Posts Tagged ‘gas tax’

Campbell’s Egghead Budget Talk Wows Cato

Thursday, June 4th, 2009

campbellprofessorTom Campbell became the first politician in history Wednesday to have staff members hand out nine pages of photocopied economic charts to his audience before delivering a speech.

“If you would turn with me to page three,” the Republican wannabe governor began, speaking to a group of about 60 members and fans of the libertarian Cato Institute meeting in Santa Barbara.

Campbell, with both a PhD in economics and a law degree, who was no doubt the goody-goody in the front row who always had his hand up, led his listeners through a 30-minute seminar on the state budget crisis, monetary policy and the coming wave of inflation. His rather rudimentary visual aid handouts included five fever charts, three bar graphs and two tables, plus a full-page explanation of Milton Friedman’s money supply equation (MV=PQ).*

You gotta’ hand it to him, the guy knows his audience.

Over broiled chicken, rice, chardonnay and a light chocolate mousse with some kind of rolled cookie the size of a fireplace poker stuck in it, the Catoites listened raptly to Campbell’s pitch. When an institute official noted in his introduction that the conservative economist Friedman had been Campbell’s faculty adviser at the University of Chicago, they ooohed and ahhhed in the same way Calbuzz might if, oh say, Miss Universe strolled into world headquarters. When he’d finished his speech, they loudly applauded when he answered “Yes” to a question of whether he is running for governor.

“Right now, it’s all about name ID,” the candidate told Calbuzz in a pre-lunch chat, “and unlike my opponents, I don’t have the money to buy it.”

As a political matter, we asked Campbell, Arnold’s former state finance director, what he foresaw as the likely outcome of the festering budget mess in Sacramento. He ticked off three scenarios:

1-Obama and the federal government get involved in providing loan guarantees so California can go into the market and get Revenue Anticipation Warrants to pay its bills. He thinks this is unlikely politically, because it would cause too much resentment among other states, adding that if Obama does act, he worries the president will attach a bunch of strings to protect the unions as his top priority.

2-The Legislature throws up its hands, repeals its earlier approval of a two-year budget, and passes a new budget with $25+ billion in phony “anticipated revenues” or some such gimmick. Because it would be a new budget, Arnold would regain the power of the line item veto to cut any spending he wanted and the political onus for the pain would all be on him. “The constitution does not require the Legislature to pass a balanced budget; it requires the legislature to say they passed a balanced budget,” he said, dryly.

3-Dysfunctional partisan “stalemate” returns, the Legislature is unable to pass a budget, and the state starts missing payments on its bills sometime in July. At that point, he believes, some unpaid vendor or vendors would file a class action suit and the state would find itself in court being ordered by some federal judge (Article 1, Section 10 of the U.S. Constitution prohibits states from defaulting, Campbell helpfully pointed out) to sell off assets and take other actions to pay the bills. The candidate said he sees this as “the most likely outcome.”

When Campbell talks about the budget, compared to the rest of the cock-and-bull-peddling gubernatorial pack, he ends up looking like the guy Diogenes spent his life searching for. To his credit, Campbell even told the tax-hating Cato crowd that a big part of his short-term solution for the budget mess would be temporary 36 cent-a-gallon increase in the gas tax.

“I want to be candid,” he told them, “even if it loses me some voters.”

*Weed whacker footnote: In the money supply equation – MV=PQ:
M= money supply
V= velocity of money (i.e. how often money changes hands in a year).
P= price level

Campbell figures that within the last year, the federal government has increased the nation’s money supply – through stimulus, TARP, tax rebates, mortgage bailouts, assistance to Freddie, Fannie, etc – by $2.8 trillion dollars, or about 34%. When the economy recovers, and the velocity exchange returns to normal, he estimates the practical impact of that will be an increase in inflation of at least 13 percent in the first year. Go figure.

Campbell’s Budget Term Paper Challenges Whitman, Poizner Rhetoric

Sunday, May 17th, 2009

campbellStaking a claim as the candidate of substance and specificity, wannabe Republican governor Tom Campbell Sunday night released a 3,131 word proposal detailing how he would deal with the state’s budget mess.

The moderate Campbell faces an uphill fight against party rivals Meg Whitman and Steve Poizner, two candidates who are expected to be far better funded and who are competing with each other to run to the political right to pander, er, um, woo the very conservative GOP primary electorate. His calculation in setting out an extremely specific budget plan, always a problematic campaign play that can trap a candidate in his own numbers, is that it positions him to challenge and scoff at the tough talk of Whitman and Poizner as empty rhetoric that does not stack up to his straight-talking, real world proposals.

