Advocates; Should Your State Adopt a Constitutional Amendment to Limit State Spending?
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Advocates; Should Your State Adopt a Constitutional Amendment to Limit State Spending?


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. Ladies and gentlemen, may I have your attention,
please. Moderator Evan Semerjian has just called tonight’s
meeting to order. 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.” 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. Howard Miller, Professor of Law at the University
of Southern California, says, “No.” 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. 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? 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. Governor, welcome to THE ADVOCATES. Thank you. Governor, you’ve just heard about the incredible
growth of government. Just what is wrong about big government? Why is it so dangerous? 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. Well, Governor, just how is this proposition
going to address itself to solving the problem? 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. Well, Governor, why a constitutional amendment? Can’t you and the state legislature solve
this problem? 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. 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. 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. How does this proposition, though, deal with
such a thing as an emergency situation? Won’t the hands of the legislature be tied? 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. One more brief question. 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? 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. All right. Governor. Mr. Miller is eager to ask you some questions. Mr. 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? 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. 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”? 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. Have you brought a lawsuit? Yes, we have brought a lawsuit with regard
to advertising, and that’s a part of it. No, you have not, and tell me. Well, Mr. Miller, can we get to the merits
of the proposal and not bicker over what the wording of the ballot is? 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. That’s right. 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? 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. 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? Mr. Miller, may I just point out that that
would have been impossible. Why? 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. 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. 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? 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? No, because we corrected a run-away welfare
situation that was spending four times as fast as revenues were increasing. No, listen to the question. You approved 8.5 percent… 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. No, no, no… One brief question and answer. 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? 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. All right, thank you. Wait a minute. Governor. Mr. Harmer, you have another question. Governor, if we take Mr. Miller literally,
you must be the absolute dictator of California, but my question is this:
You may take me literally. 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? 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. Thank you. All right, thank you very much. Governor. No, that’s all we have time for. Thank you very much, Governor. I think I have one more question. What? I’m sorry. I call for my second witness an internationally
renowned economist from the University of Chicago, Dr. Milton Friedman. Dr. Friedman, welcome to THE ADVOCATES. Thank you. 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? 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. 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? 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. 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? 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. Well, Dr. Friedman, what is this proposition
going to do about these special interests? It’s not going to make them disappear. 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. Well, Dr. Friedman… Thank you. Senator, I’m sorry to interrupt. Mr. Miller, your witness. 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? There are many special interests on both sides
of this initiative. Who are those? 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. And who are the relatively few people who
have raised over a million dollars to qualify it for the ballot and advertise it… 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… Most of the money came from relatively… 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. 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… And I think… Dr. Friedman, let him ask it. 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? Excuse me. Will you tell me: the two-thirds vote for
the income tax—you have reference to income taxes imposed on local level? No, on state… Because every change in a state-wide tax requires
a two-thirds vote under the initiative. Let me make sure you’ve read the initiative. I have read the initiative. 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? 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… By majority. And you have to have the local community… By majority. Now I have very little objection to having
the local community impose whatever taxes it wishes on itself. Except income tax, which is barred… Because by the time… Tell me. Will you explain to me how many local communities
in the state of California now have an income tax? 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. 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… Except the state of California. 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. Let me ask you this. You… Let me go on from what I
No, I’m sorry. If I may
One more point. Let Mr. Miller ask you a question before you
answer. 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? Well, let’s look. One of the things I also wrote for was eliminating
the draft. I take it that was… 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. 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… The licensing of doctors…
…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… Tell me about the special interests in the
National Parks. Make this a very brief answer. 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. Make this very brief. I would be very glad to engage in a discussion
about… The draft. National Parks. However, that is not what this issue is about;
this is a red herring that you are bringing over the trail… Along with the straw man that preceded it… 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… Well, you don’t agree with me. And that the people would be better served
if taxes and expenditures could be cut still more. All right, Mr. Miller, let’s go back to Senator
Harmer. We agree on the question, not the… Wait a minute, Mr. Miller. Back to Senator Hammer. 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? 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. All right, thank you very much. Senator. Let’s get back to Mr. Miller for one question. Dr. Friedman, what if the ballot description
is correct and it does require a reduction… And when did you last beat your wife? Wait a minute, Doctor. Let him ask the question. 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? 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. All right. Thank you very much. Dr. Friedman, for being with us tonight. Senator 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. 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. 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. Mr. Moretti, welcome to THE ADVOCATES. Speaker Moretti, the proponents tell us that
