Announcer:
Good evening, ladies and gentlemen, and welcome to THE ADVOCATES, the PBS Fight
of the Week. Tonight's debate is coming to you from the studios of KTLA in Hollywood,
California.
Semerjian:
Ladies and gentlemen, may I have your attention, please.
Announcer:
Moderator Evan Semerjian has just called tonight's meeting to order.
Semerjian:
Good evening and welcome to THE ADVOCATES. Tonight's debate deals with the size
and effectiveness of government, and specifically our question is this: Should your state adopt
a constitutional amendment to limit state spending? California Republican State Senator John
Harmer says, "Yes."
Harmer:
The growth of state government is out of control. The legislature won't stop it,
so the people must by the adoption of a constitutional amendment that will limit state spending.
With me here tonight to argue for this principle is Governor Ronald Reagan and Dr. Milton
Friedman.
Semerjian:
Howard Miller, Professor of Law at the University of Southern California, says,
"No."
Miller:
This proposal has all the glitter of fool's gold. It restricts state spending to
limit state income taxes paid by the wealthy and shifts cost to local taxes paid by the average
person. With me tonight to oppose this proposal are the Speaker of the California Assembly Bob
Moretti and Former Governor of California, Edmund G. (Pat) Brown.
Semerjian:
Thank you, gentlemen. We'll be back to your cases in a moment, but first let me
welcome our Los Angeles audience and members of the California and national press who are here
covering tonight's debate. It should be explained to those of you in our television audience
outside of California that tonight we'll present the first head-on debate between the major
supporters and opponents of a proposal that's the number one political issue in California at
this moment, and one that may soon be affecting your state. Next week the people of California
will go to the polls to vote on a proposed constitutional amendment that its supporters say
should limit the size of government by limiting the amount of money the government can spend.
While this is a California proposal, it's offered as a model for other states and perhaps the
federal government as well. Proposition one on the ballot here in California is a complex
5,000 word amendment to the state Constitution, but the essential elements of the plan are
these: under the plan a ceiling is placed on total state spending; in any year spending by the
state government cannot exceed a fixed percentage of the total income of the people of the
state. In California, for example, when fully in effect, the limit on spending would be around
seven percent of total income. To raise the percentage spending limit a constitutional
amendment, approved by the people, would be required. In an emergency proclaimed by the Governor
and approved by the legislature there could be a temporary increase, but this would expire
unless ratified by the voters at the next statewide election. The plan does not alter existing
laws covering local sales taxes, nor does it limit property taxes for schools. Let me emphasize
that although this question is on the ballot next week in California, it is of great concern to
people all over the United States. And now to the cases. Senator Harmer, why should your state
adopt a constitutional limit on state spending?
Harmer:
Most of us are accustomed to having politicians tell us why they should spend
more of our money. Tonight Governor Reagan and I are going to tell you why government is
spending too much of your money, and that somehow this must stop. We have a history of this
problem that is almost incredible. In 1930 government was taking from the income of every
American taxpayer some fifteen cents. By 1950 this had increased to some thirty cents. Today
government is taking out of your pocket forty-four cents of every dollar of your income. That
means that you work five months a year for the government before you have a nickel left to spend
for yourself. And if the process continues, it will not be long before government will be taking
more than half of your income. Now out here in California we can't do anything about federal
spending, but we can do something in our state just like you can in yours about local and state
spending. That's why we have developed a constitutional amendment that will limit the rate of
increase of the growth of state government. That way you will have more of your money to spend
at your discretion. This plan doesn't require the cutting of any vital state services. The
principle is very simple: the smaller slice of a bigger pie gives you more money, and because of
the natural increase in the aggregate wealth of the state of California, as the pie grows
bigger, a smaller slice provides yet more money to run the state. Today the state government of
California takes approximately eight and a half cents, or eight and a half percent, of the
income of the people of the state of California for its budget, which is roughly $10 billion. Under this proposal that amount of money that the state can take will be limited to
seven percent, and thus by 1990 the state will still have, with a seven percent slice of the
pie, $27 billion to run the state. We think that tripling the state budget in
sixteen years is more than adequate to provide for vital state services. No one feels more
strongly about this problem tonight than my first witness, the Governor of the state of
California, the honorable Ronald Reagan. Governor Reagan.
Semerjian:
Governor, welcome to THE ADVOCATES.
Harmer:
Governor, you've just heard about the incredible growth of government. Just
what is wrong about big government? Why is it so dangerous?
Reagan:
Well, when government gets too big, freedom is lost. Government is supposed to
be the servant, but when a government can confiscate the earnings of the people with no
restraint or no limit whatsoever on the amount that government takes, then government has become
the master. And government's track record at problem-solving is not all that good. As a matter
of fact, too often a government does not solve the problems, it subsidizes them.
Harmer:
Well, Governor, just how is this proposition going to address itself to solving
the problem?
Reagan:
Well, we think that we're proposing an economic bill of rights for every
working man and woman in California. We will limit the percentage of the people's earnings that
the government can spend, and the limit will be high enough that it will sustain the present
level of government services with the additional money needed to meet the cost of inflation and
population increase and with additional funding for new and expanded government programs. But we
will reduce all of the taxes over a period of years without reducing government services.
Harmer:
Well, Governor, why a constitutional amendment? Can't you and the state
legislature solve this problem?
Reagan:
Well, the record speaks for itself. Apparently the legislature can't. I
have—had I signed the bills that had been passed and sent to my desk in the last seven years,
the billions of dollars in spending bills, the budget of California today would be more than
$3 billion above its present level; and the state sales tax, for example: to fund
that would have to be eleven cents instead of six cents, or the income tax would have to be two
and a half times what it presently is. Now why a constitutional amendment? Because that's what
the Constitution is for. When government has broken beyond the bonds of restraint—when
government is imposing unjustly on the people, then you have a constitutional amendment because
the people take back that power into their own hands.
Harmer:
But, Governor, on that very point we're told that this very constitutional
amendment will emasculate the power of the legislature—that it will keep the legislature from
being able to function effectively.
Reagan:
Not at all. It makes one change and one change only: it places a limit on the
amount of money the government can tax. From there on the legislature is in total control of
manner of spending. In the tax structure the government—or the legislature—can raise taxes,
lower taxes, cancel taxes; it can pass new taxes, it can close loopholes.
