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Third World-style Fiscal Austerity is End Game of California’s 2010 Budget Deal

Created: 15 October, 2010
Updated: 13 September, 2023
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3 min read

   Arnold Schwarzenegger’s decision to slash an additional $1 billion from social programs like child care and CalWORKS after a record-long budget stalemate of 100 days is another example of the fiscal austerity measures that are turning California into a Third World country.

   In a statement explaining his recent line-item vetoes, Schwarzenegger said that he was trying to “build a prudent reserve” or rainy day fund.

   The purpose of a rainy day fund is to provide cash in lean times or in an emergency.

   With unemployment at 12% in California and record rates of poverty nationally, it would seem obvious that now is the time to tap that rainy day fund.

   Instead, what Schwarzenegger has done is to siphon off money from the programs and institutions designed to protect us in the worst of times in order to save money for that rainy day fund.

   This disturbing development is a preview of what Californians can come to expect, if Schwarzenegger gets his way, and voters are duped into backing yet another of his stale proposals for restricting state revenues on the ballot next year.

   Should this happen, the end result would be a steady evisceration of the state’s network of social structures, something that Schwarzenegger has been trying to accomplish over the years by using his line-item veto on funding for child care, special education, and public health programs.

   Instead of trying to resurrect an idea that voters soundly rejected in 2009, Schwarzenegger and the legislature should be concentrating on getting big business to pay its fair share by eliminating the billions of dollars of subsidies the state is handing out to multinational corporations.

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   A recent article by the San Francisco Chronicle’s Washington correspondent Carolyn Lochhead found that Sacramento could produce an annual budget surplus by simply closing loopholes in California’s tax code.

   Instead, the Democratic majority has been capitulating to Republican demands to reduce taxes for multinational corporations and big business in exchange for obtaining political agreement on budgets that are transforming California into a Third World country.

   As part of the 2010 budget deal, $200 million worth of subsidies were granted to cable TV companies and the timber industry, while corporations evading their income tax obligations were rewarded with reduced penalties.

   In 2009, the California Budget Project (CBP) reported that Democratic leaders agreed to permanently reduce the income taxes of multinational corporations operating in California, a move that is costing taxpayers almost $3 billion in revenues over the next five years.

   Although $1.2 billion of these corporate tax breaks will be delayed as part of this year’s budget deal, the smartest thing to do would be to permanently repeal those tax giveaways.

   This is because similar measures enacted since 1993 to win over Republicans intent on obstructing passage of previous state budgets have already cost California taxpayers at least $12 billion.

   And this has been going on for 30 years.

   Fortunately, voters this November will have the power to reform California’s dysfunctional budget process.

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   They can pass Proposition 24 to repeal the $1.2 billion worth of corporate tax giveaways, and they can pass Proposition 25 to change the requirement for passing a state budget from two-thirds to a simple majority.

   These common sense reforms will go a long way toward helping California escape from the Third World mediocrity to which it has descended.

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