The California Recall: What’s It All About?

As you have heard, we’re having a recall. Californians will vote October 7th on whether Gray Davis will get to keep his job as Governor.

It’s been my observation so far that many people don’t get the real reason we?re having a recall. Certainly some of the candidates don’t seem to know.

It all started when Gray Davis took office. Republican Governor Pete Wilson left him with a $10 billion surplus. California state revenue was increasing by 23% per year. But Davis began increasing state spending by the rate of 34% per year. You don’t have to be Alfred Lord Keynes (famous but wacky English economist) to know that this can’t go on forever.

So in less than five years, Davis has not only squandered the $10 billion surplus left by Wilson, but ran up a $38 billion deficit, the largest of any state in history. Some people claim he lied about the size of the deficit prior to the election. Prior to the election he was painting the deficit at $20 billion. Then you’ll recall he told us in January that it was projected to be in the $38 billion range.

Well even $20 billion is a huge deficit, and if Republican Bill Simon had just really pounded the message home that Davis overspent the budget by $30 billion during his first term, rather than chasing butterflies like that bit about Davis supposedly illegally accepting campaign money inside the Governor’s mansion, he might have won.

But now it turns out that Davis overspent his budget by almost $50 billion, an unheard of thing for any single state.

Well even at that level, Californians were probably not too happy about it, but that wasn’t what pushed people over the edge. I’ll get to that in a minute.

So then in January, Davis proposed a new state budget, with a few tax increases and lots of "tough" spending cuts. I was actually pretty happy to hear that. He took that to the Democratic-dominated state legislature, and they just told him to forget about those cuts. They would have none of it.

So here is the part that pushed Californians over the edge and brought about the historic recall. Davis came back with a new budget that featured not just a tax increase, but a whole bushel of tax increases – including tripling the car tax, an increase in the state income tax, and an increase in the sales tax. That was just too much.

Consider the typical working Californian. He knows that he already pays some of the highest taxes in the country. Now the Governor wants to implement significant tax increases more or less across the boards. And in a soft economy. Well that just didn’t go over. 1.6 million Californians signed petitions to recall Davis, or as radio talk show host Al Rantel calls him, "Governor Low-Beam."

I think the average Californian instinctively knows that there is a basic law of economics, which is that you can’t spend more than you earn. Every head of every household in the state knows that and has to apply it – otherwise he ends up in bankruptcy court or at least debt consolidation. And if so, he learns that law the hard way.

Large companies and especially governments have certain systems that allow them to bend that rule. But you can only bend it for so long. Then you have to come back down to reality. You can’t spend more than you make. Sooner or later those loans or bonds or whatever have to be paid back. And what the Governor is learning the hard way is that people have a taxation threshold.

It’s funny to me that Davis has stated that Californians now have to make the choice on whether they want to go with a more conservative type of government, or if they want to stay with the more progressive type of government that they’ve had. Even if you favor the "progressive" type of government ("progressive" is a euphemism for ultra-liberal or socialist) that Davis has been running (I don’t), I would think that people would recognize that it’s gone too far. We literally can’t afford all those programs, and the people are not willing to pay that much more for them.

Which brings me to the candidates.

Lieutenant Governor Cruz Bustamante is an ultra-liberal. It’s true that he and Gray Davis are not buds, but if Bustamante is elected, we will see no real change in the policies that brought us to the brink of financial ruin. Bustamante will just keep piloting the train straight ahead until it plunges off the cliff. What the other candidates need to ask him and get him to answer in the public forum, is what he would do financially to actually solve the economic problems of the state. I don’t see that he’s answered that question.

If his answers don’t include making a lot of spending cuts, then you know we’d continue to be in trouble. Another law of economics is that you can’t increase spending during an affluent period, and then keep that spending at the same level during a financial downturn. Kind of like getting a big bonus one year, and buying a new house and three new cars all on time payments. If you don’t get the same bonus the next year, you’re going to be in big trouble.

State Senator Tom McClintock has a lot of great ideas. You’ve heard the phrase "He’s not the sharpest tool in the shed."? Well McClintock IS the sharpest tool in the shed. I heard him speak on the radio and on the debate and his ideas on Workers Compensation, taxation, and getting around the socialist-Democratic state legislature are very sound.

The problem is that in the latest polls, McClintock (18%) is splitting the Republican vote between himself and Arnold Schwarzenegger (25%), thus giving the lead to Bustamante (30%). Make no mistake, if Bustamante wins, the whole recall would have been a completely useless exercise. The state will continue its financial slide. Some analysts say things will get even worse.

Arnold Schwarzenegger scared me initially, with his hiring of Warren Buffet (who has contributed money to Hillary Clinton) as economic advisor. Then Buffet comes out saying we Californians pay too little in property taxes. Since then Arnold seems to have effectively muzzled Warren, and has been establishing his position more and more as a fiscal conservative.