Harmer:
How does this proposition, though, deal with such a thing as an emergency
situation? Won't the hands of the legislature be tied?
Reagan:
Not at all. The legislature—there's provision in the measure for the
legislature to have access to an emergency fund, a sizable fund, in that event, either an
economic emergency or a natural disaster, and beyond that the legislature has the power to raise
the taxes above the constitutional limit to meet the emergency.
Semerjian:
One more brief question.
Harmer:
Governor, we are told by the opposition that what we're really talking about is
a shifting of the cost of government to the local taxpayer. Can you assure us that this
proposition will not result in a shift to local government, rather than just a limitation on
spending?
Reagan:
This is not a tax shift. As a matter of fact, it makes it more difficult for
local government to raise taxes; that's why some local government authorities are against it.
This proposal says that if the state tries to mandate services or responsibilities on local
government, the state has to pay for them, which the state has not done in the past. And this
program makes it harder to raise local property taxes by freezing into the Constitution the
provisions of a statute we presently have that limits local government's ability to raise
property taxes.
Semerjian:
All right. Governor. Mr. Miller is eager to ask you some questions. Mr.
Miller?
Miller:
Governor, I'm glad you ended on the note of the tax shift because I think you
left something out. This is the official state ballot that is appearing on the ballot in
California, that is an official state document that describes your tax initiative. It states
that under the initiative there will be "a reduction in projected state program expenditures of
$620 million in the first year to $1.366 million in the fourth year, and increasing thereafter with probable substantial
off-setting cost and tax increases to local government." That is in the official document of the
state of California the only thing that will be in front of the voter when he votes. Assuming
that is true, should he vote "yes" on this proposition?
Reagan:
I'm sorry that he has to look at that in the ballot because that's the
so-called neutral analysis by the legislative analyst, and the legislative analysts figures have
been refuted, repudiated, and proven untrue. Instead of suffering $600 million
loss next year, we already have the figures and are projecting a budget that can be, under the
limitation, $600 million bigger than the present budget.
Miller:
Well, Governor, I don't know if that's a satisfactory answer. There are a large
number of voters in the state who may believe what the state of California tells them on their
ballot. And it is the only thing that faces them in the ballot booth. Now the question is: for
those voters who believe what the state of California has said is the initiative, should those
voters vote "yes"?
Reagan:
I cannot answer your question in that way, Mr. Miller, because the truth of the
matter is that statement is a proven falsehood, and we have protested to the Secretary of State
about its being on the ballot.
Miller:
Have you brought a lawsuit?
Reagan:
Yes, we have brought a lawsuit with regard to advertising, and that's a part of
it.
Miller:
No, you have not, and tell me.
Semerjian:
Well, Mr. Miller, can we get to the merits of the proposal and not bicker over
what the wording of the ballot is?
Miller:
Well, I think the wording of the ballot describes the
merits of the proposal. Let me ask you this. Governor. Let me ask you this question. When you as
Governor of California have a line-item veto, that means you have the power to cross out any
particular item, or reduce it, that is presented to you for expenditure.
Miller:
in the last seven years the budget in the state of California has gone up from
$3.8 billion to about $9 billion. Is there any item over those seven years that you approved
that you should not have approved?
Reagan:
Oh, sometimes there might be some that my own personal taste might have been "no" but I
believe in the right of the legislature, and when overwhelmingly, bi-partisanly, the legislature
passed it, I felt that I should sign it, but I have also blue-pencilled $1 billion out
of the budget that has been added in by the legislature.
Miller:
Now let's be clear about the line-item veto. You have the absolute power. When
you took office, state spending was about 5.5 percent of state income; it is today 8.5 percent
of personal income. You could have achieved this restriction on state spending simply by drawing
a line through expenditures and signing your initials, yet you didn't do so. Why?
Reagan:
Mr. Miller, may I just point out that that would have been impossible.
Reagan:
Because I inherited a budget that was fraudulent, that in order to avoid a tax
increase until after the 1966 election had twelve months spending based on fifteen months
revenue; the government was spending a million dollars a day more than it was taking in.
Miller:
Governor, you have these ads supporting proposition one, "Take the politicians'
hands out of your pockets." Truth of the matter is that you have total control over spending. It
is your hands that have been in the taxpayers' pockets; you have approved every single
expenditure over the last seven years.
Reagan:
Well, Mr. Miller, may I answer you again? I also inherited a government that
had a four billion dollar unfunded liability hanging over every property owner in this state in
the unfunded teachers' retirement program. Should I have line-itemed out the very item I asked
for: hundreds of millions of dollars a year to make that an actuarially sound funded
program?
Miller:
Well, then, is it your testimony. Governor, that 8.5 percent of personal income
is necessary to run the state of California because that's the budget you've approved?
Reagan:
No, because we corrected a run-away welfare situation that was spending four
times as fast as revenues were increasing.
Miller:
No, listen to the question. You approved 8.5 percent...
Reagan:
No, we now have gone from a budget that required an $800 million tax increase the first year we arrived to a situation of asking to give back to the
people an $800 million surplus and to give them an on-going tax cut which we
have secured through our economists.
Semerjian:
One brief question and answer.
Miller:
Governor, may I remind you this is seven years later and you have approved the
budget of 8.5 percent. How could you have functioned as Governor if there had been an amendment
limiting expenditures to 7 percent, when you yourself feel that 8.5 percent was necessary in
your budget?
Reagan:
Ah, wait a minute. If there had been such a limitation before I became
Governor, I wouldn't have inherited a shambles in which the government was spending a million
dollars a day more than it was taking in.
Semerjian:
All right, thank you. Wait a minute. Governor. Mr. Harmer, you have another
question.
Harmer:
Governor, if we take Mr. Miller literally, you must be the absolute dictator of
California, but my question is this:
Miller:
You may take me literally.
Harmer:
Governor, two years ago the same person that wrote that ballot argument predicted
dire consequences for the state of California if you didn't increase our taxes $800
million. You refused to do it and did something else, and what happened?
