During boom years promotion pimps bragged that California was the tenth largest economy in the world, eclipsing Italy, Spain, Mexico and the hyper wired nation of South Korea (seriously, you folks in South Korea need to put down your game controllers and get outdoors more often – you make Silicon Valley computer geeks look like rugged adventurers).
You aren’t hearing from government PR flaks much this year because the tenth largest economy in the world has one fiscal foot in the grave and the other on a skateboard. Despite having the 6th highest tax burden of the fifty minor republics, the Golden State is broke, tragically in debt and being held hostage by people who get their money from … the state government.
Politicians and other disreputable sorts in Sacramento have engineered a $40 billion dollar shortfall, or about what California planned to spend on its own operations in the 2007-8 budget cycle. Let that sink in for a moment. The California State Legislature supped-up spending enough to consume all new revenue during the brief bubble period of escalating property values, and hence property taxes. When that bubble burst (as any developmentally disabled person could have predicted were they not employed in the state Department of Finance) a deficit opened that was approximately the size of Montana.
Afraid to raise taxes (because people want to keep their money) or cut spending (because people want free money), the state over the years has borrowed lucre to the point of illiquidity. People are so fearful of a Cal default that the state’s credit rating has plunged below that of Louisiana, a locality known for institutionalized larceny. Home loans to the Lower 9th are a better risk than lending to the government of orange groves, Hollywood starlets and Disneyland (San Francisco is still thriving, but then again congenital vice is always profitable).
The causes for this ongoing democratic delinquency are as predictable as meadow muffins in a pasture, and about as appetizing. American founding fathers – the hyper intellectuals of their era – had long watched the maturation of every form of government. They often warned about two unerring errors. Our forefathers foretold the miseries incurred when accountability is obfuscated and when profiteers control the purse.
Word came from Sacramento that the current budget impasse is in part due to state employees. Unlike regular employees (i.e., you), they are unwilling to give up a nickel despite our mutual hard times (come on boys and girls … where is your collectivist spirit … suffering for the common good and all that stuff). State employee unions are significant sponsors of terror toward politicians. They finance campaigns and are not afraid to bluntly inform an elected official that unemployment awaits should their perks be penalized. San Francisco’s local scandal sheet reported today:
“Democrats – under pressure from state worker unions who are essential to their own political livelihoods – have been told that any vote to redo overtime or workers’ compensation rules will mean no endorsement when they run for re-election or for another office.“
In other words state employees are dictating the state budget. This is akin to naming Dracula director of the blood bank. Indeed the basic flaw of every democracy (a much lower form of government than our original republic) is that those in power have license to do infinite evil providing they have a majority vote. In the case of state employee unions, they are doing what politicos in power always do – living in relative luxury at other people’s expense and protecting their sullied station in life with the ferocity of a pit bull on steroids.
Yet the government’s wage earning minions (and I use the word ‘earn’ with limbo-like flexibility) are a minority entry in California’s annual money grubbing competition. You could fire every employee in state government and still not save $40B, though you would come mighty close. Capital outlays – which despite the name has nothing to do with politicians banging hookers on the capital lawn – are even less at $7B, though at least with these expenses the taxpayer receives real merchandise in exchange. The silent sucker of California’s coffers are local governments who absconded twice as much state money as the state, or a round $96B in the last complete budget cycle.
Local governments are the largest recipient of local tax dollars after they have been laundered by the state legislature. Take two tequila shooters and wait for the pain in your skull to dissipate.
It is a simple game with complex rules. Local taxpayers bleed profusely to the state government and gripe the whole time. They lose their wealth because some politician invented or exaggerated a localized societal woe and voted to spend state money to solve the problem. Local voters then send their personal politicians (assemblymen and senators) to Sacramento to try and get back as much of that money as possible. Each representative engages in battle with 121 other professional leeches to disproportionately divide the revenue pie. As such no one representative can be held accountable for failure. Since it is impossible for any representative to bring back more money than was paid by their constituents, they mutually agree to spend more than the entire state collects.
Instant deficit.
The same game is played in Washington D.C., another town known for fiscal imbecility and for the very same reason. About $300B leaves California each year for a short stay in the federal treasury. After being yanked, pulled, tugged and slugged by 535 elected parasites, about $250B returns (in cash or indirect federal spending) to the Land of Fruits and Nuts, or a negative 17% return on investment. Like its psychologically disturbed little brother, the national government also runs in the red. Being the big player though, $40B is a mere rounding error in the federal budget that between George Bush and Barack Obama has increased about $1.5 trillion bucks.
Instant insanity.
The solution set is both simple and fair, which means it is doomed from the start. Local funding of local projects with maybe a tiny shared pool of pesos for impoverished places prevents political plunder. If San Francisco wants to build an all-you-can-smoke opium den they can do so with San Francisco dollars (though they would first have to amend their anti-smoking laws – tobacco of course would still be verboten). No cash from Calistoga would be called for. If California wished to seismically retrofit the San Andreas Fault, then no lucre from Louisiana would be allowed.
Sane, simple and completely unacceptable to the people that matter … the ones currently pillaging taxpayers.
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