By Daniel Weintraub
Tuesday’s presidential election has been touted as a contest between two starkly different views of the American future. That description might be overstated a bit, since President Barack Obama and former Massachusetts Gov. Mitt Romney hail from the more moderate wings of the Democratic and Republican parties.
Still, the stakes do seem high for California, both in the national election and in the races closer to home.
Whichever party controls the White House and Congress could have a profound influence on a number of policy fronts with huge implications for Golden State residents.
Look no further than the future of the federal health reform adopted by Congress and President Obama in 2010. No state has been more aggressive than California in implementing the law, which expands access to government-subsidized care while overhauling the business practices of the health insurance industry.
Although Romney put in place a similar law while he was governor of Massachusetts, he has pledged to repeal the federal version, which both supporters and opponents have taken to calling “Obamacare.”
Romney would probably need Republican control of both the House of Representatives and the Senate to succeed in repealing the entire law, and even if he had such majorities, it’s not clear how far he would go. He has said there are parts of Obama’s program that he likes, so it remains to be seen if he would really try to repeal the entire thing.
But the core of the law as it is rolling out in California – an expansion of the Medi-Cal program for the poorest residents and subsidized private insurance through a new, online health insurance market – could definitely be at risk. Both depend on billions of dollars in federal aid to function as planned, and with Romney and his fellow Republicans promising to cut the deficit, that funding might be the first place they look for savings.
Even if a President Romney lacked the votes in Congress to repeal the entire law, it is not difficult to imagine him settling for a “local option” – allowing each state to decide whether to keep the law in place, possibly with reduced or no funding from Washington. That would force California legislators and Gov. Jerry Brown to decide whether to continue implementing the law if doing so would add billions to the state’s budget deficit.
Romney is already proposing a similar approach with Medicaid, known as Medi-Cal in California. He wants to give each state a block grant and then free them to run the program as they see fit. He is hoping that the states would find ways to make savings that have not been politically tenable in Washington.
California has more residents on Medicaid than any other state. More than 8 million people, or more than one in five Californians, get their care through the program. At $14 billion, it is the second biggest expenditure in the state budget, after only K-12 education. So any major changes coming from Washington would be of significant interest here.
On other policies, from welfare rules to education and funding for a new high-speed rail line, Obama has been mostly in sync with the Democratic majority that runs state government. His administration has approved, or pledged to approve, waivers of federal rules requested by the Brown Administration, and Obama and his transportation department have been big supporters of the bullet train. Much of that would probably end under a Romney Administration.
But a second Obama term would also come with a price for Californians: higher taxes. The president has pledged to raises taxes on the wealthy. This is something that will happen automatically unless Congress and the president agree to do otherwise, because tax cuts put in place a decade ago are due to expire at the end of this year. So it is a promise Obama could fulfill even if Republicans keep control of the House.
Despite the recent economic doldrums, California has a relatively large percentage of high-income people, so tax increases on the wealthy would hit this state harder than others. The Washington, D.C.-based Tax Foundation calculates that allowing all of the temporary federal tax cuts to expire — including those that Obama has pledged to preserver for the middle class — would cost Californians about $28 billion annually. That tab could climb to more than $70 billion if Congress does not update the Alternative Minimum Tax to exempt middle-income taxpayers.
Those numbers make California’s in-state tax fights look puny by comparison.
But voters on Tuesday will be deciding on several proposals to raise taxes, and the results will shape the state’s budget battles for the near future.
Proposition 30, backed by Gov. Brown, would increase income taxes on high-earners and boost the sales tax by a quarter-cent on the dollar to raise about $6 billion a year. Proposition 38, sponsored by lawyer and activist Molly Munger, would increase income taxes on almost everyone, with the wealthy paying more, to raise about $10 billion.
Even if one or both measures pass, the state will still face a projected deficit when Brown and the Legislature return to Sacramento in January. If both fail, even more spending cuts will be certain, some triggered automatically, targeted at the schools, and others forced on lawmakers when they once again confront the gap between projected spending and revenues.
Californians on Tuesday will also be deciding the fate of the death penalty in the state, whether to alter the “Three Strikes” criminal sentencing law, and whether to require labeling of genetically modified food sold here.
California ballots are always filled with interesting questions for voters to sort through. The results of this one, it appears, will be more far-reaching than most.
Daniel Weintraub has covered California public policy for 25 years. He is editor of the California Health Report at www.healthycal.org