Reagan:
Well, it was the question of our welfare reforms, and we heard exactly the same
Kinds of arguments from exactly the same people that we're hearing today. We were going to dump
cost on local government; local property taxes were going to go up; county general relief was
going to increase; and the state was going to end the year with a $700 million
deficit. Well, we passed the welfare reforms. It is two years later. There are 368,000 fewer
people on welfare in California, local county relief went down instead of up, 42 counties
reduced their property taxes last year, 45 reduced them this year, and the $700
million deficit became a $265 million surplus.
Semerjian:
All right, thank you very much. Governor. No, that's all we have time for.
Thank you very much, Governor.
Miller:
I think I have one more question.
Semerjian:
What? I'm sorry.
Harmer:
I call for my second witness an internationally renowned economist from the
University of Chicago, Dr. Milton Friedman.
Semerjian:
Dr. Friedman, welcome to THE ADVOCATES.
Harmer:
Dr. Friedman was a member of the task force which helped develop this
proposition. He was a consultant to it. Dr. Friedman, was this task force with which you worked
just another consulting job for you, or was there something special about it?
Friedman:
Very far from being just another job. I believe that the major problem which
faces this country in the 1970s and '80s is how we stop the growth of government, how we prevent
leviathan from growing so big that it destroys our freedom and our ability to run our own lives.
This initiative in California is, to my mind, the only measure taking place anywhere in this
country that offers some real hope of stopping the growth of that gigantic government.
Harmer:
Dr. Friedman, why is it necessary for us to put a limit on government? What is
it about the nature of government that makes it tend to increase in its cost?
Friedman:
There is a fundamental defect in our present democratic structure. That defect
arises from the fact that the legislature—the government—approves individual programs and that
nobody takes a look at the whole. The result of that is that each one of us, when he's a special
interest, yells loud. He goes to Sacramento, he goes to Washington, he spends a lot of time
trying to get his program. That program means a lot to him; maybe it means fifty cents more in
taxes to you, a dollar more to me. No one of us is going to go down and fight hard for that
fifty cents and a dollar. The problem is that if you handle each item of expenditure separately,
the sum of the pieces tends to be larger than we would want to spend if we looked at it as a
whole. The great virtue of this amendment—of this proposal—is that it gives the people for the
first time an opportunity to look at the whole pie and decide how much of their income they want
government to spend.
Harmer:
You're telling us the special interests who look only at their part of the pie
cause this increase. Surely you wouldn't assert that school children or old people are special
interests, would you?
Friedman:
We are all the special interests. The problem isn't vicious, nasty people;
there are such people but they aren't the problem. The problem are you and me. When you speak of
school children, there are school children. We, in our capacity as parents, will act in one way.
We may not like the tax bill when it comes home; we may, as parents, vote for something which as
taxpayers, if we add up what we voted for as parents, what we voted for as automobile drivers,
what we voted for as this, it's too much. And moreover, you know, not all special interests are
equal. Some special interests are more equal than others. The school teachers are a special
interest too, and they have managed over the course of the past few years to drive expenditures
on schools up at a tremendous rate without any kind of a corresponding increase in
quality.
Harmer:
Well, Dr. Friedman, what is this proposition going to do about these special
interests? It's not going to make them disappear.
Friedman:
Oh, of course not. But it's going to force them to work in the public interest
because if you set a limit on the total amount of spending, the special interests will have to
fight against one another rather than against the general public interest. The situation will be
the same in government as it is for each of us separately. You don't decide how much to spend on
A, B, C, and D, then add it up and say, "Well, that's how much income I've got." You start with
a certain amount of money available to spend and then you apportion it out. If you do the same
thing on the state level, if you say the state government shall have a certain sum, then each
special interest will have to demonstrate the virtue of its proposal by contrast with every
other special interest.
Harmer:
Well, Dr. Friedman...
Semerjian:
Thank you. Senator, I'm sorry to interrupt. Mr. Miller, your witness.
Miller:
Dr. Friedman, I share your concern about special interests, and also your joint
statement that there's no such thing as a free lunch. Who are the special interests supporting
this initiative?
Friedman:
There are many special interests on both sides of this initiative.
Friedman:
I took a look at the list of people—list of organizations—who were listed as
opposed to the initiative and in favor of it. The list of organizations opposed to this
initiative consists for the most part of public employees. You had the schoolteachers, you had
the civil servants. Obviously their special interest is to oppose this initiative because their
special interest is to have larger state spending.
Miller:
And who are the relatively few people who have raised over a million dollars to
qualify it for the ballot and advertise it...
Friedman:
And the special interest on the other side, as I looked at the organization,
was the California Association of Taxpayers; the taxpayers are a very special interest. The
important point, Mr. Miller, is that the only way in which we, as taxpayers, can become a
special interest is by lumping together all the programs at once. This is a whole point. It is
in our special...
Miller:
Most of the money came from relatively...
Friedman:
It is in our special interest, as taxpayers, to oppose an increase in the total
amount of taxes that we bear. It is not in our special interest as taxpayers to oppose each
program separately.
Miller:
Well, as a matter of fact, most of the money for the initiative came from
relatively few people, and let me ask you why. Why does this initiative require a
two-thirds...
Semerjian:
Dr. Friedman, let him ask it.
Miller:
Why does this initiative require a two-thirds vote to raise the income tax
which basically affects the wealthy payer in the state, but with a majority vote the local sales
or the property tax can be raised?
Friedman:
Excuse me. Will you tell me: the two-thirds vote for the income tax—you have
reference to income taxes imposed on local level?
Friedman:
Because every change in a state-wide tax requires a two-thirds vote under the
initiative.
Miller:
Let me make sure you've read the initiative.
Friedman:
I have read the initiative.
Miller:
Under this initiative it requires a two-thirds vote to raise the state income
tax, the state income tax, but a majority vote for local sales. Now why is that? Does that
explain who the special interests are?
Friedman:
I would prefer to have a two-thirds vote to raise any kind of a tax. But let's
look at the local sales. Let's look at the issue you're raising. The fact of the matter is that
in order to raise the local sales tax, you both have to have a state legislature approve
it...
Friedman:
And you have to have the local community...
Friedman:
Now I have very little objection to having the local community impose whatever
taxes it wishes on itself.
Miller:
Except income tax, which is barred...
Friedman:
Because by the time...
Friedman:
Will you explain to me how many local communities in the state of California
now have an income tax?
