the real comedy tragedy is California
a few paragraphs from part #4 in "Ass-Backward Economics"
the golden state will eventually erupt into social unrest
should be out later this week
/ jim
California’s unfolding tragic comedy represents a true microcosm of US fiscal distress at the state level. Many (including me) have observed this enormous state from afar as surreal, idyllic, and thoroughly detached from reality. Few seem to understand the state’s woes originate from the tech/telecom/internet boom, from massive capital gains taxes flowing into Sacramento’s coffers. The state embarked on a wild spending binge in the late 1990 decade that only recently has abated in the face of default. The state legislature was more than eager to accommodate the profligate socialist programs, confidently assured of endless expected revenues. Seeing actor Arnold Schwartzeneggar vie for the governor post against the bright upstart Arianna Huffington and a former Olympic administrator Peter Ueberroth, I want to laugh and cry at the same time. Toss in the diminutive ex-actor Gary Coleman, the porn publisher Larry Flint, and even a porn queen, and you have a theatre of the absurd. What a microcosm of the American political stage and its microscopic financial intelligence quotient !!!
Foreign media must regard our leading state as a total joke. Perhaps it is just that. Of one thing we can be certain. Whoever effectively guides this lost state through the financial morass will be utterly hated and despised. The only way out of the fiscal duress is to cut back in committed spending, while raising taxes not at all. Initial action saw 40,000 teachers dismissed from their jobs, but not one single burokrat. Not one token job dismissal was given to the energy regulatory commission, whose price caps caused electrical brownouts. Politics as usual prevails, as the productive are fired. Brutal job cuts and budget cutbacks must occur. Plenty of tax hikes have been installed, discouraging healthy companies from remaining as bagholders. The most likely result of official policy response will be to exacerbate the financial situation, not remedy it. Eventually resentment will be overflowing. Civil unrest could easily erupt. This state is by far the most insane I have ever seen. They give illegal immigrants social program benefits and driver’s licenses. They even have mandatory prison inmate organ transplants. They boasted in 2000-2001 of the broadest and most diverse expanded social programs in the nation. Expansive socialism at the state level sounds good, but leads to state default.
Many other states suffer similar distress. In my native Pennsylvania, police officers and teachers are given pink slips for layoff. The state legislators in Harrisburg decided in 2001 to cut back school funding by 50%, which led to doubled local property taxes. While jobs are cut for those who do actual work, and provide valuable services, welfare rolls are left intact. Those same state senators routinely bill for lavish lunches to lobby groups and constituent groups, despite per diems for meals. If not inept, then corrupt. Meanwhile, PA road systems are the most potholed in the nation. Everything nowadays is backwards.
My eye is keenly set upon California’s inevitable attempt to issue legal tender money. Talk may be followed by action in state coupon issuance to contractors, rumored this past spring. Federal court challenges may ensue. A grand intrigue is underway. Within a few years, this nation might behold state secession movements, in order to wrest control of the power to print baseless money in the face of fiscal duress never experienced in our history. A California Coupon could be construed to be a state currency. To date that counterfeit privilege is the sole sovereign right of the federal govt. Heavily indebted states will covet such privilege and share willingness to risk local price inflation. Fiscally sound states like Idaho might want to distance themselves from the inflationary destruction of neighboring state efforts to do so. A fierce battle to keep our states in the union might well develop. It is all a comedy, a tragedy, a reality which typifies our entire nation’s financial folly. If you believe I am way off base, just wait two years. |
