Quote :

"As California goes, says an old cliché, so goes the nation. Oh my. These days, the Golden State leads the nation on economic and fiscal dysfunction, from the empty homes spread across the Central Valley to the highest state budget shortfall in the nation's history. Meanwhile, its political class pioneers denial in the face of catastrophe. [Cross Country] AP The spark for the immediate political crisis was a familiar Californian discovery, a fiscal hole of $41 billion. Gov. Arnold Schwarzenegger declared an "emergency" in November and took legislative leaders behind closed doors to hammer out a compromise. The budget adopted in a marathon session this week splits the baby, closing the deficit with spending cuts (hated by the left) and tax hikes (ditto the right), all the while largely failing to tackle the state's built-in structural defects. Some parts of the deal, such as borrowing from future lottery receipts, may yet collapse at the ballot in May, and California could soon be back in line to mark another first -- state bankruptcy. In anticipation, Standard & Poor's this month downgraded its bond rating a notch below Louisiana's. Even discounting for the impact of global recession, the most populous state's ills are unique and self-inflicted -- and avoidable. In the last three decades, California expanded the public sector and regulation to Europe-like dimensions. Schools, state employees, health care, even dog kennels, benefited from largesse in flush times. Government workers got 16 official holidays, everyone else six. The state dabbled with universal health care and adopted strict environmental standards. In short, California went where our new president and Nancy Pelosi of San Francisco want America to go. Now there's much to recommend the Old World. California brings to mind my last home, France -- God's country blessed with fertile soil for wines, sun-blanched beaches, and a well-educated populace. Amusingly, both states are led by bling-bling immigrants married to glamorous women and elected to shake up the status quo. In both departments, the governator got a head start on Nicolas Sarkozy in Paris. The parallels are also disquieting. The French have long experienced the unintended consequences of a large public sector. Ask them about it. As the number of people who get money from government grows, so does the power of constituencies dedicated to keep this honey dripping. Even when voters recognize the model carries drawbacks, such as subpar growth, high taxes, an uncompetitive business climate and above-average unemployment, their elected leaders find it near impossible to tweak the system. This has been the story of France for decades, and lately of California. Six years ago, Mr. Schwarzenegger arrived in Sacramento to "cut up the credit card" and give the girlie men at the State Capitol a testosterone shot. California languished then in a fiscal crisis whose causes were pretty much the same as today. The hapless Gray Davis had been recalled, and the Austrian-born actor made a promising start to break the pattern. In 2005, banking on his popularity, the governor pushed an ambitious ballot initiative to impose a hard state spending cap, limit the unions' political buying power, tighten requirements for teacher tenure, and overhaul a gerrymandered state political map. Arnold lost. After that setback, Mr. Schwarzenegger shifted his attention to green jobs and energy, winning fans in Europe and among Democrats. "He's recognized that California's a pretty moderate place," says Darrell Steinberg, the Democratic president pro tem of the Senate. "You've got to govern from the middle." People closer to the governor offer a different take. "Once he got beat, he reverted back to, 'I want to be liked,'" says a former Schwarzenegger aide. "It's classic narcissism." (The governor declined requests for an interview, but I did walk away with three custom-made Daniel Marshall cigars from his office.) In the Arnold era, the overall cost base has stayed the same as in the Davis era. That isn't entirely his fault. California's constitution locks in higher spending in good years, paving the way for huge deficits in the down. A dependence on a highly progressive tax code leaves it particularly vulnerable to boom and bust cycles. Democrats run the legislature. Across the street from the Capitol, the offices of unions and lobbyists are arguably the real locus of power in Sacramento. In this budget debacle, Mr. Schwarzenegger found himself back where his remarkable political journey began in 2003. Only now with him in the Davis role. The pill is bitterer still since the budget he signed yesterday will raise the vehicle tax -- the same Davis tax increase he campaigned against and terminated in his first act in office. Neither side won with this deal, to which the one good alternative would be a time machine to take Sacramento's political class back five years and do it right then. In the event, Republicans split, and signed off on $14.5 billion in new taxes and a less than airtight spending cap. State personnel reductions are minimal, as well, further infuriating their base. The Democrats swallowed $15 billion in spending cuts, which unions vow to fight. California is in a French-like bind: unable to afford a welfare-type state, and unable to overhaul it. "The people say they want all these programs, then there's nothing they want to pay for," says Hector De La Torre, a Democratic assemblyman. "The schizophrenia in the legislature reflects the peoples'." This week's deal likely won't keep the state in balance beyond 18 months, perhaps even fewer. "This budget will take us through 2010," says Karen Bass, the Assembly speaker, a Democrat from Los Angeles. "I don't know if it will hold." Some Democrats and Republicans privately say the best option may be failure. The rough scenario is fiscal insolvency, followed perhaps by federal receivership. No precedent or legal avenue exists for a state to reorganize its affairs under a form of Chapter 11 protection, but that striking suggestion sounds better by the day. The expectations for Mr. Schwarzenegger's two remaining years in office are low, leaving many of his supporters to ponder the might-have-been. "No one has the political incentives to cut government," says a Republican strategist. "It takes tremendous political capital, which Arnold had. It's a tragedy to have this rare moment when you can try to change and waste it." For the nation, California is the what-might-be."

