California Budget: A Recipe for Re-Election, Not Recovery

California Gov. Jerry Brown released his new budget proposal on Thursday, and it tells two stories. On the one hand, Gov. Brown wants to spend more than anyone in California's history, using a surplus that is the result of voter-approved tax hikes and such, Wall Street-fueled tax revenues. On the other hand, he is striking a pose of fiscal constraint, setting aside a small amount in the state's Rainy Day Fund for the first time since 2007.

It is a careful balance--and a political one, calculated for a re-election year, splitting the difference between Democrats who want more spending (there is some in the budget, especially for schools) and Republicans who want fiscal reform. Crucially, the budget does not address California's $355 billion in unfunded liabilities and debts. Gov. Brown says that he will produce a new proposal to deal with that "wall of debt" later this year. 

Essentially, the budget makes two contradictory promises to two different groups of voters. To the unions and special interests that run the Democratic Party and hence the state, Gov. Brown hints at future spending after 2014. To the middle-class voters and discouraged Republican constituencies worried about taxes and debt, Gov. Brown has done enough to head off strong opposition, though they know he will not solve the state's problems.

Brown's budget reveals that the state is a long way from the success story that left-wing media have labored to concoct. But it also suggests that he has learned from President Barack Obama's mistakes. Obama came into office in a time of fiscal crisis, and made it worse while promising big future payoffs. Brown began with more modest reforms in the hope that he will have a freer hand in a second term to pursue a more ambitious agenda.

It is a strategy that seems to be winning. Yet Brown still faces a few challenges of his own creation. One is the state's high-speed rail project, which shows no sign of leaving the station and is now opposed by a majority of voters. The other is that there is a growing divide between the coasts and the interior, parts of which are facing severe drought, and parts of which are undergoing rapid social change as the result of immigration, often illegal.

That divide is not just a natural outcome of uneven economic growth, but also the result of a political dynamic that favors public-sector unions and Democrat-aligned interest groups. A backlash has already begun, starting with Colorado-style recall efforts aimed at legislators who helped pass new gun control measures. Brown is a likely winner in November, but California's pressing fiscal and social problems cannot be deferred forever.


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