From yesterday’s Wall Street Journal Political Diary…
California’s Budget Hostage Drama ended yesterday after state legislators effectively were put under lockdown for six days until they agreed to a package of budget cuts and tax increases.
Governor Arnold Schwarzenegger declared victory after the standoff ended when a moderate Republican senator provided the necessary two-thirds majority to pass the budget in the State Senate. "This is the perfect medicine for our ailing economy, and it will boost public confidence in California, reassure the financial community and allow us to start selling bonds and rebuild our state," the governor declared.
That’s almost precisely what another governor, Republican Pete Wilson, declared in 1991 after he pushed through a massive tax increase to stem a tide of recessionary red ink. The expected revenues didn’t materialize, as the state’s economy sank further into recession.
"The most likely scenario is [for the Wilson experience now to repeat itself] so that in just a couple of months, the tax hike will have contributed to weakening the California economy further, and that will result in depressed tax receipts," predicts Assemblyman Chuck Devore, Republican of Irvine. The tax increases include a one-cent hike in the state’s sales tax and a hike in every income tax bracket by a quarter point, taking the highest bracket to 9.55%. These tax hikes bear an eerie similarity to the tax increases passed back in 1991.
The process, which involved last-minute strong-arming and unseemly back-room deals, left many legislators exasperated. "The words that come to me are blackmail, extortion, skullduggery," Assemblyman Kevin Jeffries, a Riverside Republican, complained just before the vote. "If any integrity is left in this house we should send [the budget bill] back." Instead, his colleagues voted to pass the budget and once again push the state’s structural fiscal problems down the road for another legislature to tackle.
— John Fund