Miller:
I will tell you that none do. This is the first provision that requires it,
and throughout this provision to impose a tax on wealthier taxpayers requires a two-thirds vote,
and to impose a tax on ordinary taxpayers involves a majority vote.
Friedman:
You are really bringing up the straw man of the straws. You are really
bringing up an extremely shoddy straw man because the fact of the matter is that no community in
this state today, when the situation has been different than you've been painting it, has found
it appropriate to impose...
Miller:
Except the state of California.
Friedman:
No local community has found it appropriate to impose an income tax. In the
country as a whole, very few local communities have done so. Personally, I think it is highly
desirable to have a relatively stable tax system. I do not think you ought to have tax systems
that change from one year to the next. And therefore I see no reason—in fact, I see a great
advantage—in requiring a two-thirds vote for any change in the tax system of any kind.
Miller:
Let me ask you this. You...
Friedman:
Let me go on from what I
Miller:
No, I'm sorry. If I may
Semerjian:
One more point. Let Mr. Miller ask you a question before you answer.
Miller:
Okay, there's a budget here of questions. Let me ask you this. You really
don't think very much of government at all. In your book on Capitalism and Freedom you write
that National Parks ought to be run by private enterprise, doctors shouldn't be licensed by the
state, Social Security has no governmental role. You don't care about restricting government
expenditures because you really don't think government has much to do, do you?
Friedman:
Well, let's look. One of the things I also wrote for was eliminating the
draft. I take it that was...
Miller:
If your defense of your economic views is to say you must eliminate the draft,
that's a very shallow defense on your tax views.
Friedman:
The draft is a form of taxation, Mr. Miller. It's a form of taxation, in kind,
of servitude. The fact of the matter is that indeed most governmental programs do not achieve
the objective that the well-meaning people who support them are interested in...
Miller:
The licensing of doctors...
Friedman:
...and the reason
they don't is precisely the same special interest argument because you may have a general
interest in passing a program, but once that program gets passed, those of us who have a general
interest go home and tend to our business, and the special interests come and take it over.
That's why the Interstate Commerce Commission has been run by the railroads...
Miller:
Tell me about the special interests in the National Parks.
Semerjian:
Make this a very brief answer.
Miller:
You say there should be no National Parks, and one of the requirements of this
initiative is that fees for State Parks go up, turn them into a private kind of business. Tell
me why the state should not be in the State Park business, why Yellowstone—as you mention in
your book on the Grand Canyon—ought not be a National Park but should be run by private
enterprise.
Semerjian:
Make this very brief.
Friedman:
I would be very glad to engage in a discussion about...
Friedman:
National Parks. However, that is not what this issue is about; this is a red
herring that you are bringing over the trail...
Miller:
Along with the straw man that preceded it...
Friedman:
The fact of the matter is that this initiative provides the state of
California with as much money as it is now spending on all state projects. It would not require
a reduction in any activities in the state of California. Now from my own personal point of
view, I would much rather that the initiative require a still further reduction. I think—I agree
with you that much of what the government is now spending is waste...
Miller:
Well, you don't agree with me.
Friedman:
And that the people would be better served if taxes and expenditures could be
cut still more.
Semerjian:
All right, Mr. Miller, let's go back to Senator Harmer.
Miller:
We agree on the question, not the...
Semerjian:
Wait a minute, Mr. Miller. Back to Senator Hammer.
Harmer:
Dr. Friedman, you've been asked about everything but the proposition, so let
me ask you now. Let me ask you now: as a non-Californian who has nothing personal to gain or
lose by the passage of this, will this program work? Can it set a meaningful limitation upon the
costs of state government without drastically reducing state services? And does it hold some
national value?
Friedman:
Looking at it as objectively as I can as an outsider, there isn't the
slightest doubt that the limits set in this initiative would provide a level of governmental
services as high as is now being provided and higher as California continues to increase at the
rate at which it has been increasing over past years, so it is a very generous proposal from
that point of view; it certainly can work. Whether it will work or not depends on whether the
citizens of California feel strongly enough about it to make it want to work.
Semerjian:
All right, thank you very much. Senator. Let's get back to Mr. Miller for one
question.
Miller:
Dr. Friedman, what if the ballot description is correct and it does require a
reduction...
Friedman:
And when did you last beat your wife?
Semerjian:
Wait a minute, Doctor. Let him ask the question.
Miller:
The ballot proposition says you are beating your wife. Now, what if it is
correct and it requires a reduction? As a non-Californian, can you tell me what the percentage
of state-local assistance is to schools and how it will be affected?
Friedman:
Not as a Californian, but as someone who understands arithmetic, I have looked
at the numbers in the proposal, there is no conceivable way in which those numbers, as they have
been proposed in that program, can require a reduction from the present level in the
expenditures on state services. What you are asking me to say is that Arithmetic is a bad
discipline and must, be discarded.
Semerjian:
All right. Thank you very much. Dr. Friedman, for being with us tonight.
Senator Harmer?
Harmer:
Ladies and gentlemen, if the polls are correct, the one service that the
people really want from the government is the ability to keep their own money in their pockets.
And there is no doubt that you are not going to be able to rely upon the legislature to do it.
Therefore, obviously, based upon the testimony you have heard tonight, we have but one recourse:
the people to adopt a constitutional amendment that will limit the cost of state
government.
Semerjian:
Thank you. For those in our audience who may have joined us late. Senator
Harmer and his witnesses have presented the case in favor of states' adopting a constitutional
amendment to limit state spending. And now for the case against. Mr. Miller, the floor is
yours.
Miller:
Thank you, Mr. Semerjian. Something very significant has happened here
tonight. When the Governor was asked what he would advise people if the ballot measure
accurately states what this ballot is, he couldn't answer "yes." And he is the major proponent
of the measure. But the ballot measure does state the measure. And the ballot says probable
offsetting tax increases to local government. What is really going on here? You know, we're all
used to the slick salesman who promises us something for nothing, but you've got to read the
fine print, and the fine print in this amendment—what is the fine print? It's really not that
complicated. At every point of the amendment it requires a two-thirds vote to raise the income
tax, and the income tax is overwhelmingly levied on those who earn more than $20,000 a year, and
at every point it only takes a majority vote to raise the sales or property tax for schools
which is levied on those who earn under predominately $20,000 a year. What else? Professor
Friedman couldn't give us the percentage, but 68.5 percent of the state budget is local
assistance—gets paid to local communities, most of it to schools. If that is cut, the taxes will
have to be picked up by the local taxes, again paid for by the average taxpayer. That's why the
ballot initiative says probable substantial off-setting cost and tax increases to local
government. Proponents here love to talk about special interests, as though somehow school
children getting textbooks were a special interest. Look at the income tax provision. There's
only one special interest in this room tonight: those proposing this initiative. Fortunately
millions of Californians have seen that, and foremost among them is Speaker of the California
Assembly, Bob Moretti.