http://online.wsj.com/article/SB123517419077037281.html


On a related note, the American Legislative Exchange Council has a new publication on the relationship -- at the individual U.S. state level -- between economic freedom and economic prosperity.

http://www.alec.org/am/pdf/ALEC_Competitiveness_Index.pdf

Quote :

"The historical evidence is clear: States that keep spending and taxes low exhibit the best economic results, while states that follow the tax-and-spend path lag far behind. Colorado, for example, was able to restrain government spending and tax burdens through the Taxpayers’ Bill of Rights, creating one of the strongest economies in the nation. On the other hand, some states show little concern for spending restraint, whether during times of prosperity or poverty—in some cases spending their way into financial ruin. The case of recalled governor Gray Davis of California serves as an important example. By coupling high taxes with rampant government spending, California had a budget crisis of historic proportions. At the time, Carl DeMaio of The Performance Institute argued for the “need to stimulate the economy without further burdening taxpayers or driving more businesses out of state.” It is clear that California did not follow that advice and still doesn’t. Unless our current lawmakers choose the path"

[Edited on February 23, 2009 at 2:02 PM. Reason : /]

2/23/2009 2:00:32 PM

Quote :

"Cali - microcosm of future U.S.?"

Over my dead body.

2/23/2009 2:34:06 PM

this thread implies that 9/10 of the us population gives a flying fuck about california

2/23/2009 2:45:00 PM

you can check out any time you want

but you can never leave

2/23/2009 2:50:35 PM

The public service unions are incredibly powerful in California, and their ridiculous pension and health care deals are bankrupting the state. Arnold went up against them in 2004 just after being elected, and his approval rating went from 70% to less than 30% in just a few months. He was getting hammered nonstop with television and print ads denouncing him and his initiatives, and the papers were coming out with manufactured "scandals" against him every week, tying him to big business, etc. It was disgusting, and yet disgustingly effective. After that he learned that going up against the unions in Cali is political suicide.

The lesson to be learned is to never allow unions to have too much power, because they will never give it back and they can be just as greedy and unscrupulous as big business. I worry about Obama in that regard, since he is expanding government and he has always been a vocal supporter of the unions. If we are not careful, by the end of his term the public employee unions could have us all by the balls the same way they have the state of California and the US Automakers by the balls.

[Edited on February 23, 2009 at 3:38 PM. Reason : 2]

2/23/2009 3:37:49 PM

Cali as as much of a microcosm of the US as westboro baptist church is a microcosm of Christianity.

2/23/2009 3:56:34 PM

ahem

Microcosm of *future* US.

