During his conference call with editorial writers on
Wednesday, Gov. Gray Davis urged support for his newly
announced budget revision, which attempts to plug a
gaping budget hole largely with deficit financing and
new taxes. No matter one's political perspective, he
said, California media need to pull together because the
state's future is at stake.
Given the size of the budget gap, and the state's
battered image in the financial markets, the governor's
characterization may not be much of an exaggeration. The
future is at stake. But it will take more than any
number of editorials to fix it.
The problem isn't just the budget deficit, which has
soared from estimates of $35 billion in January to $38
billion today. It is the state's increasingly hostile
climate toward businesses, taxpayers and freedom.
Despite being warned by Republicans that they would
not approve any tax hikes, the governor bases his
proposed budget on four such hikes - a tripling of the
vehicle license fee, a half-cent sales tax increase and
tax hikes on the perennial easy targets of wealthy
people and smokers. Despite this unprecedented deficit,
caused by increased spending of 37 percent over the past
four years even as the economy was floundering, the
governor has proposed about $2.2 billion in new spending
since the January plan, mainly to gin up support among
public-sector unions and other liberal interest groups
that have been whining since cuts were announced as part
of the January budget proposal.
Even if the revision would solve the financial
crisis, which it doesn't, the Legislature and governor
will spend us into a similar problem in a few more
years. Why? Because the budget includes no serious
structural reforms - i.e., constitutional limits on
increased spending tied to population growth and
inflation - that would address the simple fact that the
government is spending far more than it takes in.
"It just doesn't stop," said Assemblyman Ray Haynes,
R-Murrieta, referring to the new taxes and regulations
Democrats continue to push forward even in the face of
this massive budget debacle. "They believe that
California is such a great place that people will come
here and create jobs no matter what we do."
On Tuesday, I met with the California Chamber of
Commerce's senior vice president and general counsel
Fred Main, and vice president of government relations,
Richard Costigan, to discuss the state's tanking
business climate. Most people understand that
California's welfare state and all the goodies
legislators toss to constituents are paid for thanks to
jobs created by business. Yet the new crop of
legislators, who lean sharply to the left, don't show an
understanding of that most basic economic principle.
They believe government creates everything.
Quite frankly, it was impossible to fit into this one
meeting discussions of the hundreds of anti-business,
tax-hiking and job-killing bills that are making their
way through legislative committees.
There is a package of four health-care bills that
would impose billions of dollars of new mandates on
businesses, and will particularly hit small businesses
that cannot now afford to offer health care to their
employees. One proposal would impose a single-payer,
government-controlled system on the state, similar to
the health-care system in Canada, in which people must
wait years for the medical procedures Americans now take
There's a health-care bill that would mandate a
prescription-drug program, which, supporters say, could
be financed by a 1 percent sales tax and a 7 percent
payroll tax. Then there's the Budget Accountability Act,
a union-backed initiative to reduce the vote threshold
to 55 percent from two-thirds in order to pass a budget.
That means that virtually every new tax would pass,
given the current Legislature, so that within a few
years your entire paycheck can simply be
direct-deposited into the state treasury. I'm saying
that without too much exaggeration.
Then there are the new tax proposals that continue,
one after another. Republicans have a list of at least
50 new taxes and fees proposed by Democrats, mainly to
fund new programs.
The flip side of all the anti-business legislation is
the lack of real legislation to fix any of the problems,
Costigan explained. Workers compensation insurance rates
are doubling and tripling on businesses, and yet
legislators are too busy debating the value of cat
declawing to do anything about a genuine crisis.
Tom Hayden and other left-wing legislators always
used to propose a handful of crazy ideologically driven
bills each year, Main explained. But a certain level of
sanity would prevail, and the proposals would lead to
legislative hearings on the legitimate issues. "Now, the
crazy bills aren't being quickly dealt with so [the
business community] can focus on bills that are only
My personal favorite is the Three Strikes and You're
Out of Business bill, which would allow the state to
shut down any business that has been convicted of a
crime three times. It has a great Soviet element: After
each strike, the corporate evildoer must pay for
newspaper ads admitting its crimes against the
Instead of being laughed away as a piece of far-left
nonsense, it actually passed the Senate Judiciary
Committee on a 5-2 partyline vote.
I'm astounded by the sheer vindictiveness of the
legislation targeting companies.
And, thanks to the ever-powerful trial lawyers'
lobby, legislators keep passing new ways for attorneys
to sue companies. I had written about the grievous
abuses of the 17200 consumer protection laws, in which
trial lawyers file extortion lawsuits against small
businesses who may have violated some infraction of some
hard-to-understand regulations. Yet, recently,
reasonable reforms were killed, and a new "reform" bill
was passed that actually makes it easier for trial
lawyers to collect extortion settlements from small
California is beautiful and the threshold is high
before anyone will leave, but there is a threshold. Just
check out the sprawling new developments outside Reno or
Las Vegas. They are populated by Californians. Check out
the pro-business ads from other states that appear in
airline magazines and in California newspapers luring
businesses and workers across the border.
Democrats may scoff, but ultimately people vote with
their feet. Many simply cannot afford to operate a
business in California. Others are suffocating by the
climate here in which the government wants to regulate
every part of our lives. Business owners - at least the
small ones who are still entrepreneurial, as opposed to
some of the bigger businesses that fund Democrats and
play the influence game - are getting tired of being
taxed, regulated, punished, sued. Heck, if Las Vegas
starts looking good, you know things are bad in
"California is still the best place to start a small
business," jokes Sen. Tom McClintock, R-Simi Valley.
"But you have to start with a big business."
McClintock believes that Republicans can still make
inroads in the Legislature and start turning things
around. Haynes fears that so many Republican voters
already have left for other states that things are going
to have to get far worse before they get better.
After spending a week in Sacramento and watching the
Legislature in action, I'm left wondering what will be
left of this state if even a few more years of such
socialist nuttiness continues. Unfortunately, the
deficit is only the beginning of California's