Semerjian:
Mr. Moretti, welcome to THE ADVOCATES.
Miller:
Speaker Moretti, the proponents tell us that 44 percent of our tax dollars are
being taken. What do you make of that statement?
Moretti:
Well, the legislative analyst points out the falsehood of that percentage.
They have included about twelve different items that certainly are not taxes as part of taxes.
For example, admission to the University of California sporting events; for example, purchase of
postage stamps, which is certainly not a tax. A tax is something you involuntarily pay and is
extracted from you. The federal government sale of surplus goods is put down as a tax; that's
not a tax. You raised the tax when you bought it in the first place. Secondly, they do not
include undistributed corporate income, and the legislative analyst takes their figures apart
and says, "Actually, it's 32 percent," and at that rate the citizens of this country are the
second lowest taxed citizens of any industrial nation in the world.
Miller:
And most of that is federal tax anyway? Let's just look at the state portion.
Could there have been a single tax measure, or a single dollar of state money spent, as the
state taxes without the Governor's approval?
Moretti:
No. The Governor has signed every single budget for seven years and every
single appropriations measure, and don't be confused between the federal government and the
state government. We cannot deficit spend in California; it is unconstitutional. We must
remember that first. Secondly, we don't have something like a defense budget. Our monies go for
support of education, health programs, the aged, blind, disabled, and children. That is the big
chunk of state spending, and there is this sinister desire to mix it all up with what's going on
in Washington. The Governor of this state has said all of the fat has been cut out of this
budget? that apparently means that what is left is needed, and the fact is, as you pointed out,
more than two-thirds of our budget underwrites the property tax and has subvented the cities,
counties and school districts in California.
Miller:
Well, tell me about the shift. If state expenditures are cut, will that be a
tax shift to the local taxes?
Moretti:
Well, it has to be. By definition, if you put an absolute maximum in the state
Constitution, the legislature has absolutely no ability to do anything about that. You have to
make changes in statutory law. The cost of government will be forced down onto the cities and
counties and school districts, and that means to a large extent the property tax, which is the
most unjust and most regressive of all taxes, and the less money you make, the harder it hits
you.
Miller:
Let's pick an example out of this amendment. Today the legislature can give
homeowners tax relief by paying special sums of money or exemptions simply to people who own
homes and pay taxes on them. Will they be able to do so under this amendment?
Moretti:
No, because under this amendment there must be an across-the-board property
tax reduction. Seventy percent of that amount would go to the business and commercial interests
of the state of California. It is unlike the home-owners exemption and the renters' relief that
we have passed which will directly reduce their taxes but not so for business. If this passes,
any property tax reduction, seventy percent of that amount will go to the commercial interests
in the state of California.
Miller:
The state government simply couldn't take a billion dollars and give it for
home-owners' relief; $700 million of that would have to go to business as well.
Moretti:
That is correct.
Miller:
And beside the effect on taxes, what does this do to the government structure
of our state? Who does it give power to?
Moretti:
Well, what this does is it installs in our Constitution minority rule:
one-third of the legislators in either House of the legislature will be in a position to totally
control the state of California; as few as fourteen members of the California State Senate, just
over ten percent of the entire membership of the legislature, will be able to decide and direct
the future and destiny of the state of California.
Miller:
And you can imagine what the special interests will do with that.
Moretti:
I can imagine what they will do with that, and I don't think minority rule is
what this country is all about.
Semerjian:
Okay, Mr. Miller. Let's see what questions Senator Harmer has.
Harmer:
Mr. Speaker, I gather from your testimony that you don't think Californians
are paying 44 percent of their income in revenue to the government, is that right?
Moretti:
That's right. Senator. You know that's right.
Harmer:
You're taking that from the legislative analyst. It's interesting that you
take that figure from the legislative analyst...
Moretti:
No, that's not just from the legislative analyst. Senator.
Harmer:
But what about—may I finish the question, Mr. Speaker?
Moretti:
Well, is that one question?
Harmer:
No, you'll hear the question. I'll be sure to tell you when it's
finished.
Harmer:
Mr. Speaker, the National Tax Foundation, who doesn't happen to work for you
and me and the legislature, tells us that, in fact, this year the people of California are
paying in excess of 40 percent of their income in taxes and more than 44 percent of their income
in revenue to the government. Now as opposed to the man you've been quoting who works for you
and me and the legislature, why should the National Tax Foundation in New York, who have had a
national reputation for being accurate on this matter, be less correct than our own legislative
analyst, who's going to lose his job if you and me get unhappy with him?
Moretti:
Well, as a matter of fact, Senator, you have conveniently overlooked what the
international monetary commission has pointed out, and they say, much closer to the legislative
analyst, that Americans pay about 33 percent in taxes...
Harmer:
Americans, not Californians...
Moretti:
But let's talk about the state of California.
Moretti:
That's what's going on...
Harmer:
Let's talk about the state of California.
Harmer:
How much money do you think the people in California ought to pay in taxes?
Are they paying too much now?
Moretti:
Well, as a matter of fact, the people in this state have control over that
right now...
Harmer:
How about answering the question? Are they paying too much money in taxes or
not, Mr. Speaker?
Moretti:
That is a decision they make. Are you telling me to speak for all the people
in this state?
Harmer:
I want your opinion.
Moretti:
I think I agree in this one instance with Governor Reagan who says, "We need
every dollar that's in that budget." We must because he signed that budget.
Harmer:
Then you don't think we are paying too much in taxes. How much would you like
us to pay?
Moretti:
In the state of California? No. Because we only pay $3.1 billion for the state
of California, as you well know, Senator.
Harmer:
You're telling me that right now our tax load isn't high enough. Tell me how
much you'd like it to be, Mr. Speaker.