44 percent of our tax dollars are being taken. What do you make of that statement? 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. 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? 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. Well, tell me about the shift. If state expenditures are cut, will that be
a tax shift to the local taxes? 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. 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? 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. 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. That is correct. And beside the effect on taxes, what does
this do to the government structure of our state? Who does it give power to? 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. And you can imagine what the special interests
will do with that. I can imagine what they will do with that,
and I don’t think minority rule is what this country is all about. Okay, Mr. Miller. Let’s see what questions Senator Harmer has. 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? That’s right. Senator. You know that’s right. You’re taking that from the legislative analyst. It’s interesting that you take that figure
from the legislative analyst… No, that’s not just from the legislative analyst. Senator. But what about—may I finish the question,
Mr. Speaker? Well, is that one question? No, you’ll hear the question. I’ll be sure to tell you when it’s finished. Fine, fine. 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? 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… Americans, not Californians… But let’s talk about the state of California. Right. That’s what’s going on… Let’s talk about the state of California. Fine. How much money do you think the people in
California ought to pay in taxes? Are they paying too much now? Well, as a matter of fact, the people in this
state have control over that right now… How about answering the question? Are they paying too much money in taxes or
not, Mr. Speaker? That is a decision they make. Are you telling me to speak for all the people
in this state? I want your opinion. 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. Then you don’t think we are paying too much
in taxes. How much would you like us to pay? In the state of California? No. Because we only pay $3.1 billion for the state
of California, as you well know, Senator. 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. Did I say that? Excuse me. I didn’t. Tell me how much you would like it to be. Is a state budget of $9.3 billion high enough
for you, Mr. Speaker? 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. How does the state get that money? Does it print it? Well, of course not. You know very well where it gets it. It gets it from the people, right? Yes. What? Yes, that’s right. 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. Well, do I get to answer or not? Yes, if you will. You may answer if you will answer, Mr. Speaker. Are we paying too much in taxes or not? For support of the state of California? No. We’re not paying too much for the support
of… No. Thank you, Mr. Speaker. Now to my next point. You seem very worried about the emasculation
of the legislative process by this proposition. Aren’t you? 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? Senator, you hope… Go ahead, Mr. 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. Great speech, but nothing to do with the question,
so let’s talk about the 70 percent… Well, it certainly is. The legislature’s ability to deal with the
problems of the state… Let’s talk about the 70 percent
One brief question, Senator 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? 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. You mean, Mr. Speaker, then that these oil
companies have been absorbing this tax themselves? 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. Precisely! All right. Thank you. Senator. Thank you. Senator. Mr. 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? 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. Could he have stricken out any single individual
item or tax he thought was unnecessary? Of course. He has the right to veto or blue-pencil or
whatever he likes. All right, thank you, Mr. Miller. Let’s get back to Senator 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? I authored… You seem surprised. Would you tell me the bill numbers. Senator? 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. I authored… But you will introduce legislation which will
cost nearly $300 million? Senator, now you said a piece of legislation,
didn’t you? No. Yes, you did. A total legislative package… 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. That’s not in this… That’s not what we’re talking about, Mr. Speaker. We’re not getting anywhere. One question. 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? One very brief answer. 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. All right, thank you very much, Mr. Moretti,
thank you. Mr. Moretti, thank you. 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. Welcome to THE ADVOCATES. 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. 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. 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? 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. 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…? 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… All right. I’m going to have to interrupt you. Governor. Thank you, Mr. Miller. Let’s go to Senator Harmer. It is your fate to have absolutely no. Wait a minute, Mr. Miller, wait a minute. Senator Harmer, your turn. Governor Brown, we’ve appreciated your rewriting
of history, but let’s talk about one of those bills that you signed. I don’t think I have the power to rewrite
history. Senator. 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? 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. Gentlemen, I wonder if we could get back to
the issue. I’m very happy to get back to any issue you
have. 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? 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… How about answering the question? Now let me answer the question! Please do. 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… 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. Well, I certainly can. Then tell us where. 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… Governor Brown, we’ll have to accept your
answer then—that is, as a matter of fact… Well, I don’t care if you accept it or not. It’s a fact. Wait a minute. Governor. Let him ask the question. 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? Why hasn’t Governor Reagan done that during
the past three years? Why hasn’t he said that the legislature… How much… 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… Well, now wait a minute… Now wait a minute. Senator. Senator. Senator Harmer, thank, you very much. Senator… Senator, will you please sit down. Mr. Miller… I don’t say he can do… Governor, you haven’t—no question has been
put to you, Governor. Okay. 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? 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. All right, thank you, Mr. Miller. Let’s go back to Senator 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? 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. 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? Make this very brief. Governor. 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. Which is… All right, thank you. Thank you very much, Governor. Who could project out fifteen years? 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. 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.” Okay, Senator Harmer, your closing argument,
please. 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. 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:
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. And now with thanks to our advocates and their
very able and distinguished witnesses we conclude tonight’s debate.

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