When Fiscal Prudence Requires Imagination : Fiscally responsible Wilson looks to avoid budget collapse

For all the partisan criticism he is getting, Gov. Pete Wilson did not exactly create the recession plaguing California and is not exactly loving every minute of it. Next year he is up for reelection and little would enhance his prospects more than the recession’s timely death. To achieve that he might be willing to do almost any prudent thing, consistent with the principles he deeply holds. The question for this determined man is how wisely to apply those principles in recession.

PRINCIPLES: Among those principles are a commitment to fiscal responsibility, a balanced budget and clamps on spending. Wilson does not believe there’s a government program for every problem but neither does he take the Neanderthal view that every problem will solve itself and that no government is better than smart, focused government. In this sense the governor is a modern Republican with a pragmatic streak--and a resulting tendency to anger the right wing of his party with, say, his support for abortion rights.

Both principle and pragmatism will come in handy as Sacramento moves closer to the June 30 budget deadline. A summer rerun of last year’s horror show looms. Revenues are down and California’s budget will be balanced before July not by some miracle but only by a prudent combination of principle and pragmatism. Sacramento needs to understand that, once again, everyone will have to bear a measure of the pain but that this time the choices are just awful. Do we really want to savage, say, the L.A. Sheriff’s Department budget so much that stations must be closed and deputies laid off in scary numbers? Do we say a simple goodby to libraries and recreation centers? Must whole categories of government services be cut off? Shall the state sacrifice its most prized possession--the still-brilliant system of higher education--on the altar of the yearly balanced budget? Or is there a better, more prudent way?

True leaders do not shrink from extraordinary deeds in a time of crisis--indeed that is what defines leadership. Wilson made a gesture in just such a direction with his recent statement that he was now prepared to entertain new measures. He mentioned specifically the possibility of restructuring the payments on the state’s multibillion-dollar budget deficit, perhaps over a period of years. But far more interesting than this specific was the underlying premise, which is that in times of economic crisis innovation may not merely be a fiscally prudent thing but the only fiscally prudent thing.

PRAGMATICS: Last year this newspaper proposed consideration of a two-year budget cycle not because we support unrestricted spending but because we believe that severe program cuts would cause more economic distress than the state can handle. Laying off deputies, closing libraries, raising student fees--all these not only increase the threat of crime, erode the quality of life and imperil public education, they also contribute to what economists call “demand deficiency.”

What that means is that as payrolls are trimmed, salaries held in check (or sliced) and overtime eliminated, aggregate purchasing power cools. This reduces the demand for goods and services, accelerating the downturn. State government has a huge role in demand creation--for goods, services, food, housing, cars and so on. To reduce that demand drastically in an already severe recession could be suicidal for the state’s economy. So if a prudent, multi-year fiscal plan can be devised--one that is credible and isn’t simply a cover for spending--it deserves to be considered.

The governor now indicates a willingness to review options that in the past he said should not be on the table. It seems to us that this well-known fiscal hard-liner is precisely the right person to have when a longer-range fiscal plan may be needed. It would certainly be irresponsible to axiomatically exclude that option from consideration.