Moretti:
Did I say that? Excuse me. I didn't.
Harmer:
Tell me how much you would like it to be. Is a state budget of $9.3 billion
high enough for you, Mr. Speaker?
Moretti:
Well, the state share, as you know, is $3.1 billion of that, Senator. $6.2
billion goes to local support in this state, and the state is underwriting the property tax to
that amount.
Harmer:
How does the state get that money? Does it print it?
Moretti:
Well, of course not. You know very well where it gets it.
Harmer:
It gets it from the people, right?
Moretti:
Yes, that's right.
Harmer:
I guess you're not going to answer the question because you don't want to tell
the people here, do you? That you don't believe that they're being taxed enough money right now.
Well, let's talk about another one of your problems.
Moretti:
Well, do I get to answer or not?
Harmer:
Yes, if you will. You may answer if you will answer, Mr. Speaker. Are we
paying too much in taxes or not?
Moretti:
For support of the state of California? No.
Harmer:
We're not paying too much for the support of...
Harmer:
Thank you, Mr. Speaker. Now to my next point. You seem very worried about the
emasculation of the legislative process by this proposition.
Harmer:
No, I'm not, Mr. Speaker, and I'll tell you why: because you and I just went
through an experience where in 48 hours we sat in a legislative body that sent to this
Governor 750 pieces of legislation, many of them containing appropriations, and 95 percent of
the people who voted for them had no idea what was in them. Why did they do it? Because they
wanted to get on their vacation, and they knew that the tyrant Mr. Miller referred to would take
care of it. Does that sound like a legislative body that is frightened to death of being
emasculated of its prerogatives?
Moretti:
Senator, you hope...
Semerjian:
Go ahead, Mr. Moretti.
Moretti:
You voted for the state budget as I did; you voted for legislation last year
as I did to put one billion dollars of property tax reduction into the state of California, and
you know it. We needed to give money to the schools, we needed to reduce the property tax, and
both of us worked very hard for the passage.
Harmer:
Great speech, but nothing to do with the question, so let's talk about the 70
percent...
Moretti:
Well, it certainly is. The legislature's ability to deal with the problems of
the state...
Harmer:
Let's talk about the 70 percent
Semerjian:
One brief question, Senator Harmer.
Harmer:
The 70 percent of the property tax we pay that goes to business, about which
you're so concerned. What does business do with the taxes it receives, Mr. Moretti? Does it pay
them itself, or pass them on to the people in increased costs?
Moretti:
Well, you know very well, Senator, because the oil companies have been
reducing monies all along for the purchase of gasoline and oil. They make whatever profit they
can, and you know it. Whatever the market will bear is what they charge.
Harmer:
You mean, Mr. Speaker, then that these oil companies have been absorbing this
tax themselves?
Moretti:
No, what I mean is that they will charge the public whatever the public will
bear, whatever the public will pay. That's why their profits are up 50 percent.
Harmer:
Precisely! All right.
Semerjian:
Thank you. Senator. Thank you. Senator. Mr. Miller?
Miller:
Mr. Speaker, with all the arguments over tax rates it seems to me there's a
very simple question. The California budget now is 8.5 percent of personal income. Could that
budget have gone into effect unless Ronald Reagan thought also that every tax and expenditure
under it were necessary?
Moretti:
Absolutely not. He controls the Republicans in the legislature; he puts his
name to that budget, he signed that $9.3 billion, and I assume he believes in it or he wouldn't
have signed it.
Miller:
Could he have stricken out any single individual item or tax he thought was
unnecessary?
Moretti:
Of course. He has the right to veto or blue-pencil or whatever he likes.
Semerjian:
All right, thank you, Mr. Miller. Let's get back to Senator Harmer.
Harmer:
Mr. Speaker, this year you authored legislation, you as the lead author,
legislation which according to this legislative analyst of whom you're so fond would have cost
the people of the state of California $277 million. If every member... You didn't know
that?
Harmer:
You seem surprised.
Moretti:
Would you tell me the bill numbers. Senator?
Harmer:
The sixteen pieces of legislation which you introduced and I have each of them
here of which you are the lead author, and you didn't even know.
Harmer:
But you will introduce legislation which will cost nearly $300 million?
Moretti:
Senator, now you said a piece of legislation, didn't you?
Harmer:
A total legislative package...
Moretti:
Secondly, I authored the bill for one billion dollars in property tax relief
and school monies that the Governor of this state signed and that you voted for.
Harmer:
That's not in this...
Harmer:
That's not what we're talking about, Mr. Speaker.
Semerjian:
We're not getting anywhere. One question.
Harmer:
Mr. Speaker, do you believe that the people of the state of California owe it
to this legislature to be burdened with $300 million of increase services each year a new person
becomes Speaker?
Semerjian:
One very brief answer.
Moretti:
The people of this state elect the members of the legislature. If they want
120 like you or 120 like Ronald Reagan, they can elect them, but they have not chosen to do
that.
Semerjian:
All right, thank you very much, Mr. Moretti, thank you. Mr. Moretti, thank
you.
Miller:
Thank you, Mr. Speaker. There is also a man here who has had ample experience
in controlling governmental expenditures and what they ought to be, the distinguished former
Governor of the state of California, Edmund G. (Pat) Brown.
d
Semerjian:
Welcome to THE ADVOCATES.
Miller:
Governor Brown, I was intrigued by the response because it's really an illustration
of what myth can do in politics. When you became Governor, the state tax burden on this state
was about 5 percent of personal income, and when you left the governorship, it was about 5
percent of personal income, the lowest increase of any governor in history.
Brown:
That is true, and during the years from 1959 to 1966 California faced the
highest mass migration in the history of the world. When I became Governor in 1959, 200,000
more youngsters entered the elementary schools, and I had to anticipate twelve short
years later that they'd be going to the University or the state colleges or the junior colleges
of our state. We had to plan the growth of the great California water project. We had to have
beaches and parks and freeways and highways to take care of them. We had one tax increase during
the eight years I was Governor, one major tax increase. There were tax adjustments during that
period of time, and I am proud of that record.
Miller:
You are proud of it, and all Californians are, and to illustrate where myth
goes, the man who talks most about budget cutting and who wants this constitutional amendment
has seen the percentage go to 8.5 percent. Do you begrudge that, or do you also think that's
necessary?
