Saturday, January 12, 2013

Krugman is excited that Jerry Brown more than balanced California's budget

Paul Krugman takes note of Jerry Brown's latest California state budget for fiscal year 2014 (July 25013-June2014) in California in Surplus 01/11/2013. The Governor's proposed budget has a surplus of revenue over expense with no big cuts or revenue increases required to balance the budgets, as California is required to do, like most states and localities.

Here is how the Governor's website presents the proposal (Governor Brown Proposes 2013-2014 Budget 01/10/2013):

Governor Edmund G. Brown Jr. today proposed a balanced state budget that boosts investment in education, implements health care reform and keeps California on a long-term path to fiscal stability. This budget builds on the work of the last two years to eliminate the ongoing deficit.

“The budget cuts made in the last two years and the passage of Proposition 30 make it possible to both live within our means and to increase funding for education,” said Governor Brown.

When Governor Brown took office, the state faced a $26.6 billion budget deficit and estimated annual gaps of roughly $20 billion. The first two state budgets under Governor Brown’s watch eliminated these deficits with billions of dollars in cuts as well as temporary revenues. The 2011-2012 and 2012-2013 budgets provided three dollars of spending cuts for every dollar in temporary tax revenues approved by the voters.

To maintain the fiscal stability that has been achieved, the budget reflects the continuation of spending cuts made in the last two years, continues to pay down the "wall of debt" and recognizes risks that remain.
In his message transmitting the budget to the Legislature, he stresses that the budget increases funds for K-12 schools, proposes increases for higher education and implements Obamacare. And he writes:

This budget finally puts California on a path to long‑term fiscal stability. What must be avoided at all costs is the boom and bust, borrow and spend, of the last decade. Fiscal discipline is not the enemy of democratic governance, but rather its fundamental predicate. That is the spirit that I trust will characterize our work together in the coming year.
That's a very Jerry-esque statement, "Fiscal discipline is not the enemy of democratic governance, but rather its fundamental predicate." But I would say he's primarily directing that at Republicans, whose focus in California since 1978 has been cut taxes, cut taxes, cut taxes.

During the Schwarzenegger years, not only was the budget passage chronically late. Even more importantly, the percentage of revenue going to interest payments was increasing as a share of the budget year after year. It was the "starve the beast" strategy in practice: disappoint everyone with the deteriorating quality of government services and create a situation where there would be a chronic squeeze every year for more and more public service cuts. It also relied on legally borderline measures like borrowing from the school districts to finance state government.

Jerry approached this in a couple of ways when he took office in 2011. He bit the bullet on the revenue shortage, proposing that it be filled by a combination of cuts and new tax revenue to be approved in a referendum this past November. Before the referendum was placed on the ballot, he came to agreement with progressive advocates and modified the referendum to include more progressive taxation, i.e., higher taxes on the wealthy, thus risking increased conservative opposition. The race was close, but he got it passed.

I see that as particularly significant, because he took full account of degree to which initiative and referendum play a role in California politics. He had pledged in his gubernatorial campaign that he would not raise taxes without a popular vote. And he followed through. He spent more than a year laying out the fact repeatedly that there was a tangible choice between public services and tax revenue. There were defined sets of cuts already approved in the budget that would happen if the tax referendum had not been approved. And he campaigned aggressively for the measure (Proposition 30) on the ballot. And he got it passed.

At his press conference (11/07/2012) after the referendum was approved, he said:

The people of California have put their trust in a bold path forward. And I intend to do everything in my power to honor that trust.

Many people said you shouldn't go to the people and get their views in a statewide vote about whether or not to raise taxes. I made a pledge when I ran for Governor two years ago that I would, number one, tell the truth, no more smoke and mirrors on the budget, level with people; seek a vote of the people before any new taxes; and, thirdly, bring government inclusive of people.
He also noted that by his count there had been three dollars of cuts for every dollar of new revenue, presumably referring to the current fiscal year when the new revenue will be available for half the fiscal year.

When I listen to his evaluation in that press conference, I don't hear him praising the cuts as such. On the contrary, he presents them as painful and forced by the state of the budget. But, very importantly, he does not frame cuts to education and funding for the elderly as virtuous policies, unlike President Obama's approach to his Grand Bargain to cut benefits on Social Security, Medicare and Medicaid.

About six or seven minutes into it, he answers a question by citing a story from the book of Genesis. You can hear someone, presumably reporters, snickering when he starts. But Jerry has a very extensive Jesuit Biblical education. He's not being pretentious with that kind of thing, it's how he thinks.

