True Courage

George Skelton has an interesting op-ed in the LA Times today, in which he says that Governor Schwarzenegger had to be shaken to his fiscal senses by Republican State Senator Tom McClintock. McClintock pointed out that state spending and budget deficits are growing at a faster rate under Schwartzenegger than in former Governor Davis's term. He writes that the governor, hearing that pleas that he was going to have to get the $14.5 billion deficit in order, responded "That is bad news that people don't want to hear. People want to hear only good news. I don't want to hear pessimism. I'm an optimist." But since that conversation, obviously Governor Schwarzenegger has decided to take a turn to the right. He had been trying to please everybody, and I guess he's decided that he can't do it. So, we got a demand from the governor for draconian budget cuts, across the board. A law that requires a certain level of increased spending each year in education is to be suspended under his plan. Health care for the poor is going to be cut. School lunch programs are going to be hit. This hurts the governor. I don't think he wants people to get hurt. I don't think he wants me to lose my job, as will probably happen. But he ultimately believes in what George Bush the elder once called 'voodoo economics': that by taxing less, we'll ultimately all be better off. It's the "trickle-down" supply-side theory. And so that's where he'll take his stand, I guess.

The Laffer Curve is ultimately correct, but simplistic. It says that if you tax people too much, less tax money actually flows into the state coffers because people stop producing as much. There comes a point when you have to cut back on taxation. True enough. But I have to believe that Jude Wanninski would argue that you can't just keep cutting taxes either. There comes another point when you've cut too much, and the tax revenues start falling again. I mean, it's obvious really. It shouldn't have to be said. The curve hits a crest and then falls again. But it does have a crest. You have to find the optimal level of taxation. And it seems to me we're not there right now.

It seems to me that enough is enough. If the governor truly had courage, he'd step
up to the plate and say that there are some programs that we must fund properly in order to improve the health of the state. And to do that, we can't keep cutting taxes. In fact, we face a crisis that demands that we raise revenues. We need to keep the State of California prosperous, and the way to do that is to spend just enough. Not too much. Not too little. That's what takes real courage.