Brown:
No, I do not begrudge that. I think that Governor Reagan has made a real
effort to cut the cost of government in California, and the principle reason that the budget has
gone up to the extent that it has in California is because they've transferred some of the cost
of local government to the state government, something that I wanted to do during the eight
years, but the priorities that we had did not permit it. But under this initiative measure that
he's now proposing, this flexibility will no longer exist. You have to understand that we have
three major units of taxation: you have the federal government, you have the state government,
and you have the local government. And to try to push it down here, you push it up here. There's
no question about it at all. And to pass a prohibitory statute like the prohibition laws of the
1919, 1920s, to try to rule the government by fear is one of the most outrageous things I've
ever heard. When I hear Senator Harmer questioning Bob Moretti, the Speaker, it's an attack upon
representative government. The whole attack is upon the legislature. For two hundred years in
this country we've had representative government. We haven't had a constitutional amendment such
as this is proposed in any state in the union or in the federal government, and the country ha s
been run pretty good. I'm proud of America, and I don't think it's necessary to take away the
powers of the legislature or representative government in the way that this is suggested.
Miller:
Not just the powers of the legislature. You have sat in the Governor's chair;
you've done this. Describe to us how easy it is if you have the will to hold down state
spending. The Governor has absolute power, doesn't he? How does he cut out an item...?
Brown:
The
Governor of the state of California has a greater power than the President of the United States.
We have one of the greatest budgetary systems in the entire United States. Is all you have to do
is take a pencil and just draw a line through that pencil and that item is out, and I don't
believe in the history of the state of California has the legislature, which they have the power
to do, ever overridden the budget of the state of California. For Governor Reagan to stand up
here and make a statement that he inherited a bankrupt government is an outrageous statement
because in the state of California under the Constitution you must have a balanced budget. We
did have a balanced budget. What he's referring to is the fact that we adopted a cool accounting
during that period. That meant that at the end of this is what most major corporations use,
recommended to me by the certified public accountants of the country. The money that comes in,
the money that goes out; you don't always pay the bills on July 1st because the money doesn't
come in. You pay it later. And as a matter of fact, Governor Reagan bought...
Semerjian:
All right. I'm going to have to interrupt you. Governor. Thank you, Mr.
Miller. Let's go to Senator Harmer.
Miller:
It is your fate to have absolutely no.
Semerjian:
Wait a minute, Mr. Miller, wait a minute. Senator Harmer, your turn.
Harmer:
Governor Brown, we've appreciated your rewriting of history, but let's talk
about one of those bills that you signed.
Brown:
I don't think I have the power to rewrite history. Senator.
Harmer:
You happened to have signed one of those bills about which you are so proud,
known as AB-59, which had to do with restructuring the whole welfare system of the state of
California. Now you made certain projections as to what that bill would cost the people of the
state, relying upon our good legislative analyst, and both you and he were wrong. As it turned
out, hundreds of millions of dollars in excess cost on welfare had to be spent, and it was only
when Governor Reagan came into office, and a welfare reform bill was signed that we got those
360,000 people off of the welfare roles that he earlier mentioned. Now my question to you is.
Governor, do you feel that it was a mistake for the people of the state of California to revise
that welfare program, to reduce those costs, to get those people off the welfare role?
Brown:
I really can't say, and I don't think anybody can say as yet. I only want
government to leave me alone, protect me by police powers. Government must help the indigent and
the aged and the poor and the sick, and I don't know what's happened to those people. I haven't
the power to determine whether or not Governor Reagan's welfare bill is good or bad. I know that
some of his programs have hurt people; I know that his mental health programs have hurt people;
I know they've hurt people... I know too. Senator, that if they had adopted the withholding tax
in 1967 when he took over as Governor, you wouldn't have had to increase the taxes of this state
one iota, but you fought me on that during that campaign.
Semerjian:
Gentlemen, I wonder if we could get back to the issue.
Brown:
I'm very happy to get back to any issue you have.
Harmer:
Governor, you have reference to all the aged, the blind, and those who are
going to be denied certain services, will you tell me how this proposition tonight is going to
be so destructive to those needy people of the state of California?
Brown:
Well, I had read the statements of Professor Friedman; I've read Governor
Reagan's arguments; I've read the legislative analyst. The legislative analyst has been there
under Governors Warren, Knight, both Republicans, myself and Governor Reagan...
Harmer:
How about answering the question?
Brown:
Now let me answer the question!
Brown:
Please don't interrupt me. I'm trying to answer your question. And is all I
can say to you is that I think that the legislature over a period of years has done a mighty
good job in the state of California, both Republicans and Democrats. Now I...
Harmer:
The question was where in this proposition will these vital services to the
needy be cut? You have not answered the question. You can't.
Brown:
Well, I certainly can.
Harmer:
Then tell us where.
Brown:
If the legislative analyst is correct, and I don't know whether he is or not—I
can't tell those figures; Professor Friedman says he's wrong, Bob Moretti says the legislative
analyst says he's right— if you have to cut $650 million out of the California budget next year,
and two and three years later down the line you have to cut $1.25 billion, somebody's going to be hurt. Please believe me. Either that or Governor Reagan
has signed budget bills for the last two or three years— maybe I was responsible for the first
one, maybe I was responsible for the second one, but for the last five he signed those budget
bills—and if he thought that he could have cut that down, I know as an honorable man that he
would have cut it down, but he can't do it and no Governor can, and you cannot put in the
legislature...
Harmer:
Governor Brown, we'll have to accept your answer then—that is, as a matter of
fact...
Brown:
Well, I don't care if you accept it or not. It's a fact.
Semerjian:
Wait a minute. Governor. Let him ask the question.
Harmer:
Isn't it true then that the effect of this proposition will be to force the
legislature to decide what has the priority, where will the money be spent? Even you have had to
admit the proposition doesn't deny these people these services; it simply says: even if we
stipulate it for fact, which we do not, but for the sake of argument, that the analyst was
right, isn't it simply saying that the legislature must now decide within that budgetary
limitation what's important and what isn't important and then make their decision?
Brown:
Why hasn't Governor Reagan done that during the past three years? Why hasn't
he said that the legislature...
