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Dark clouds are back

November 29, 2005

THE NEWS A FEW WEEKS AGO that California's budget was enjoying a revenue surge (even a temporary one) brought a sunny tinge of optimism to the economic conversation. Now the pessimistic clouds are back, like a bore who won't leave the party. Blame congressional budget cuts, a job slowdown and signs of a slower housing market.

The next question: Can California's elected leaders do more about these problems than calculate their political gains and losses?

As The Times' Evan Halper noted last week in an analysis of Senate and House versions of the federal budget, California will suffer more than most from the planned cuts. These include food stamp eligibility cuts for legal immigrants, reduced payments to doctors for care of the poor and reductions in federal child support collection efforts.

The state's high immigrant population and increasing income gaps will magnify its losses. Two stagnant months in the state's job-creation figures (previously fueled in part by home construction and a hot real estate market), combined with the federal cuts, mean that the $4-billion projected increase in revenue next year may vanish.

All of the state's GOP delegation in the House voted for the spending bill. Rep. David Dreier (R-San Dimas) said "the deficit must be cut, reforms must be undertaken, and the Congress will act." Unfortunately, that action won't include any rollback of the high-earner income tax cuts passed in 2001 and 2003, which would be the swiftest way to ease the growing federal deficit.

Democrats won politically in the across-the-board rejection of Gov. Arnold Schwarzenegger's special-election slate earlier this month. During next year's state elections, they will probably be inclined to attack the governor for not living up to his promises to rake in federal funds for California. That would do little more than intensify voters' dim view of lawmakers, reflected in approval ratings even lower than the governor's.

Oregon attacked its budget problems with substantial cuts in school and other spending, including state employee pensions. Illinois modestly raised taxes; its leaders recently approved healthcare for all of the state's children. Colorado voters this year lifted a spending cap that was harming public services.

California's elected leaders have done nothing substantial because they can agree on nothing substantial. The neglect is magnified because localities have so little independent control over their revenues.

Schwarzenegger is belatedly humbled and needs to jettison the advisors who pushed a special election to the exclusion of any compromise. Democratic leaders must choose between taking full political advantage and taking care of California's future.

Yes, 2006 is an election year. But the state cannot tolerate continuous, unbroken electoral politics.

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