Davis’ Budget Has Flaws, but Works

Los Angeles Times, February 5, 2002
By Leon E. Panetta

When I served as chairman of the House Budget Committee and was struggling to put together a tough fiscal package to reduce federal deficits, a senior member of Congress pulled me aside. A tough budget, he counseled, was no good if it didn’t pass.

Ultimately, that is the dilemma that faces every president, governor or budget chairman, including Gov. Gray Davis.

The challenge is to fashion a budget that recognizes political realities that must be balanced and yet provides the flexibility for negotiation. In the pragmatic test of moving the governing process toward a final and successful budget, Davis’ proposal is a good start.

Of course, the budget can be criticized from all sides for all kinds of reasons: too political, should have raised taxes to close the budget gap, not enough cutting, too dependent on fund shifts and transfers.

But nobody in the Legislature has labeled it “dead on arrival” because, deep down, they know there are few alternatives.

In an election year in a state in recession, there is little likelihood that the Legislature will have the political will or courage to enact tax increases.

At the same time, with more Californians needing the support of safety net programs, these should be protected. And if there is to be a midyear recovery, as some project, it is important not to retreat from the gains made in education, public safety, the environment and health care coverage.

So where does California turn to deal with a $12.5-billion budget deficit? It turns, as it must, to a combination of proposals included in the governor’s recommended budget: $5.2 billion in reductions; $586 million in funding shifts; $1 billion in federal funding increases in security, health care, child support and immigration; and $5.6 billion in loans, payment deferrals and transfers.

None of this is pretty and yet it provides the principal ingredients of a budget that will pass.

The danger is that if economic recovery is delayed and there is little rebound in state resources, that as Davis’ budget says, “additional measures will be necessary.” That’s budget language that really means: If anyone has any other bright ideas to deal with this mess, let’s hear them.

The steps needed to solve deficits are by their nature contrary to every political instinct. Most members of the Legislature believe that they are elected to spend money, cut taxes and bring home the bacon, not to reduce deficits.

During the late 1980s and early 1990s, when the federal government was running close to $300-billion annual deficits, there wasn’t a member of Congress who didn’t have a simple solution to balancing the budget. Change the Constitution to require a balanced budget. Raise taxes across the board. Cut defense spending. End welfare, reduce domestic spending and cut entitlement programs. Give the president line-item veto power. Few of these were politically acceptable. The result was to borrow and spend. The national debt quadrupled.

In California, which requires a balanced budget to be passed by a two-thirds majority of the Legislature, governing can happen only by negotiation, compromise and consensus.

That is the essence of our democracy. It is also the essence of the budget process.

Is the governor’s approach to reducing the deficit the only way to get the job done? Probably not. But has he presented a pragmatic framework within which the political process has a realistic opportunity of finding the necessary consensus to bridge the budget gap? I believe he has.

© 2002 Los Angeles Times All Rights Reserved.