4 billion in magical tax revenues that the budget assumed would arrive, the Amazon Tax that won't happen this year, the revenue backfill from the state's redevelopment agencies, and yes, that $2 billion in deficit spending. As far as "eliminating the structural deficit," are we really supposed to believe that Sacramento is capable of taking a massive pile of money and using it for deficit reduction, rather than new spending?

But things are looking up. "The good news is that our financial condition is much better than a year ago." Brown points to the $10 billion in budget cuts made this year, though he focuses on meaningless gestures like taking away government cars and cell phones and looks past some of the elephants in the room, like the state's gargantuan unfunded pension debt and the fact that his vision for economic recovery involves burying the state's taxpayers under a mountain of interest payments on bonds. "Spending is now at levels not seen since the seventies." Ah yes, the seventies; an era of limited government if there ever was one! Sadly, it doesn't occur to Brown that the state's financial condition is improving because of spending cuts, not in spite of them. "Schools have been hurt and state funding for our universities has been reduced by 25%. Support for the elderly and the disabled has fallen to where it was in 1983. Our courts suffered debilitating reductions." Because, of course, it makes complete sense to look to public schools, social service agencies, and courts as models of economic efficiency, given the tremendous competitive pressures they face to use our money wisely.

Brown then moves on to his tax plan, which calls for hikes on sales taxes and income taxes on high earners. Tellingly, Brown misrepresents the plan as he unveiled it just days before issuing this letter. According to the letter, "[n]o family making less than $500,000 a year will see their income taxes rise." This is technically true, but fails to mention that individual filers with incomes between $250,000 and $300,000 would see their income tax rate jump 1%, while those with incomes between $300,000 and $500,000 would see a 1.5% rise in tax rates. The Governor claims the new revenues will be directed solely to public safety and education, but remember that this is Jerry Brown: the new taxes are about protecting the pay and pensions of unionized prison guards, cops, firefighters, and teachers, which doesn't necessarily translate into safer streets or better schools (ask a resident of Vallejo or San Jose if you don't believe us). Brown justifies the call for more taxes as follows:
The stark truth is that without new tax revenues, we will have no other choice but to make deeper and more damaging cuts to schools, universities, public safety and our courts.
So there you have it. Californians have a choice: maintain the status quo of rising government spending, or . . . maintain the status quo via slightly lower levels of spending. And going the first route involves, essentially, giving Sacramento so much of our money that it can't find new ways to spend it, thus leading to some deficit reduction.

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