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When California Rejected A Bad Tax Deal

12:00 PM ET, 12/12/2010
Over the last week, President Barack Obama's deal on the tax cuts - where he caves in to right-wing hostage taking and agrees to deficit-exploding tax cuts for the rich in order to get a few more months of unemployment benefits - has gotten a lot of criticism from progressives, who correctly see it as a very bad deal.

Many of those critics are here in California. And that is fitting, because we have faced this situation before - and we made the correct choice, to reject a bad deal designed to promote right-wing goals and instead keep fighting for progressive solutions.

In February 2009, Democratic leaders in Sacramento cut a budget deal with Governor Arnold Schwarzenegger to close a $20 billion deficit. The deal included temporary tax increases that lasted until mid-2011, but also included several ballot initiatives for a May 19, 2009 special election that would extend these taxes and take money from other voter-approved funding streams, including funds for early childhood programs (First 5) and for mental health services, along with "securitizing" the state lottery.

One of the ballot measures, Prop 1A, extended the tax increases for another 2 years - but only at the cost of accepting a spending cap. A spending cap has been a Republican holy grail since 1979, when Paul Gann's Proposition 4 passed, designed to limit the growth of state spending. John Garamendi later put Prop 111 on the June 1990 ballot to eviscerate the Gann limit, and its passage sent the right back to the drawing board to impose a spending cap to achieve the destruction of state government they've always desired.

California voters have twice now rejected a spending cap - Prop 76 went down in flames as part of Arnold's 2005 special election, and Prop 1A failed in May 2009 as well. Progressives understood the danger of the spending cap, and that it would make austerity permanent, further enshrining right-wing ideology in the state constitution.

Here at Calitics, we strongly denounced the deal from day one. But as soon as the campaign for the May 2009 special election proposals got under way, Sacramento Democrats began a full-court press to convince progressives, unhappy with the bad deal, that we had to support it - or else cause widespread suffering.

One Sunday in April 2009, I was on a conference call with then-Speaker Karen Bass and her staff. She was anxious to get me and others to back the initiatives. For two and a half hours we discussed the deal. I understood Bass's point, that if the initiatives failed there would be "ugly" cuts that would hurt people. But I rejected the premise. I pointed out that not only would Democrats still have the ability to drive a better and harder bargain because they had the votes to block Republican budgets - but also that the long-term damage of the deal would cause MUCH more harm than any short-term pain.

Bass and her staff kept returning to the same metaphor that President Obama used in his press conference last week: that Republicans had "taken hostages" and we could not let them shoot the hostages. My response was the same then as it is now: giving in to Republican demands merely encourages them to take more hostages in the future, while the deal itself would cause much more pain indefinitely, given the effects of the spending cap.

At the time, I was working as Public Policy Director for the Courage Campaign, and as always, the Courage Campaign polled our members on the initiatives for our endorsement in our progressive voter guide. We presented Bass's and Darrell Steinberg's arguments alongside a staff recommendation that the initiatives be rejected. Courage members saw both sides, and overwhelmingly voted to reject Prop 1A and the other flawed proposals. A few weeks later, on May 19, Californians as a whole did the same thing; the special election initiatives went down in flames.

And yet the suffering that was predicted never materialized. Sacramento Democrats didn't surrender to Republicans. They kept fighting. Within days, progressives and Sacramento Democrats had put the special election split behind them to unite to fight Arnold Schwarzenegger's austerity - and to lay the groundwork for proposals for the 2010 ballot to advance the progressive cause. Out of that post-May 2009 effort came Prop 25, which finally restored majority rule on the budget.

To be clear, we still have not solved the budget crisis. Progressives have not suddenly fixed California's problems because we rejected the May 2009 proposals. But neither are we permanently hamstrung by a right-wing spending cap. By late 2009 the progressive movement and Sacramento Democrats were working to defeat Meg Whitman and her right-wing fiscal plans. That victory has now paved the way for a June 2011 special election that, we hope, will provide a clear choice for Californians - austerity or stimulus.

What we learned in May 2009 is that it's OK to reject a deal that is rigged to advance Republican goals. We can live to fight another day, the sky will not fall, the world will not end. It is imperative that we do the same and reject the president's foolish deal.

Everything in this deal is designed to advance Republican goals. The huge spike in the deficit is intended to force massive federal budget cuts in 2011. The payroll tax cut is intended to make Social Security's finances look bad and force big cuts to that program. The one-year extension of some unemployment benefits (and not to the 99ers) is intended to set up another hostage crisis whereby Republicans can take advantage of Obama's naive understanding of politics and do this all over again. Progressives are told that if we don't support this deal, people will suffer - but if this deal becomes law, a LOT more people will suffer a great deal more, and over a longer period of time.

Californians are now in the position Winston Churchill was in 1938 - denouncing appeasement as a fool's errand that will only result in greater demands that forestall the inevitable fight. Some might object at the comparison, but it's merely the most familiar example of appeasement; history is full of others. The basic concept is always the same - when a more powerful side is afraid or unwilling to fight, and are willing to make deals with extremists, the extremists will always come back for more and will always demand an even more insane price to avoid the fight. But in the end, you WILL have to fight the extremists, or else surrender to them entirely.

Neville Chamberlain eventually understood this, declaring war on Nazi Germany in September 1939 after Poland was invaded. Had Britain stood firm at Munich a year earlier, or had France been willing to stop German rearmament, perhaps there would have been fighting sooner, but it is also possible that one of the most horrific experiences in human history could have been stopped.

I hope that the stakes are not nearly as apocalyptic today as they were then. But we know how this story is going to end. Barack Obama will eventually have to fight the Republicans. He does not want to; he is an appeaser at heart. But there will come a moment when Republicans demand the equivalent of the surrender of Poland, and Obama may finally realize he has to fight. Either that or he simply yields to the right and lets them do whatever they want.

Let's hope that progressives understand the lessons of history, particularly the May 2009 special election here in California: you don't have to give in to Republican demands. Instead it is better to fight now, since the fight will come eventually, rather than make huge concessions to the right and be in an even worse position when the battle begins.

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About Calitics

Calitics is the leading progressive community blog for California politics. Started in 2005, the blog has been cited in the major media outlets including the Washington Post, the San Francisco Chronicle, and the Sacramento Bee. Calitics has become known throughout political circles for its sharp left-leaning commentary and as the thermometer of California's progressives.
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