Maybe Kevin Drum and I Should Start a Recall ARNOLD campaign

There are a few themes that I keep coming back to. One is my frustration with governors such as Rick Perry selling the state’s income producing assets for a lump-sum below the present value of the future cash flows. The other is how the modern Republican Party wants to spend and borrow rather to admit that spending means one has to raise taxes someday. I have this problem with President Bush as well as the current governor of California. I think Kevin Drum shares the same frustration with ARNOLD’s lack of leadership and basic fiscal dishonesty.

And now Kevin brings this to our attention:

Gov. Arnold Schwarzenegger is poised to call for privatizing the state lottery, a move that would bring California a cash infusion of as much as $37 billion to help solve pressing budget problems but also could sacrifice a major revenue source for decades to come. The lottery would be leased to a private company for up to 40 years in exchange for a lump-sum payment or series of payments

Kevin notes:

Once again, Arnold “We Have To Stop This Crazy Deficit Spending” Schwarzenegger is desperately trying to figure out a way to increase our deficit spending so that he can continue to pretend that he hasn’t raised taxes. That’s all this is about. He’s already done this once with his deficit bonds, which will have to be repaid out of increased taxes eventually, and now, in order to make sure that “eventually” is sometime after he leaves office, he wants to raid the lottery to tide himself over. The result, of course, will be lower revenue in the future and therefore higher taxes. But not on his watch. Schwarzenegger may have a sunnier persona than George Bush, but the cynicism on offer here is even worse than Bush’s. Arnold knows perfectly well he’s raising taxes. He’s just hoping the rest of us are greedy enough to allow ourselves to be convinced otherwise.

Kevin is making the assumption that the present value of expected future cash flows from this lottery is greater than this $37 billion. Using the same assumptions as to expected nominal increases in lottery payments and interest rates that I used in my discussion of the Texas lottery giveaway, ARNOLD’s deal is long-run neutral if the initial cash flow is $1.45 billion. If it is higher than that – then Kevin is absolutely correct – this is a bad deal for the California taxpayer. If so, we Californias need to get this big phony out of Sacramento ASAP.