Yesterday's election

As I was awaiting the inevitable results of yesterday's election I was taken back to 1978 and the passage of Proposition 13, which some observers suggest was the start of the downhill road of California. Back then housing prices were escalating quickly, we were a growing state then. And the effects of the late 1970's round of inflation was ripping through the country. Inventive county assessors were just discovering the real possibilities of computers in aiding them in their jobs of keeping assessment roles up to date. Property taxes were rising even faster than inflation - we began to understand the tangible meaning of tax elasticity, painfully.

The political leaders at the time warned that a $6 billion reduction in taxes would have consequences. There is a branch of Public Choice Economics which suggests that bureaucracies will cut services first, while entrepreneurial firms will cut them last - that based on the differing incentives that each type of organization faces. Public officials suggested that with the cut in property unemployment would increase (it actually dropped) and all sorts of vital services would be slashed and burned. Actually, public employment over the near term increased - exactly as the public choice models suggested it would. Services were cut but staff increased.

Prop 13 was caused in part because of the then Governor (and now future candidate for Governor) Jerry Brown. He was terrified of running a deficit(because he thought his father's defeat by Reagan in 1966 had been caused by Pat's deficit) and so hoarded revenues to the tune of about $6 billion. In the end local governments were partially compensated for their tax loss from the reduction in property taxes (by using the surplus) and the state extracted a significant new level of control over local agencies.

At the end of the campaign for the five initiatives that failed yesterday - public officials were again making the claim that all sorts of drastic reductions would take place if the tax increases and shifts were not adopted. I think the voters were immune from the claims. A lot of them had two responses. First, they said "You've said this before, it did not happen then and we don't believe you now." Second, they said "We hired you to make intelligent decisions - so do what we hired you to do." Budgets are about choices. If the leadership in Sacramento makes broad brush across the board reductions on programs - voters (who hold the Legislature and the Governor in very low esteem) will be even grumpier than they are today.