- The Washington Times - Tuesday, May 28, 2002

California Gov. Gray Davis, once the golden boy of Democratic politicians, is running for re-election while the state he has been "governing" for three and a half years faces a projected budget deficit of $23.6 billion. How big is that? Well, it represents 30 percent of the state's general budget and is significantly higher than the entire budgets of many states.

Mr. Davis has indisputably led his state to the fiscal abyss. If the man had a single responsible fiber in his body, he would resign from office. Instead, with his campaign coffers flush with nearly $30 million and with the use of smoke and mirrors, Mr. Davis hopes to bluff his way to victory over insurgent Republican challenger William Simon Jr. in November, long before voters feel most of the pain of the suicidal fiscal policy Mr. Davis and the Democratic-controlled legislature have been pursuing.

Indicative of the utter irresponsibility with which he has conducted California's fiscal affairs, the recently announced $23.6 billion projected deficit for fiscal 2002-03, which begins July 1, represented a doubling of the estimate the governor made as recently as January. Audaciously, the governor declared this week, "The problem is not spending. The problem is lack of revenue." In particular, Mr. Davis blames "the decline in the performance of the stock market," which he cites as "the heart of the problem." This self-serving, blame-shifting gambit does not even begin to describe the real cause of the fiscal disaster over which the governor and his Democratic colleagues have presided.

The root cause is over-spending; to be fair, it began during the last four years of the administration of Mr. Davis's predecessor, Republican Gov. Pete Wilson. But the problem of over-spending just got much worse during Mr. Davis's first two years. California's general budget nearly doubled between 1994-95 and 2000-01, rising from $42 billion to $78 billion. That nearly 90 percent increase occurred while cumulative inflation was less than 17 percent. During the first four years of that six-year period, state spending increased by about 8 percent a year, while inflation averaged less than 2.5 percent. That was bad enough, but during Mr. Davis's first two years, spending accelerated dramatically, as the income-tax windfalls from Silicon Valley-generated capital gains and stock options exploded. In 1999-2000, Mr. Davis's first year, spending soared by more than 15 percent. During the second year, it jumped by more than 17 percent. Thus, over the two-year period, the general budget increased from $57.8 billion to $78 billion, reflecting a rise of more than 30 percent, while consumer prices increased by less than 6 percent.

By any measure, that is an astounding increase in spending. Recklessly and irresponsibly, Mr. Davis funded the spending binge on the assumption that the stock-generated windfalls would continue forever. Although Mr. Davis is claiming surprise today, the truth is that he and his budget officials had to know that tax revenues from capital gains and stock options would plummet after the tech-driven NASDAQ bubble burst in March 2000, more than two years ago. But Mr. Davis and the legislature refused to act. Now, California is a fiscal disaster and is in dire need of new leadership. Bill Simon Jr. would provide the fiscal responsibility that his state desperately needs.


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