Ouch! Why We Need a Budget Deal That Hurts Everyone

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Question: Should the budget deal that state lawmakers make this summer include pension reforms that hurt a key Democratic constituency (public employees and their unions)? Should the deal include tax increases on corporations and high-income earners, a proposal that Republicans oppose? Or should there be a big new rainy day fund and major cuts to health and human services program?

The answer: Yes -- to all of them.

With the state facing persistent budget deficits of nearly $20 billion annually, it's time for a budget that hurts everyone. In fact, if the legislature passes a budget that has any clear winners, it will not have done its job.

Why is pain good? Because too many Californians seem to believe that the state's budget problems are somebody else's fault, and somebody else's problem. In fact, Californians themselves have created this problem, not only by holding to the fundamentally childish view that they can have all the public services they want without paying more in taxes but also because they have enshrined this "something for nothing" philosophy in state law.

Until Californians understand that, our budgets will -- and should -- punish them. It's the only way to build a constituency for the deep systemic reforms needed.

The political trade involved in such a deal is difficult but necessary. Democrats should betray their public employee supporters by ending guaranteed benefit pensions for new employees (and forcing negotiated rollbacks, whenever possible, in existing retiree health obligations). They also need to sign up for a real rainy day fund -- 15 percent of the budget at least -- even if it means bigger cuts to existing programs. It's time, for once, for today's citizens to sacrifice in the name of their children.

In return, Republicans should accept the pension victory and drop their opposition to new taxes -- on oil, gas, and income (with most - but not all -- of the burden born by high-income earners); Democrats also need to force the Republicans to accept, at the very least, the end of the two-thirds vote requirement on the budget.

Is this sort of deal likely? Of course not. In this election, the usual dynamic almost certainly will prevail, with Republicans holding the budget hostage until Democrats meet demands that usually include tax cuts or new spending that adds to the long-term budget deficit (which can then be disguised with questionable borrowing or accounting gimmicks). The only way to break out of that cycle is a deal that punishes everybody.

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