California's governor initially indicated he would veto an $18 billion package of cuts and tax increases that had been passed last week by the Democratic legislature on majority vote. But yesterday, he said he had made progress in negotiations with Democrats on the package. Schwarzenegger simply wants a rollback of some laws that he thinks restrain economic growth.

This package, put together by legislative Democrats, is significant not merely as a response to the ongoing state buget crisis. It's a precedent setter because it involves passing a tax increase without the two-thirds vote required under the California constitution. Republicans are crying foul and threatening to challenge the package in court. If Schwarzenegger agrees to sign the legislation after these current talks, you can expect a lawsuit.

That litigation may prove crucial not only to preventing the state from running out of cash in two months. Depending on how the courts rule, it may open up a new era in California's budget politics, providing a crucial loophole around the two-thirds rule on taxes (which was part of Prop 13). The state constitution also requires a two-thirds vote for a budget; that law has been in place since the 1930s.

One final point: The last 48 hours were full of nasty rhetoric between Democrats and the governor. The Democrats should cool it. Here you have a Republican governor who seems willing -- in the interests of saving the state from economic disaster -- to undermine a pillar of Republican power, the two-thirds vote. In the spirit of the season and common sense, now is the time for Democrats to shut their mouths and try not to seize defeat from the jaws of victory.