How can California be in financial trouble again?  We just went through this nonsense four years ago and booted Gray Davis out the door.  Now we sit with another pile of red ink amounting to a $14 billion deficit and promising to rise closer to $20 billion or more before it is all said and done.  We never really got out of trouble on the last financial crises.  All we did was approve bonds to finance the last debt, which we pay dearly in installment payments today increasing our annual budget requirements.  We used one credit card to pay off another.  Not the brightest move ever made, but they had no choice.  They spent the money and we have to pay it back.

Back when Democrat Gray Davis was elected and the Democrats took control of the legislature in 1998, their first budget for 1999-2000 was a monster.  They pumped up spending like Arnold pumps up muscles.  The Dems controlled the legislature, meaning they controlled the budget, and they had a Democrat as the governor who never saw a budget increase he didn't like.  With everyone hating Republicans, and Democrats in complete control, why not spend more?  So in 2000-2001, they pumped it up even more with a 22.3% increase in spending over the previous year.  Over two years, they increased spending by over 38%, then sat around scratching their collective attorney-behinds wondering what went wrong.  It doesn't take a legislative analyst to figure out what went wrong.  They spent far more dollars than they had in tax revenue from you and me, and it caught up with them.  The chart below from the California Senate shows what lead to the first fiscal crisis.  By 2002, this state was in big financial trouble.

Fiscal          Budget      Increase
Year            Billions $   Percentage

As a result of the budget debacle, Californians decided they had enough with debt up to their eyeballs, a lot of spending, and electricity shortages like some kind of third-world nation and booted Gray Davis out of office. 

Out of the sunset rode in a hero.  He called himself "The Terminator" and he was going to get California's free-wheeling spending under control.  And that he did for about one year.  The Dems in the legislature were scared to death that voters would blame them for the energy shortages and debt, and subsequently take it out on them in the 2004 elections like they took out Gray Davis.  But, low and behold, as Schwarzenegger battled the legislature, the people fell out of love with the Terminator.  It seemed the press was tiring of fiscal restraint and blamed Schwarzenegger for being hard to deal with.  He was an obstructionist.  He wanted to put old people out in the street, take away health care from children and retirees, and the worst of all things, he wanted to stop making California prison guards the highest paid law enforcement officers in California.  He turned from hero to villian thanks to the likes of the liberal media and the Dems in the legislature.  Instead of getting things under control, the voters of California in poll after poll suggested the terminator was the problem and that he needed to work with the legislature.  Mind you, work with the very people who created the fiscal problem in the first place.  Does that make sense to anyone?  The liberal media did a masterful job of the old switcheroo trick.  Blame the guy fixing the problem, and make the people who caused the problem look like the good guys.

Schwarzenegger learned quickly how to be a politician.  Because, after all, what do you do after you are termed out of office?  You run for another office of course.  And the rumors have been flying for at least 18 months that he wants to be a U.S. Senator.  You don't get there by arguing with the legislature.  Californians love big spenders as long as there isn't a financial crisis.  So the polls said spend, spend and spend more, then we'll like you more.

So, that is exactly what happened, again.

The chart below shows what has happened over the last four years and the new proposed 2006-2007 budget.

Fiscal          Budget      Increase
Year            Billions $   Percentage

Now, I ask the fine people of California: Why in the world would spending increase in 04-05 by over two times the inflation rate, and again in each year after that at least five times the inflation rate?  There is no reason other than a desire on the part of Dems to spend on social programs like they did when they got their buddy and fellow party member Gray Davis booted out of office.  The Dems are feeling their oats.  After all, they have the press and the people on their side.  These are legislators who are fighting to continue their political careers after being termed out of their legislative seats.  They can point to all the programs that they implemented for the poor and old people.  Someone needs to fill all those other elected seats, it might as well be Democrats who spend like crazy.  And, to make matters worse, they have a governor who wants to be in the U.S. Senate and will do anything to stay in good stead with the press and the people of California who like to spend money.  So he signs off on the spending bills and grouses about an ever increasing spending problem.

Schwarzenegger, not being a complete idiot, only half an idiot, said California needs to cut spending in 2006-2007 by 10%.  Spending cuts need to be across the board in all areas.  The Democrats have gone ballistic and said no way.  We will have to cut services, like fire and police.  And old people will be without social services and medical care.  And what of poor children and their health care?  We are taking money away from the most vulnerable of our society they claim.

Now, let's see if that is really true.  The budget increased 11.4% last year, over four times more than the inflation rate, and certainly larger than our rate of growth in population.  And the proposed 12% increase in spending for this coming year is once again about five times larger than the inflation rate.  Now, if we increase spending by 12%, and cut spending by 10%, we have actually increased spending by 2%.  Who is getting screwed in this deal?  What senior citizen will get their benefits cuts?  What child will have their health care benefits cut?  What fire stations will be closed and how many police officers will get fired?  It seems to a simple-minded person that we can offer another 2.3 billion dollars of services in 06-07 if we increase spending by 2% over 05-06.  Is the math wrong?  Why of course not.  Only in Sacramento can we spend $2.3 billion dollars more than last year and call it a cut.

Schwarzenegger wants the cuts in spending, because you see, we don't have enough money to pay for the $131.4 Billion dollar budget in fiscal year 2006-2007.  The Democrats, true to form, say we don't have a spending problem, we have an income problem.  We aren't getting enough tax revenue to support the 33% increase in spending since the 2004-2005 budget.  Golly, it seems all we have to do is increase taxes and the problem is solved according to the leadership in the legislature.  And who exactly will have their taxes increased?  Why you guessed it, those rich people, that's who.

And, who might those wealthy people be who are holding out on the government, you ask?  Why, it's you and me.  Homeowners, and our mortgage deduction are the cause of the deficit.  Huh?  I didn't realize I was classified as wealthy.  My wife would find that rather humorous.  So would my creditors.

From Media News - Sacramento Bureau:

"Elizabeth Hill, a legislative analyst, said in a report that the deduction, which exceeds $5 billion a year, no longer serves its intended purpose of encouraging home ownership. She believes there are more targeted, less costly ways to aid those who need the assistance, without subsidizing wealthy homeowners."

If you own a home, you are now classified as wealthy.  And, wealthy people need to give up more of their money to Sacramento.  Now, Elizabeth Hill is only a legislative analyst, but don't be fooled by her title.  She works for the state, appointed to her position as a bureaucrat to represent the policies of the legislature.  She's been propped up, pushed out into the media by the heads of the legislature to see how us little people with pitchforks will respond to the idea of having mortgage deductions eliminated.  That's because the heads of the legislative bodies never put themselves in a position of ever having to suggest such a thing because they can't afford the political fallout of being on the record.  (How would that look for the next run for office?)   If the people decide they don't like it, the leadership can always say 'the analyst was not speaking for them,' though the analyst is doing exactly what she was told to do by the legislative leadership.  These are men among titans, aren't they?  So what does Senator Don Perata, head of the Senate, and Assemblyman Fabian Nunez, head of the state assembly have to say about this proposal?

From Media News - Sacramento Bureau:

"...Senate leader Don Perata, D-Oakland, and Assembly Speaker Fabian Nunez, D-Los Angeles, said Friday the Legislature will seriously consider Hill's recommendations."