Brown:
Wait a minute. Wait a minute. Let me finish my answer. Why hasn't he said to
the legislature, "I will only permit seven percent of the income of this state to be spent by
the legislature? The reason that he hasn't done it is because he can't do it. As a Governor
trying to do his job, he just can't do it. The legislative process, the budget process...
Harmer:
Well, now wait a minute...
Semerjian:
Now wait a minute. Senator. Senator. Senator Harmer, thank, you very much.
Senator... Senator, will you please sit down. Mr. Miller...
Brown:
I don't say he can do...
Semerjian:
Governor, you haven't—no question has been put to you, Governor.
Miller:
You can talk when he's asking you a question. Governor Brown, in terms of
where they'll be hurt, 68.5 percent of the state budget goes to local assistance and most of
that to schools. Is there any way to have the kind of cuts the legislative analyst says is the
effect of the measure without hurting local communities and schools?
Brown:
The whole trust of this measure is to put the tax burden on the local
taxpayer. That's the theory of the economists represented by Professor Friedman and the people
who have drafted this bill. They say they want property taxes; they admit it. They say that
Governor Reagan does not; they say they disagree with him. These are the statements that have
been made that I've heard about. These are hearsay statements of course, but I've heard them.
But if you ask Professor Friedman, he'll tell you that he wants the tax burden to be at the
local level. They have what they call a foot economy, that if you don't like it—if you live in
Los Angeles and the City Council is bad, then move from Los Angeles to Alhambra or some other
city. This is their theory, and I just disagree with it.
Semerjian:
All right, thank you, Mr. Miller. Let's go back to Senator Harmer.
Harmer:
Governor Brown, you tell us you've read the proposition. You're aware of the
fact that in Section 10A of the proposition it allows the state to absorb any increase in this
limitation, if there is a corresponding decrease in property taxes. You're aware of that, are
you not?
Brown:
Senator Harmer, I've read this proposition ten to twenty times, and I say that
no one knows what this proposition will do, and it will create financial chaos in the state of
California.
Harmer:
Governor Brown, let me be the first to tell you that, in fact. Section 10A
provides just that, that the state can absorb any time it wishes to do so an increase in this
limit if it decreases these property taxes about which you're so concerned. Now the question:
Governor Brown, under this proposition within sixteen years the amount of money available for
our state budget will triple. Can't you believe that even the state of California can run its
affairs on $27 billion a year?
Semerjian:
Make this very brief. Governor.
Brown:
Those projections are as false as the statement that the California taxpayer
pays 44 percent of his income in taxes. That is absolutely untrue. What you are considering is
that we'll have the same growth rate in the universities and the state colleges, we'll have the
same welfare rate, we'll have the same tax increases that have happened over the past twenty
years.
Semerjian:
All right, thank you. Thank you very much, Governor.
Brown:
Who could project out fifteen years?
Semerjian:
Gentlemen! Thank you. Governor, for being with us tonight. Governor, thank you
very much. Thank you. Thank you, gentlemen. That completes the cases, and now, Mr. Miller, will
you please present your closing argument.
Miller:
Thank you, Mr. Semerjian. It sounds complicated, but I think you really can
focus in on it. What does the amendment necessarily provide? The official ballot measure says
so—off-setting tax increases to local government. Why? Because you must cut local assistance,
mostly to schools, and when you do, who's going to pick it up? The property taxpayer. What is
the responsibility of those who govern? Is it to talk about cutting taxes and propose an
amendment and then sign the highest state budget in history and say you were forced to? Of
course not. The Governor could have held spending down to seven percent if he wished to, and he
did not. The responsibility of government is to raise money for the people's needs and to tax
fairly. This amendment does neither. It cuts the people's needs, taxes unfairly, not a blessing
but a curse. On this amendment the vote is "no."
Semerjian:
Okay, Senator Harmer, your closing argument, please.
Harmer:
You have heard arguments tonight on three basic points. The first is the total
cost of government, and even the opponents here tonight would not argue that the present cost of
government is reasonable. And secondarily, we've heard absolutely no testimony tonight that
would lead us to believe that either the Congress or the state legislatures are going to be able
to discipline themselves financially. That leaves us one final issue: is this proposition a
valid solution to this real problem? Now the opponents tell us that we will bury local
government in unknown costs, and yet the proposition—even if Governor Brown can't understand
it—very clearly makes it plain that the state, at any time it wishes to do so, may absorb those
increased costs to local government and shift that cost to the taxpayer. This brings us to the
real opposition: that is, the fear of the opponents of this proposition to put in the hands of
the local people the right to say how much government will cost them and for what reason. I urge
you to vote "yes" for this proposition, join Governor Reagan and Milton Friedman and myself in
seeing to it that we return to a rational government.
Semerjian:
Thank you, gentlemen. It is now time for you in our audience to get involved.
What do you think about the subject we've debated tonight? Should your state adopt a
constitutional amendment to limit state spending? Send your "yes" or "no" vote on a letter or
postcard to THE ADVOCATES, Box 1973, Boston 02134. Today the issue is before the state of
California, and tomorrow it may be before your state, and as we've said, this device of limiting
state spending is proposed as a model for the federal government. So let's hear from you in
California and elsewhere, and we'll tabulate your views and make them known to state governments
and to Congress. Remember the address: THE ADVOCATES, Box 1973, Boston 02134. If you'd like a
complete transcript of tonight's debate, send your request to the same address: THE ADVOCATES,
Box 1973, Boston 02134. And enclose a check or money order for $2.00 to cover the cost of
printing and mailing. You should get your copy within three weeks of our receiving your request.
And be sure to specify the program by name and your return address. Now recently THE ADVOCATES
debated the question "Does executive privilege justify the President's withholding of the
Watergate tapes?" Of the more than 3,600 viewers who sent us their votes, 30 percent said "Yes,
executive privilege does justify withholding of the tapes," and 70 percent said, "No, it does
not justify it." And now let's look ahead to next week's program:
Announcer:
Wage and price control are an indispensable part of any economic
policy that this country can have, and we certainly, I hope, will not again pay attention to the
people who are offering us this dream of the free market. Should we end all wage and price controls
now? A question next time on THE ADVOCATES.
Semerjian:
And now with thanks to our advocates and their very able and distinguished
witnesses we conclude tonight's debate.