As in where we could be headed. Looking at Obama and the momentum that the Dems have, it's a legitimate concern IMO.

2/23/2009 3:58:39 PM

I'm more concerned with Michigan to tell you the truth.

2/23/2009 4:21:53 PM

I, for one, would not complain if Wilmington was a carbon copy of San Diego.

2/23/2009 5:28:21 PM

for one thing, California is the largest single economy of any of the 50 states by a large margin. it's larger than many industrialized nations.

so, if it has a budget shortfall *OF COURSE* the absolute value of that shortfall will be ginormous.

this sounds to me like more ratings-driven doom-and-gloom from Rupert Murdoch's latest acquisition.

is it me, or has the WSJ become more sensationalist by orders of magnitude since it was assimilated the LOLFOXNEWS conglomerate?

2/23/2009 6:33:50 PM

No, the article was pretty much spot-on. I live in California and the budget crisis has hit epic proportions. The state is sending IOU's to taxpayers and contractors.

2/23/2009 6:39:44 PM

I think the largest issue here is how much of California's budget is locked-in due to various ballot initiatives. The legislature and the Governator have shown little interest in addressing this or other pressing issues, but regardless, we've seen the outcomes of a direct proposition system gone amok.

Which is why I've said it before and I'll say it again: democracy just doesn't work.

http://tinyurl.com/c6z2bb

Rampant public service unions certainly haven't helped this, but it doesn't exactly look good when you're practically in the red right out of the starting gate.

Now, if you're looking for a microcosm of the Federal Government - there you go. Have fun with our entitlement spending in, oh, 20 years so...

2/23/2009 6:44:34 PM

People expect the government, whether it be state, federal, or local to give them something without realizing that they have to take it from somebody else first.

2/23/2009 7:27:08 PM

Quote :

"After that setback, Mr. Schwarzenegger shifted his attention to green jobs and energy, winning fans in Europe and among Democrats. "[b]He's recognized that California's a pretty moderate place]/b]," says Darrell Steinberg, the Democratic president pro tem of the Senate. "You've got to govern from the middle.""

wat?

2/23/2009 11:32:38 PM

What don't you understand?

Since getting hammered for being a right-wing ideologue, he has shifted to the center by working with democrats on some issues and picking his battles rather than beating the party-line drum.

2/24/2009 12:04:59 AM

the notion that Cali is "moderate" is "wat?"

2/24/2009 12:12:12 AM

Democracy is the most inefficient form of government but it is most definitely not the worst.

The worst would be the kind where a mentally 12 year old neurotic leader can sentence half the population to death for wearing glasses.

Seriously, to even argue against democracy because of weak leadership in general is laughable. Do you have any idea of what poor leadership translates to in other forms of government? Go ahead and take a moment to look through Africa.

2/24/2009 12:17:14 AM

BURRO, yeah, i realize your entire conception of anything outside North Carolina is predicated by what you've watched on TV and movies...

because if you had any clue as to what you're talking about, you'd realize California, the state, is demographically and geographically diverse.

2/24/2009 12:18:42 AM

Quote :

"Seriously, to even argue against democracy because of weak leadership in general is laughable. Do you have any idea of what poor leadership translates to in other forms of government? Go ahead and take a moment to look through Africa."

Dude, did you even click the link? It's a joke. From a pretty referenced series. Jesus man, get out more.

I stand by the idea that the direct proposition process is a terrible idea, however.

2/24/2009 12:20:26 AM

Burro thinks of San Francisco when he thinks of California.

Ignoring the massive latino -and catholic- population of socal.

I didnt click the link :Carlface:

[Edited on February 24, 2009 at 12:21 AM. Reason : >.<]

2/24/2009 12:20:49 AM

I read this article last week and agree its something to be concerned about. California's government is debt-ridden, they've locked in spending in their constitution, their unemployment rate is one of the highest in the nation, and their taxes are ridiculous. In 2007 they enacted a carbon cap and trade scheme which is only helping lead them further down the path to economic ruin. They have a credit rating lower than Louisiana!

