What Would Reagan Do?

On Monday, Governor Schwarzenegger signed a bill to plan celebrations for what would have been Ronald Reagan’s 100th birthday next year, and another bill declaring February 6th as Ronald Reagan day. Nationwide, conservatives have been pining for their “next Reagan” to lead America out of its economic woes and toward a vision of limited government and individual liberty.

It might be worth considering the answer- on a state level- to a question that is oft-repeated by conservatives for more national issues of public policy: What would Reagan do?

Ronald Reagan was after all, the Governor of California before he became “The Great Communicator” of conservative ideas on a national level, as President of the United States. He came in as a Sacramento-outsider during an unpopular war and with a substantial fiscal mess to clean up (though not quite the abject budget crisis California faces today). Are there any lessons to be gleaned from Reagan’s tenure in Sacramento?

Let’s have a look.

Reagan won on a “Tea Party”-style platform as a political outsider and ordinary citizen who had had enough with politics as usual, and planned to make Sacramento more efficient and accountable. After a landslide victory against incumbent governor Edmund G. Brown, Reagan froze government hiring and ordered an across-the-board reduction in state spending by ten percent, a solution echoed by the budget-cutting strategy of today’s Republicans in California.

Before a year had passed, however, Governor Reagan was faced with the harsh fiscal realities of Sacramento, and after restoring funding to several of the state programs, which couldn’t survive the spending cuts, Reagan did something more in line with what today’s Democrats propose: he pressed for a major tax increase.

Democrats in the Legislature crafted a very progressive tax hike (which is to say, one that falls more heavily to higher-income taxpayers). It was the highest tax increase in the history of California or any other U.S. state at the time. Reagan signed it, blaming his predecessor for making the tax increase necessary through two terms of irresponsible government.

California ran a budget surplus in the following years, but instead of taking the opportunity to shore up the state’s finances and put it on the road to lasting fiscal soundness, Reagan then grew government programs to an alarming level. In total, Reagan’s budgets were twice that of his predecessor’s, and he ramped up spending on state programs and projects that his conservative supporters vowed to cut.

Here we are decades later with a budget that continues to grow and a Legislature at its wit’s end to keep up with it. Examining Reagan’s time in Sacramento, we can learn some important lessons about California’s fiscal problems.

Number one, arbitrary and unimaginitive spending cuts can cause a lot of harm without fixing the root inefficiencies of government. Number two, it is possible to get out of a fiscal hole and run budget surpluses, though tax hikes might be necessary in the short-term to accomplish that. Number three, it is also possible (and very easy, even for an avowed conservative) to climb right back into that fiscal hole by allowing state programs and pork to grow.

Now that we know what Reagan would do, let’s advance the discussion by talking about what California’s next governor should do to fix California’s budget deficit.