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Budget Baloney

The shrill attacks on government spending -- "it's always wasteful! it *never* invests!" -- have already begun. The anti-tax crowd has begun its triumphal victory dance, spinning the defeat of proposition 1A's rather modest extension of taxes as an endorsement of their prejudices. But this is one voter who turned down the convoluted logic of California's recent propositions because they did not raise taxes enough, and because they threatened to limit government services in the face of a severe recession.


What the anti-tax crowd ignores with their YOYO (you're on your own) talk is the simple logic that collective action is often cheaper and more effective than privatizing everything. U.S. private health plans cost nearly double what a single-payer system would, and provide worse outcomes. The World Health Organization ranks the U.S. 37th in healthcare outcomes despite its gold-plated expense.

On the plus side, we don't have to share our good health with the undeserving. The Dixiecrats defeated Harry Truman's single payer health care proposal largely because they feared it would racially integrate hospitals.

Incidentally, the philosophy opposing YOYO is this: We're all in it together.

So California faces a serious budget problem, not because there's not enough money in the state, but because prying it out of the hands of the economic elite that now has most of it is politically difficult. As one wag observed, we have the finest politicians money can buy.

The common denominator of most attacks on government investment is that they're disingenuous. Critics say that government spending is "out of control," citing figures that conveniently omit any adjustment for inflation or population growth. Taking those into account, spending has changed insignificantly in the past decades, while taxes have been declining. According to the California Budget Project's 1996 study, "total California state and local taxes per $1,000 of personal income declined 26.5% between 1976-77 and 1991-92. The national average declined 9.7% during the same period. In other words, California’s state and local tax burden has dropped two and a half times more than the national average."

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And why is California government unable to get revenue? Basically, special favors and the fine print in things like Proposition 13 exempt our wealthy citizens from paying for public services shared by all of us. Champion stock investor Warren Buffet observes that tax rates on his investment income are lower than his secretary's.

One culprit, Proposition 13, was marketed as a way Grandma could keep her house despite how inflation hit 1978 home prices. However the tax limitations in the proposition included commercial properties, not just Grandma's house, and commercial property owners disguise the re-assessment-triggering sale of these properties by selling the entities that own them. So why isn't taxing commercial properties on the ballot?

Worst of all are those who claim the wealthy are already paying their fair share. "There's class warfare, all right," [says Warren Buffet] "but it’s my class, the rich class, that's making war, and we’re winning."

Now we are at the end of a new gilded age, after the bubble-enriched elite have run amok, and ordinary people are left to try to pick up the pieces. The solution is actually simple: stop the special favors, and tax even things that are really lost revenue opportunities. People need to understand that, in spite of its all-too-frequent flaws (true of any human enterprise, public or private), government most often invests.

Finally, what we need, in particular, are Republicans in the mold of Ronald Reagan and Pete Wilson -- both of whom signed historic tax increases to deal with budget shortfalls.

Adam Eran