Past GOP govs. had guts for budget fixes

Former Gov. Pete Wilson famously -- or infamously, depending on your politics -- raised taxes to help tame a behemoth budget deficit. I asked him recently whether, 17 years later, he had any regrets.

“Sure,” he replied instantly. “I regretted it at the time. I hated it.

“What I hated even worse -- what I thought was even more pernicious than raising taxes -- was deficit spending. I’d just come from eight years of watching the federal government engage in deficit spending. It is the ultimate slippery slope.”

The Republican reminded me of his most celebrated moment as a U.S. senator. It clearly illustrated his repulsion for red ink.

Although he had just undergone an emergency appendectomy, Wilson agreed to leave his Bethesda Naval Hospital bed on a gurney, be driven the long distance to the Capitol in an ambulance and cast a crucial vote from a wheelchair at midnight for a deficit-reduction bill sought by President Reagan.

“I recall lying in the ambulance and feeling every damn chuckhole we hit along the way,” he says. He was wheeled into the Senate chamber “with a big jar of something dripping into me.”

For many years afterward, Senate Majority Leader Bob Dole (R-Kansas) would joke: “We had to bring Pete Wilson in under sedation. He does better under sedation.”

“It got old the first time I heard it,” Wilson says.

It was a gutsy vote to cast. The bill, among other things, denied benefit increases to Social Security recipients and provided only an inflationary bump in Cold War defense spending. Wilson’s vote thrust the bill into a 49-49 tie, allowing Vice President George Bush to cast a rare tie-breaking vote.

Wilson was a hero that night of high drama in 1985. Six years later in California, he was hanged in effigy at a GOP state convention after temporarily raising taxes by $7 billion to help fill a record $14.3-billion budget hole. He and the Democratic-controlled Legislature also cut spending, borrowed and used accounting tricks to mop up the remaining red ink.

“The predictable outcome was that it worsened the business climate,” Wilson concedes of the tax hike. “But deficit spending is even worse.” Besides, he notes, unbalanced budgets are supposed to violate the state Constitution. Nobody seems to pay much attention to that anymore.

All that said, the former governor insists that his 1991 budget solution should not be regarded as the model fix for the current conundrum, which is much less severe by scale than what he faced. Gov. Arnold Schwarzenegger and the Legislature are confronted by an $8-billion deficit that they recently reduced from $16 billion with -- what else? -- cuts, borrowing and tricks.

Wilson says Schwarzenegger and the lawmakers should start by examining the spending of surplus tax revenue during the high-flying times of 1998 to 2001. “See where they spent all that money and begin to seriously think about cutting.”

That big spending era began during Wilson’s last year as governor, 1998, and escalated through Democrat Gray Davis’ first two years.

During one year alone, 2000, tax revenue rose $12 billion above projections. Little was salted away. Sacramento spent at will -- Democrats on program growth, Republicans on tax cuts.

Where’d the money go? Name it: Class size reduction. Car tax cuts. A tripling of the dependent income tax credit. Major boosts in per-pupil spending. Buying a redwood forest. Nice paydays for state employees. Boosting teachers’ retirement. Senior tax credits. Child-care credits. Expanded Medi-Cal and Healthy Families programs for the poor. More nursing home staffing. Many business tax breaks, including higher credits for R&D; and manufacturers’ investment.

Schwarzenegger and Democratic lawmakers agree that tax loopholes should be closed. They’re a long way from agreeing on which ones. Republicans apparently don’t want to close any.

“Everything ought to be on the table,” says Sen. Jenny Oropeza (D-Long Beach), whose Revenue and Taxation Committee recently held a long hearing on loopholes. She says even the dependent child credit should be reconsidered.

“We don’t have a lot of smoke and mirrors left.” Postponing payments, accelerating revenue accounting -- “those tactics already have been used. We’re in a different place than we have been.”

But it’s a familiar problem in a state with roller-coaster tax revenue.

Republican Gov. George Deukmejian stared into a budget hole similar to Schwarzenegger’s when he took office in 1983. His compromise with the Democratic-led Legislature was to freeze spending, close loopholes, roll half the deficit into the next year with legal gymnastics and adopt a provisional sales tax hike. The tax would be triggered if the economy didn’t rebound. It did and the trigger never was pulled.

“It was a helluva plan,” says Deukmejian’s then-chief of staff, Steve Merksamer, who runs a Capitol legal-lobbying firm and is close to the Schwarzenegger administration. “Personally, I think the governor should consider something like that.”

Nobody can foresee a political endgame or a negotiating sweet spot. But everybody could find it useful to review history -- the budget books from nearly a decade ago and the courage of previous Republican governors.

Wilson regrets having been compelled to raise taxes. But under the same circumstances, he’d do it again.

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george.skelton@latimes.com