There are plenty of similarities between this and the path Obama wants to lead the nation, so yes I'm concerned.

2/24/2009 12:08:55 PM

If I remember correctly, some fifty to sixty percent of the California budget is locked in by entitlements and voter initiatives. While these ideas may have sounded great when people voted on the propositions, in a time of fiscal crisis, the state government has almost no options on how to solve their budget woes. They can't even raise taxes without a supermajority. It's not that I'm a big advocate of raising taxes, but I think in California's case, you can't close a $40+ billion dollar budget with spending cuts alone...

2/24/2009 1:24:05 PM

Quote :

"It's not that I'm a big advocate of raising taxes, but I think in California's case, you can't close a $40+ billion dollar budget with spending cuts alone..."

Yes you can. $40 billion just happens to be how much spending has grown since the latest governor took office. Had they just managed to hold spending flat they would have balanced the budget. And taxes in California are already quite high, so the supermajority requirement has not done much to keep taxes low.

2/24/2009 3:55:44 PM

^^They most definitely can solve this problem fairly easily by doing two things.

One: legalize Marijuana and make billions a year in revenue off the excise taxes.
Two: Allow drilling off the coast for oil and natural gas. Billions and billions of dollars a year are just sitting there.

I mean let's be honest, there's absolutely no reason to feel sorry for this state (and I'm not saying anyone in this thread says we should).

2/25/2009 8:40:29 AM

pot is legal there

2/25/2009 9:01:35 AM

I mean fully legalize pot. Not this medical marijuana BS. Of course the problem with this is that legalizing marijuana goes against a federal law so it would be challenged in court. But whatever, someone has to fire the first shot.

2/25/2009 10:51:36 AM

^you seem like such a conservative and yet you throw out stuff like:

Quote :

" One: legalize Marijuana and make billions a year in revenue off the excise taxes. "

so you incorporated your dad's politics with your favorite college activities? thats pretty funny

2/25/2009 11:07:14 AM

^umm, wat? Explain to me how marijuana is more harmful than tobacco and booze. How does me being conversative mean I should believe a bunch of bullshit preached by the government for the last 30-40 years?

I don't really see a conflict of interest here. And my dad's politics? Excuse me for believing in fiscal conservation and small government

2/25/2009 11:16:54 AM

The government locking up millions of non-violent Americans is a big-government activity. As such, conservatives should be in favor of legalizing Marijuana and legalizing the shooting of drug-dealers as justifiable homicide.

2/25/2009 11:25:28 AM

^^haha relax i dont need a rehash of the marijuana argument, i just think your combination of viewpoints is funny

well i must say as history has shown recently, being conservative is all about believing bullshit that is preached by the government, but that is for another thread

[Edited on February 25, 2009 at 11:28 AM. Reason : .]

2/25/2009 11:28:14 AM

^you couldn't be more wrong.

Quote :

"well i must say as history has shown recently, being conservative a blind party follower is all about believing bullshit that is preached by the government, but that is for another thread"

Believe it or not there are a lot of people that don't blindly follow their party when it strays from its roots.

2/25/2009 11:34:32 AM

Quote :

"One: legalize Marijuana and make billions a year in revenue off the excise taxes. Two: Allow drilling off the coast for oil and natural gas. Billions and billions of dollars a year are just sitting there."

I think the problem with both of these suggestions is that the Federal government has to be willing to play ball for either of these to go forward; these are outside of California's control. I don't see the Fed budging on the first one in the near future, and while I can see them relaxing on the latter, I don't think they'll be able to do it in sufficient quantities. Besides, with the latter, I think the lead time to get the hydrocarbons flowing is not going to help California enough today.

(For the record, I support both ideas in theory, but I don't think realistically they'll be of much use to the immediate California crisis...)

[Edited on February 25, 2009 at 11:51 AM. Reason : .]

2/25/2009 11:49:53 AM