Gov. Arnold Schwarzenegger on Monday ordered all state departments to draft plans for deep spending cuts after receiving word that California's budget is plunging deeply into the red largely because of the troubled housing market.Why are we in trouble now? It's not just because of the housing crisis: "When the economy improved nationwide several years ago, most states erased chronic deficits and began building rainy day funds. California did not. It continued to spend more money than it brought in."
....The news is a major setback for the governor's other policy initiatives. His proposals to pass legislation this year that would bring healthcare to all Californians and address the state's water problems were already faltering in the Legislature. News of a massive looming deficit will make the proposals, both of which would require billions of dollars of new spending, politically less palatable to lawmakers.
Four years ago Arnold Schwarzenegger took office in the midst of a massive budget crisis after promising voters that he would end our "crazy deficit spending." In true Republican fashion, he did this by immediately reducing the state auto licensing fee by $4 billion a year and then insisting that we all approve $15 billion in bonds to paper over a shortfall that was now even more desperate than the one he inherited. The hope, apparently, was that nothing bad would even happen to the economy and eventually we'd squeeze out from under the rock we were under.
I opposed the bonds at the time, and I've never regretted that vote since. Defeating the bonds would have caused immense fiscal pain, but it would also have forced Schwarzenegger and the legislature to actually fix our underlying problem by increasing taxes and reducing spending. Our nonpartisan legislative analyst made it clear from the beginning that Arnold's plan had no long-term chance of success, but he just flashed that million-dollar smile and went ahead with it anyway.
But gravity still pulls downward and reducing taxes still creates bigger deficits, not smaller ones. Now California has a massive deficit and tens of billions of dollars worth of bonds for our kids to pay off. And $16 billion of it and counting is due to the demagogic tax decrease that Arnold used to win office. Nice work, governor.