One of Ronald Reagan’s more whimsical quotes is that “Government is like a baby; an alimentary canal with a big appetite at one end and no sense of responsibility at the other.”
Thankfully, even though he is interred at the beautiful Reagan Library in Simi Valley, he is not around to see the gross fiscal malfeasance of California’s current political leadership.
To the average Californian, it makes no sense that the state went from a nearly $100 billion surplus to a $68billion “deficit” in just 18 months. How could this possibly happen? The answer is that the government’s definition of a “deficit” bears absolutely no relationship to the commonsense understanding of the term.So, let’s put it in the context of a family budget, rather than the large, profligate behemoth that is the state of California.
Let’s assume a typical family with two earners. One makes $80,000 annually and the other $40,000 for a total family income of $120,000. Except for modest contributions to their savings and retirement funds, they pretty much spend most of what they make every year under an austere family budget.
But now assume the spouse who makes $40k annually loses his or her job. Under the common sense understanding of a “deficit,” the family will need to significantly reduce spending by $40k or tap into their savings or, worse, draw down their retirement funds. Until the spouse finds new employment, the family has a $40k deficit in their annual budget.
That is a real world deficit.
But instead of one spouse losing his or her job, the spouse who makes $80,000 gets a raise that doubles their pay to $160,000. Nice, right? Their family income is now a comfortable $200,000 annually.
But rather than live within their new, much higher income, the family goes crazy and buys a Ferrari, goes out to eat at nice restaurants every night, and takes trips to exotic locations. Feeling good about themselves – and bragging about how special they are – they start spending $300,000 annually on $200,000 income.
The question now is, does this couple really have a $100,000 deficit? To the average common-sense Californian, the answer is of course not. They just lacked the discipline to restrain their spending even when the available revenue went way up.
This, in a nutshell, is California’s version of “deficit.”
Stated another way, California’s “deficit” simply means that spending is far outstripping the vast year-over-year increases in tax revenue. This may be one reason why California’s Legislative Analyst often uses the term budget “problem” rather than “deficit” because it moves away from the notion that California doesn’t generate sufficient revenue to pay for an adequate level of public services.
So, how comparable is California to our fictional couple who lost all spending control when their available cash went up? Pretty close. State spending has increased $116,000,000,000 in six years, nearly doubling the state budget.
Of course, California’s progressives, being the spending addicts they are, deny there is a problem. Rather, they repeat the same mantra of higher taxes and, of course, they blame Proposition 13 for “starving” government.This attempt at gaslighting Prop 13 has been rejected by California voters several timesover the last four decades. Moreover, it is hard to blame Prop 13 when California ranks 14th out of 50 states in per capita property tax collections.
As this column noted just last week, other states are pursuing pro-growth, tax-cutting strategies that result in high levels of revenue. Their leaders know what average American families know: healthy budgets require spending discipline.
In other words, don’t be a baby.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
