I pointed out yesterday that California gubernatorial candidate Meg Whitman’s (R) job creation plan is based on a tax cut that economists don’t believe will create jobs or boost investment. Rather, it would amount to nothing more than a giveaway to California’s wealthy.
But Whitman’s plan to balance the state budget also leaves a lot to be desired. As UC Berkley economic Michael Reich noted, Whitman’s promise to cut $15 billion from the budget “necessarily implies significant reductions in spending on education, health, and social service programs on top of the deep cuts already made in the past two years.” But you won’t hear that from her, if her interview today with the New York Times’ John Harwood is any indication:
HARWOOD: Every single, at the national level, big deficit reduction package…has involved tax increases, revenue, as well as spending cuts. Is the better part of honesty and candor with the voters of California to say that’s what you’re going to have to do as well?
WHITMAN: I don’t believe we are going to have to do that. I am against increasing taxes on Californians.
HARWOOD: You can close a $19 billion budget deficit just by cutting spending?
WHITMAN: And growing the economy.
In the interview, Whitman named four things that she would do to supposedly save $15 billion (which still wouldn’t eliminate California’s $19 billion deficit). Here’s a look at why they amount to little more than hot air:
– Reduce government workforce: Whitman claims this will save $3 billion per year, but fails to mention that she plans to lay off one-quarter of the state workforce. California’s government employment per capita is already 28 percent below the U.S. average, ranking 48th among the states, and has not increased since the early 1980s. Such cuts will obviously depress consumer spending and increase social safety net spending in the state, harming economic recovery.
– Pension reform: Whitman acknowledged that California spends about $3.9 billion on pensions, and obviously they won’t be eliminated entirely, rendering savings far below that. Unless she plans to cut benefits for already retired workers, pension reform will do little to close California’s current budget gap.
– Welfare reform: Whitman doesn’t specify how much money she can save by reforming welfare, but it’s likely not very much. As the California Budget Project noted, “welfare spending dropped $349 million between 1996-97 and 2009-10, without adjusting for inflation. On an inflation-adjusted basis, spending is down by $2.5 billion.” Under the proposed 2011 state budget, welfare accounts for just 3 percent of state spending.
– “Run this government more efficiently and effectively”: The rest of Whitman’s spending cut plan amounts to finding efficiencies in government that everyone else has somehow missed. As Harwood said, “don’t you think, if it were as easy as cutting wasteful and obviously frivolous programs, it would have been done long ago?”
So even if she eliminates California’s public pension system entirely — an obvious impossibility — Whitman comes nowhere close to balancing the budget without raiding important education and health programs. And remember, she is proposing to blow another $4.5 billion hole in the budget by completely eliminating her state’s capital gains tax, almost entirely offsetting the cuts outlined above.