If you make $100,000, but you’re spending $200,000, you’re either going to use up your savings or go bankrupt. Individuals and families know this; we all live within our budgets.
However, that fiscal discipline seems to be an afterthought for most states and the federal government. The people have had enough of tax increases (even here in California no tax increase passed in the November election), and want government to live within its means. A limited government.
California’s budget deficit is something like $30 billion. The state’s revenues are about $75 billion. The day of reckoning is here. Republicans aren’t going to agree to tax increases. Their constituents are fed up, and want a smaller government.
Meanwhile, California does almost everything it can to drive business out of state. The regulations that a business must comply with in California are lengthy. Every week I see in the Register another business that’s moving out of California.
True, businesses move all the time, and some of this is inevitable even if California were a business-friendly state. But California is making it hard even on entrepreneurs. Why is Texas, a low-tax, low-regulation state prospering? Why is it that the two states which have the most budget issues, Illinois and California, are run by Democrats? I don’t think it’s a coincidence.
Joe Kristan has an interesting post on the issues in Wisconsin. He states,
Tomorrow’s here. Government defined benefit funding deficiencies range from serious (Wisconsin, for example) to catastrophic (Illinois, California). By having some current compensation diverted to fund their retirement plans, Wisconsin employees are finally facing Mr. Johnston’s theoretical trade-off in real life.
In California, government pensions are going to be cut; the alternative is perhaps increasing income tax rates by 50% (and that’s just not going to happen). This may occur next year, or ten years from now, but it’s inevitable. California is bankrupt; we just continue to operate with the facade that all is well.
Not only are pensions going to be cut, but state agencies will be, too. There just isn’t the money to fund every agency. This will likely force a cutback in regulations, as there just won’t be the people to administer every regulation.
One area where I think we’ll see this first is in higher education. There have been several new state universities and schools within universities (both in the University of California and California State University systems) open in the past few years. For example, a friend of mine is attending the new UC Irvine School of Law. Some of these colleges and universities will close. (I don’t necessarily mean the UCI School of Law; just that some of the new schools and colleges are likely going to be victims of budget cuts.)
I’m not a fan of public employee unions. In Irvine, my garbage is picked up by Waste Management (a private contractor). I pay about $36 a quarter for garbage collection. My mother lives within the City of Los Angeles. Her garbage is picked up by the city (by public employees). She pays about $36 a month. I don’t think the difference is a coincidence.
I doubt that the bankrupt cities in California (such as Los Angeles) will voluntarily privatize their public services. Yet it’s far more likely that once a large California city, county, or other public entity (besides the state) declares bankruptcy–and it’s inevitable that this will happen–that we’ll see a flood tide of privatization. It’s pure economics: If Waste Management is willing to pick up garbage for $36/quarter and it costs a city $36/month, so what that unions and union employees lose their jobs. Unfortunately, it will probably take a city such as Los Angeles declaring Chapter 9 Bankruptcy in order for privatization to take hold in California.
Will California bite the bullet and make expenses match revenues? With Democrats in control of the governorship and the state legislature, the chance is about the same as it snowing in Irvine. Well, it almost snowed in the flatlands of Southern California this past weekend. I suspect that it will almost get resolved…and then there will be yet another smoke and mirrors budget.
Hopefully, I’m wrong and Governor Brown will do the unthinkable (for Democrats): confront the problems that California faces. I’m just very skeptical that this will occur.