| Submit your comments on this article |
| Economy |
| California shows the way – down |
| 2009-12-07 |
| Once the envy of the other 49 states, California has become the measure of failure. Historically a trend-setter, once again, as California goes, so may go the nation. The Pew Center on the States recently completed an extensive study of the 50 state governments and found California in the worst straits, but also discovered nine other states have joined us in a condition of "fiscal peril." "The same pressures that drove the Golden State toward fiscal disaster are wreaking havoc in a number of states, with potentially damaging consequences for the entire country," concluded the study, "Beyond California: States in Fiscal Peril." Those states – Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin – share many of California's maladies. Some, the study found, suffer from economies that disproportionately rely on particular industries, such as housing in Florida or auto manufacturing in Michigan. California, Illinois and New Jersey repeatedly have used borrowing or accounting schemes to put off tough budget decisions. Like California, Arizona, Florida, Nevada and Oregon are restricted in raising taxes or cutting spending because of voter initiatives and constitutional restraints, Pew noted. "The recession put almost all states in a bind," the study observed, "but California, Illinois, Michigan, New Jersey, Rhode Island and Wisconsin have a history of persistent shortfalls." The Pew study was based on data up to July 31 of this year and bluntly forecasted "states' fiscal conditions are widely expected to worsen even when the national economy starts to recover." Indeed, that seems to be the case. Unemployment in California was 11.7 percent and nationally 9.2 percent as of the study's completion, the study reported. In the scant months since, California's jobless rate has risen to 12.5 percent in November, and the national rate has hit 10.2 percent. Pew evaluated joblessness, foreclosures, declining tax revenue, budget shortfalls, poor money-management and legal obstacles to raising taxes and passing budgets, like California's two-thirds majority requirement. Huge public-employee pension and health care liabilities weren't even among the factors considered, which, particularly in California's case, threaten to bring over time absolutely crippling debts in the hundreds of billions of dollars. In short, as dark as Pew's outlook seems, it may get much worse, particularly in California. The Pew authors said their study was "not framed as a case for more federal stimulus," although the Center included calls by some economists for more "help" for the states from Washington. We find just the opposite is called for. The problem will only be aggravated by bailing out states like California that repeatedly have used poor judgment in relying disproportionately on cyclical industries, and that have borrowed excessively or employed accounting gimmicks rather than making tough decisions about which activities to stop doing, or do less of. Providing more federal billions, which come from the same taxpayers these states already have abused, is a circuitous way of further bleeding taxpayers rather than cutting back years of over-spending that created the "persistent shortfalls." The "too big to fail" approach to fiscal management is merely more of the same poison that made these states so economically ill. Rather than more of the same, it's time for California and other "states in fiscal peril" to become fiscally responsible. |
| Posted by:GolfBravoUSMC |
| #4 Put illegals in the mix and California's budget has the glide profile of a brick. |
| Posted by: DarthVader 2009-12-07 13:24 |
| #3 there's a petition floating for signatures to get an initiative on the CA ballot next year - to switch the State legislature to part-time (like Texas) and cut their pay in half; both in order to get rid of professional pols and to minimize the damage they do with their mischief. (If you're in CA and want to circulate it just note it has to print out on legal size paper) |
| Posted by: Frank G 2009-12-07 12:45 |
| #2 Huge public-employee pension and health care liabilities weren't even among the factors considered WTF? OK, so a "study" of CA's fiscal sit-rep is even worth looking at if it doesn't factor in, uh, one of the largest problems wrecking the state. Gotcha. Sort of like attempting to model and forecast global average temperature without considering, uh, the SUN. Oh, wait ..... Once again, the disappearance of anything resembling a press is key here. Ask most Kahleefornians, about the fiscal problem, and they'll robotically mention something about Prop 13. Not a clue as to how to measure fiscal burden in an apples-to-apples fashion over time (state spending and taxes per capita, state employee headcount per capita, rates of increase, etc.). Not. A. Clue. Of course, they are rarely taught or encouraged to think for themselves, and then they're fed this nonsense about revenue restrictions. This is absolutely characteristic of the broader collapse of national common sense and astonishing level of ignorance or misunderstanding (again, mostly attributable to the lack of a professional, intelligent, serious press). A friend back in NY reporrts that many in his circle robotically list Prop 13 as a major cause of fiscal troubles here. When he corrects them by pointing out that CA has seen a gigantic increase in revenue - by every measure -since '78, they just sit there not knowing what to think. |
| Posted by: Verlaine 2009-12-07 12:22 |
| #1 "The recession put almost all states in a bind," the study observed, "but California, Illinois, Michigan, New Jersey, Rhode Island and Wisconsin have a history of persistent shortfalls." Certainly something for the pattern detection crowd to ponder, at least for a few seconds. |
| Posted by: Besoeker 2009-12-07 07:16 |