The empire strikes back

OC Register

The empire strikes back

Any great work is going to generate great opposition. After Gov. Arnold Schwarzenegger gave his State of the State address on Wednesday, the forces against him quickly shaped up to do battle against his substantive proposals to solve the state's gnawing financial and other problems.

Indeed, even a day before the speech, state Treasurer Phil Angelides, a likely Democratic rival should the governor seek re-election in 2006, blasted a shot across his bow. In a press release, Mr. Angelides said that "the governor's path has led directly to $26 billion in credit-card debt and a looming $8 billion deficit that now threatens devastating cuts to critical services and investments in our people and our communities."

OK, but what should the state do about it? Mr. Angelides didn't say so in this announcement, but in the past he has proposed tax increases to solve the budget shortfall.

Tax increase upon tax increase is not the way to go (California voters just approved raising the top income tax rate to 10.3 percent on millionaires). New taxes are an endorsement of the status quo and only a further step down the path of higher spending. Such an approach ducks the need for the hard work of enacting the changes that studies and commissions recommend making to move the state forward. Moreover, tax increases would harm economic growth and likely drive businesses from the state.

While last year's borrowing was not the best idea in the world - we opposed the bond - the deed is done and the only real solution left is what the governor is proposing: Cut spending. Details of the scope of those cuts will come out Monday, when he releases his fiscal 2005-06 budget.

Others criticized the special session. "I resent the showmanship of the special session," Sen. Carole Migden, D-San Francisco, told the Oakland Tribune. "I don't understand these diversionary tactics and gimmicks." The special session began yesterday and is to deal with the state budget problems.

But special sessions are for special problems. And there's no greater problem than an annual structural deficit of up to $9 billion.

As to the governor's proposal to move state and local government workers' pensions to a defined-contribution program, Senate President Don Perata, D-Oakland, compared it to President Bush's plan to privatize Social Security. If it's like the Bush reform, Sen. Perata told the Oakland Tribune, "I don't think it's a good idea. It's flat-out a bad idea, an ill-conceived idea. I don't think Bush's idea is going anywhere. This one won't either if that's what they want."

Mr. Perata is giving us a glimpse of the scare tactics to be used in days ahead, making defined-contribution plans sound like a shaky, private-sector investment scheme. But CalPERS itself, the public employee retirement investment fund, invests in the stock market, just as 401(k) plans do in the private sector, and its investments generally are conservative. It's a long cup of coffee to discuss the whole picture, but 401(k)s are not from Mars.

These first observations from the opposition show how high the wall is the governor will have to climb over to enact some or all of his reforms. We can only urge him, again, never to let up.