He used that story to illustrate that the state needs to keep a certain amount of emergency surplus. There's some history there from the first of his three terms at Governor. In 1978, state revenue was surging due to rapid inflation in housing costs. That was not only the occasion for the famous/infamous Proposition 13 that year that lowered property taxes and placed severe restrictions on states and localities in raising taxes. But the surplus was also a major focus of the tax-cutters' agitation. State governments do need a surplus for exigencies of revenue downturns due to recessions or other reasons. There's no magic number or percentage for what a prudent surplus should be. But the whole notion of a reasonable surplus had almost disappeared from public discussion of the budget during the Schwarzenegger years.

The passage of Prop 30 was a breakthrough, because both the Republicans and (to an non-trivial extent) the Democrats have promoted the notion even in state government that we cut taxes again and again and not have services affected, so that an individual voter could always tell himself that he wouldn't be hurt by the service cuts. The campaign for the tax referendum reframed that choice for the moment in a much more realistic and serious way.

I've disagreed with Jerry's choices at times during his current governorship. And I take it for granted that those representing labor and progressive causes have to aggressively press their issues even with a sympathetic Governor. Politics is politics, after all.

But Jerry Brown is a sympathetic Governor to labor and progressive causes. This is one area in which I have a running disagreement with some of the netroots people I most respect. I'm hoping that Jerry will address the Netroots Nation conference in San Jose this summer. A lot of the netroots activists just don't seem to be familiar with his environment record, his support for immigrant and minority rights, or his outlook on the concentration of wealth. They haven't heard him quote Greek philosophers on why plutocracy is bad, or compare the leadership in Washington to European leaders in the first half of 1914 in their cluelessness, incompetence and sloppy priorities.

For instance, Kevin Yamamura reports on Jerry's announcement in Jerry Brown says California's budget deficit has disappeared Sacramento Bee 01/11/2013, including this:

Brown unveiled the latest version of his K-12 funding overhaul, which eliminates most state-driven earmarks and directs more money to districts with impoverished students and English learners who are presumed to face greater challenges. The governor acknowledged that the proposal is controversial, especially in wealthier suburbs that stand to receive less funding than urban and rural districts.

But he considered it a matter of fairness.

"We know from back to Greek philosophy, Aristotle, that treating unequals equally is not justice," Brown said. "Growing up in [poor communities like] Compton or in Richmond is not like it is to grow up in [very wealthy ones like] Los Gatos or Beverly Hills or Piedmont." [my emphasis]
How many times have we heard President Obama plead that all he wants from the wealthiest is that they pay "just a little more" in taxes? Can you imagine him defending a policy the way Jerry did on that one? Obama may run from any association with "liberation theology," but former Jesuit novice Brown probably really takes seriously the Catholic notion of a "preferential option for the poor." The guy worked with Mother Teresa for a while assisting in hospice care. He actually takes this stuff seriously.

Another instance of a can-you-imagine-Obama-saying-this comment comes in the press conference linked above. In response to a question about whether he worried wealthy people would move out of state because of higher taxes, he said:

The Stanford study shows very clearly that high-paying individuals have more to fear from their spouse than they do from the State of California. Most of them when they do leave, leave because they just go through a nasty divorce. So I would say that if they'll work on their relationships, we'll take care of spending their money wisely.
And then there was this. Near the end, after defending the concept of progressive taxation, he commented on the failure of an anti-union initiative, Proposition 32:

I think some, if I could give some advice to some very conservative people, they see through a filter, and they see only the negative aspects of union[s], of organized labor. The fact is, average people - not the powerful, and not the wealthy - feel the benefit of having an advocate in their corner. And of all - all sides, all parties, all people have flaws. But when you try to emasculate an institution that does protect the less powerful, you are carrying a very heavy burden.

And even though many powerful people think they can do that, they've failed now three times. And the ability of dues check-off is very much a part of the First Amendment, freedom of association, coming together to advance a collective goal.

And that effort to cut that off was hypocritical, and the way they kind of framed it, I think helped sink it. And that level of, I want to put it charitably, of lack of candor was mirrored in the other group which called themself small business but they're taking huge amounts of money from people who are not small business and then they say they're for transparency, and they're for concealment.

... Like 'em or not, unions have advanced middle-class standards all across America for the last 75 years.
Part of this is a matter of trust based on a politician's record. I can understand progressives being nervous - it makes me a bit nervous, too - when he says things like in the press conference linked above, when he refers to something he used to tell other meditators when he was studying Zen Buddhism in Japan, "Desires are endless, I vow to cut them down." He also said:

There's this idea that government is about, you know, it's a problem and you solve it. No. Life is a condition and you deal with it every day or every month. And we will always have issues between the money we have and what we do with it. And because of the kind of system and because of human nature, desires will always outrun the available money.
But I also know that he isn't just using some focus-group tested marketing phrase when he says things like that. It's part of his broader, complex - and fundamentally democratic and progressive - worldview.


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