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Budget Done to a Golden Brown

California Governor Jerry Brown hopes he can get both parties to agree to the budget by spreading the pain equally.
By Amiel Ungar
First Publish: 1/24/2011, 4:24 PM / Last Update: 1/24/2011, 5:36 PM

One of the advantages of the American federal system is that sometimes states take the lead over processes that eventually go national, as in women's suffrage.  The burning issue today is fiscal solvency and economic recovery. (INN will be covering Barack Obama's State of the Union address and the official Republican reply by House Budget Committee Chairman Paul Ryan Tuesday night Eastern standard Time). The Democrats and Republicans have locked horns over the best way to tackle the out-of-control budget deficit. To a large extent the Democrats see tax increases as providing the solution, while the Republicans propose hefty slashes to government spending. The Golden State of California with its new-old governor Jerry Brown is suggesting a 3rd way -- combining the 2 approaches.

If California were independent, it would be a country larger than Spain in area and population. The state is coping with a massive debt that even Arnold-the Terminator Schwarzenegger could not reduce during his two terms as California's governor. State Treasurer Bill Lockyer has threatened that unless Governor Brown and the state legislature can agree on budget negotiations, the state of California will be required to issue IOUs because it will simply not have the cash. to pay expenses.  Other emergency alternatives include cutting 6 weeks off the school year.

Brown and Lockyer hope that by presenting the legislators with the full impact of a fiscal meltdown, he can get them to concentrate on compromise. For the Republicans it will mean agreeing to a ballot measure to extend temporary tax increases. The Democrats will have to swallow spending reductions in areas such as health and higher education.

This is a major political gamble. First of all, Brown is putting the success of the program in the hands of voters whom he expects to convince to support a tax hike. Liberals believe that budget cuts have already taken a severe toll and would demoralize the Democratic base and its belief in the beneficence of government. Republicans noted that the Brown proposal does not address the issue of unfunded state pensions that they consider one of the main reasons behind the financial hemorrhage.

The financial rating agency Standard & Poor's expressed its approval of any measure that could produce an "improvement in the state's structural misalignment between revenues and expenditures." The agency,however, expressed its doubts that Brown and Lockyer would be able to pull it off, adding: "we also believe the scale of the governmental and fiscal reforms proposed may prove difficult, given the timeline with which lawmakers have to work."

When he was last governor of California 28 years ago, Brown was at one point considered a presidential aspirant. Now at the age of 71 and with the Democratic incumbents in the White House, Brown does not have presidential ambitions. However,  if he does manage to succeed, he will definitely get national attention and possibly be imitated.