"Putting it as simply as I can, California is on the mend. Last year, we were looking at a structural deficit of over $20 billion. It was a real mess. But you rose to the occasion and together we shrunk state government, reduced our borrowing costs and transferred key functions to local government, closer to the people. The result is a problem one fourth as large as the one we confronted last year."
Gov. Jerry Brown's brain is writing checks his budget can't cash.
That became clear during the governor's state of the state speech.
The address was entertaining and thought-provoking, and refreshing in its breadth of topics (high-speed rail, water, education, climate change, energy efficiency, prisons), given Brown's first-year focus on the budget.
But the speech may cause more problems for Brown than it solves -- because the address was built around a fundamental contradiction that the governor has not resolved, in rhetoric or reality.
That contradiction is this: Brown talks constantly, and again in this speech, about the need to cut back, show prudence -- and then urges the building of big, expensive projects with uncertain funding.
In the state of the state, the governor began with a call for frugality, "In a world still reeling from the near collapse of the financial system, it makes no sense to spend more than we have," he said early on, adding, "It is said that the road to hell is paved with good intentions and digging ourselves into a deep financial hole -- to do good -- is a bad idea. In this time of uncertainty, prudence and paying down debt is the best policy."
But within minutes, Brown began advocating for big, expensive new projects.
These include the high-speed rail system, new spending on schools and renewable energy, and a big new plan for preserving the Delta and the San Francisco Bay and ensuring water for 25 million people.
He even chided skeptics of such initiatives, quoting historical criticisms of major endeavors such as the Central Valley Water Project and the Bay Area's BART.
"California is still the Gold Mountain that Chinese immigrants in 1848 came across the Pacific to find," he declared.
From cuts and paying down debt, to Gold Mountain.
In less than 15 minutes of the same speech.
As politics, Brown's message of frugality steps on his message of big projects.
There's a huge tension there, and it has to be resolved. Of course, Brown and his supporters argue that there is no contradiction here, that the state needs to cut back in some areas so it is on stable financial footing to make big investments.
But Brown -- and other American politicians (including President Obama) who have made similar cut-back-and-spend-big arguments -- have failed to show how the cuts can lead to big investments.
In California and other places, budget cuts have led to more budget cuts -- not big investments.
No one seems to know how. And many economists say you can't cut your way to bigger investment -- you need to stop cutting and start spending to spur growth, and produce the revenues for big projects.
If Brown has a clear idea for how to get us from budget cuts to big new spending projects, he didn't explain it in this speech. Instead, the contradiction hangs like a dark cloud over this speech, over California -- and over the country and the world.
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