With California operating in de-facto bankruptcy mode, Schwarzenegger threatens to shut down state government:
Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a “grinding halt” rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks.
State finance officials say California coffers will be empty in late July unless the projected $24-billion budget shortfall is resolved quickly. Schwarzenegger said that emergency borrowing would be too expensive and that his threat to block it was necessary to prod lawmakers into swift action.
A loan would only “give them another reason why we don’t have to do it now,” the governor said. “What we need to do is just to basically cut off all the funding and just let them have a taste of what it is like when the state comes to a shutdown — grinding halt.”
In the Senate, Democrats have sketched a counter-proposal that would drain the state’s reserves and rely on hopes for a rosier economic future to hold off the deepest of the cuts. Their plan would resolve up to $20 billion of the projected $24-billion deficit.
The governor called that approach “hallucinatory” on Tuesday and “irresponsible” on Wednesday. “We have not hit the bottom” of the economic crisis, he told The Times.
Some rank-and-file Democrats are holding out hope of raising taxes to close the deficit. And the state’s largest labor group, the Service Employees International Union, launched a $1-million TV advertising campaign Wednesday to press for more taxes on oil, tobacco and liquor.
Eliseo Medina, SEIU’s national executive vice president, said the governor “ought to be worrying about trying to maintain services instead of trying to kill the messenger.”
I say: Eliseo Medina is the one who ought to be worrying … about having his head examined. California is suffocating from over regulation and over taxation. It is already the highest taxed state in the country. And his recommendation to fix a structural budget problem is more taxes. You can’t make this stuff up …
Schwarzenegger said the financial crisis should be the impetus for a leaner and more functional state government. But he said he had no confidence in the Legislature to change the status quo and hoped a constitutional convention — the radical notion of tossing out California’s oft-amended legal framework to start from scratch — would.
I applaud Schwarzenegger for the unmistakable stance he is taking. Unlike other politicians he is not trying to use the financial crisis as an opportunity and an excuse to expand government powers, he is actually trying to do the exact opposite, to finally dismantle its bureaucracies and shrink its size and scope. This is what will have to happen eventually sooner or later anyway.
What is also interesting is that he is actually one of the few politicians who realize that we have not even come close to a bottom and that there is more pain to come.