State Govt. Will Be Cut 20%

John Seiler:

Steven Greenhut reports on last week’s budget deficit powwow of state budget bigshots, including Jerry Brown, legislative leaders and budget experts. Fortunately, Arnold wasn’t there, or his mere presence would have again doubled the budget deficit. At the confab, everything supposedly was “on the table.”

Steve observes that, in the end, for most of the participants, including Jerry, the obvious solution “on the table” is tax increases.

As I keep pointing out, raising tax rates doesn’t necessarily bring in more tax revenues. The state’s economy already has been so battered by big government and high taxes that any tax increase will be greeted with a further exodus of businesses, jobs and the tax base — thus making things even worse.

The conclusion is inexorable: Spending will be cut. How much? The answer there is less exact, but around the world, 20 percent seems to be the number for governments with California-magnitude tax gaps:

* In Russia, bureaucrats were cut 20 percent.

* Ireland is cutting spending by 20 percent.

* Britain is cutting spending by 20 percent.

* Communist Cuba, model for many California politicians, is cutting its government work force 20 percent.

* Outgoing S.F. Mayor Newsom, just elected lieutenant governor, is calling for 20 percent cuts in city budgets.

The budget Arnold signed in October was for $88 billion. Right now, the latest deficit number pegs it at $28 billion; but $6 billion is for the current fiscal year.

So, assuming the numbers stay the same, for fiscal year 2011-12, the deficit would be $22 billion out of an $88 billion budget. Pretty easy math on that one: a 25 percent deficit.

Now, a cut of 20 percent would only drop the deficit by $18 billion, still leaving a $4 billion gap. Close enough for government work. Maybe economic growth will bridge that remaining $4 billion gap. Or maybe they’ll find more “gimmicks,” as they’re called in the state capitol.

So that’s what’s going to happen. Because it has to happen. There’s no other choice. Tax increases won’t help. Only cuts will. Cuts of 20 percent.

Dec. 11, 2010