The Party of Fiscal Responsibility

Potential recallee Gray Davis has a plan to deal with California’s $38 billion deficit by raising taxes by $8b and reducing spending by $18b. In contrast, California Republicans want to deal with the revenue shortfall without raising taxes, preferring to instead cut unnecessary services (like kindergarrten!), increase borrowing, and basically pretend the crisis doesn’t exist. This approach has predictable consequences:

Two major credit-rating agencies, alarmed by California’s continuing political and fiscal trauma, said this week that they were considering further lowering the state’s credit rating, already the worst in the nation. Such a move would significantly raise the state’s cost of borrowing and make potential investors wary about purchasing California public debt at a time when it appears that the state will have to turn to the markets to help pay its bills.

A downgrade would mean an additional $400m per year in interest costs for the state and so would presumably by follwed by Republican calls to eliminate first grade.