I told you so

Sept. 5, 2012

By John Seiler

I’ve been warning about California’s looming fiscal disaster for more than a decade now. While researching another article, I dug out some quotes from articles I wrote for the Orange County Regisgter, where I wrote editorials from 1987 to 2006, and for which I still freelance.

If you remember, back in the late 1990s America, and especially California, enjoyed the dot-com boom. People were talking about a New Economy that didn’t suffer recessions. In his last two years in office, 1997 and 1998, Gov. Pete Wilson enjoyed surging revenues, which he splurge on by signing budgets that increased spending 8 percent each year.

Then Gray Davis became governor in 1999. His first two budgets enjoyed even greater revenue growth as the dot-com boom kept zooming. And he spent all of it, increasing spending an incredible 15 percent in each of those first two years.

Davis also signed the pension-spiking bills. Pension “experts,” giddy with the skyrocketing stock market, promised pension returns would keep going up and up and up. Recessions had been banned!

I didn’t buy it. In a Register editorial, I warned at the time, “The business cycle has not been repealed. Unless California makes its tax rates more friendly to businesses and citizens, the next recession again could hit like an 8-point Richter earthquake.” That was on January 26, 1998, when Wilson was in charge.

June 14, 1998: “The business cycle has not been repealed.”

Aug. 2, 1998: “In fact, the business cycle has not been repealed…. If California doesn’t get its economic house in order, assuring strong growth through tax cuts that help stimulate the private sector, the next recession could hit as hard as the last.”

Feb. 18, 2001, under Gov. Gray Davis: “We’ve long been warning that the business cycle has not been repealed.”

Of course, the dot-com boom turned into the dot-com bust. In 2003, Gray Davis was recalled in part for his profligacy. The recall election catapulted Arnold Schwarzenegger into the governor’s throne on his promises to “terminate” the “crazy deficit spending.” He was so-so his first two years in office. Then on spending he became the Governor Gone Wild. Spending rose 15 percent in 2005, then 11 percent in 2006. Arnold said, “Jawohl! Hasta la vista recession! Real estate boom ist für immer und ewig! Ach du lieber!”

On Nov. 28, 2006, in a Register editorial, I quoted Esmael Adibi, the director of the Center for Economic Research at Chapman University, who warned, “But the business cycle has not been repealed.”

The spending continued until everything crashed again and the state has suffered deficits ever since. Having “terminated” not California’s problems, but California itself, Arnold left office in disgrace and divorce.

I told you so.