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Democrats to drain California’s budget reserve?
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AP Photo/Rich Pedroncelli
Governor Schwarzenegger has finally realized what the state government must do to alleviate its financial troubles. Unfortunately, key California Democrats disagree and are opting to drain the state’s budget reserve in order to fund health, welfare and educational services currently provided by taxpayers.
If the Governor’s plans are realized, the safety net for low-income Californians will essentially disappear. Given that possibly, Senate Democrats see the budget reserve as a way to continue providing social services during these difficult economic conditions. Senate President Pro Tem Darrell Steinberg was reported as saying "[t]he purpose of a rainy-day fund is to provide funds for a rainy day. It's thunder and lightning in California right now."
Assembly Speaker Karen Bass also explained that “[t]he bottom line for Assembly Democrats is that we are committed to ensuring that the state's fiscal emergency isn't allowed to be misused to eliminate the safety net in California or to eviscerate our public education system."
It’s interesting that only after the state’s leaders have spent California into a massive $25 billion deficit are they suddenly protectors of the public concerned about the little guy. While cuts in social services will hurt poorer Californians, what benefit did those same people receive, for example, when Sacramento politicians endorsed inordinate environmental regulations, supported the highest tax increases in the state’s history and did nothing as the teacher’s union held school districts hostage for millions? Not only did all of these policies not benefit struggling citizens, they hurt them.
When regulations on industry are enacted to protect the environment and taxes raised to fill the state’s coffers, the inevitable consequence is economic loss. Businesses fire employees, produce less and even leave the state in some cases. Those hurt most by these results are the poorest individuals. Similarly, when school districts are forced by unions to pay unfit teachers $70,000 salaries plus benefits not to teach, less money is available for education—again, hurting the poorest the most.
The legislature did nothing to prevent such unwise policies, and even encouraged them in most cases. But unwise policies have their consequences and the benevolent public servants in Sacramento don’t want to deal with them. Since big spending cuts mean big cuts to the public services their supporters rely on, Democrats aren’t enthused. After all, upsetting your constituents really isn’t a good strategy to win re-election.
Nonetheless, spending cuts and less intervention in the marketplace are the only options the state government has left to straighten up its budget situation, and the ongoing recession is a part of that adjustment. As economist Jesus Huerta de Soto points out: "Under these circumstances, the most appropriate policy would be to liberalize the economy at all levels [...] Likewise, it is essential to reduce public spending and taxes, in order to increase the available income of heavily indebted economic agents.”
The Governor has finally realized the error of his ways and admitted that the state cannot dig into the budget reserves and keep spending as it has for so long. "California's day of reckoning is here," the Governor said.
Now it’s the legislature’s turn to have the same realization.