“I challenge anyone who wishes to lead our state out of this crisis to offer at least as much detail as I have,” Campbell said in the statement posted on his web site. “This is not a time for vague generalities, or declaring anything off limits.”

Although similar in many ways to Governor Schwarzenegger’s most recent proposals, Campbell’s term paper is notable in:

  • Calling for a 15 percent salary giveback from state employees, for a savings of nearly $3 billion; if public employee unions do not agree with the reduction, he said he would furlough as many state workers as necessary to get the same result.
  • Raising the gas tax by 32 cents a gallon for one year, in the event Propositions 1C-1E do not pass on Tuesday, deepening a $15 billion deficit to $21 billion, in order to avoid deeper cuts in K-14 schools and community college districts.
  • Rejecting the governor’s proposals to sell off state properties, “borrow” $2 billion from local governments and accelerate tax payments, all of which he described as one-time gimmicks that will not address California’s structural deficit.

Campbell is scheduled to debate the special election budget props with Insurance Commission Poizner in Sacramento Monday. Whitman declined to join the debate, presumably to have drinks with Fred Barnes.

Split Personality of Californians Fuels Dysfunctional Government

Tuesday, May 12th, 2009

split-personality Calbuzz has spared neither effort nor expense to bash the governor and legislative leaders for the shameful spectacle of the May 19th ballot measures.

But we’d be remiss if we didn’t also call out our fellow voters, who exhibit a maddening syndrome of self-canceling impulses about how to pay for their government.

A recent Field Poll on the subject, which passed with little media notice amid widespread reports about the life-support status of the five budget props, brings some quantitative rigor to the diagnosis of this heart-breaking disorder, which afflicts Californians of every political persuasion.

For starters, two-thirds of the voters – including 83% of Republicans, 65% of independents and 57% of Democrats – agree we should balance the state’s budget mostly through spending cuts. Fair enough, but where to cut?

Not anywhere that would affect most of those calling for cuts – or take a serious whack at spending by state government.

Majorities of voters oppose cuts in public schools, health care and higher education – three huge chunks of spending which collectively represent nearly three-fourths of the budget.

Oh yeah, they also oppose cutting law enforcement, child care, mental health, water storage, environmental regulation, public transportation or state roads and highways.

The only items majorities of voters favor cutting are prisons and state parks, which make up about 12% of the total budget.

On the revenue side, six in 10 voters say they are not willing to pay higher taxes, meaning income, general sales, vehicle license or property taxes should be off limits, according to most citizens.

They also don’t support higher business property taxes, 37%; increased gasoline taxes, 27%, or expanded sales taxes for entertainment, legal, medical or professional services, 25%.

But voters are willing to raise taxes on things they perceive as not necessarily affecting them personally: sale of pornography, 80%; income taxes for millionaires, 78%; tobacco taxes, 75%; alcohol taxes, 74%; legalizing and taxing recreational marijuana, 56%; oil severance taxes, 54%; and out-of-state Internet sales, 51%.

quentin-tarantino-gun-to-head1What do policymakers see when they look at such data? Voters, pointing a gun to their own heads, screaming “Stop, before I shoot!”

Having been in and around state government for decades, we get that there’s some of the famous waste, fraud and abuse that can be trimmed out of the state budget. Sure, there are some efficiencies to be implemented. But this stuff is nibbling at the margins.

As a practical matter, the Capitol will remain in near-permanent budget deadlock, as long as a) California remains one of only three states to require a two-thirds vote in the Legislature to approve the state budget and b) legislative districts are drawn to protect incumbents and partisan interests.

There is some evidence that voters might consider relaxing the two-thirds vote rule.

For the first time, the Public Policy Institute of California reported in January that a majority of Californians – 53% – favored relaxing the two-thirds budget rule. However, two months later, after the February budget deal that produced the May 19 election props, support had dropped back to historic levels, with only 43% favoring the idea.

Look for the two-thirds issue to become an issue in next year’s governor’s race: two initiatives to reduce the 67% rule to 55% have been cleared for circulation by the Secretary of State, and new state Democratic Party chairman John Burton has said passage of such a measure will be a priority.

The 2010 candidates for governor need to know that as long as California remains in the august company of Rhode Island and Arkansas in requiring a supermajority to pass the budget, no governor will have the power to fashion a spending plan that makes sense.

P.S.: Netroots progressives, who also want to relax the two-thirds vote for passing new taxes, will find the political territory far more rugged: According to the Field Poll, seven in 10 voters — including 84% of Republicans, 72% of independents and 58% of Democrats – say they like the requirement for a two-thirds vote of the Legislature to enact new taxes.