Saturday, January 03, 2009

California Will Be Bankrupt Before General Motors 

The following was posted as a comment to Ronnie Schreiber's piece at Pajamas Media.

I like Fighterdoc's analysis. As one who lives in California but who has old onnections with, if not roots in Michigan, I agree that both states (to follow Fighterdoc's analogy) should be in the ICU, but Michigan just might follow doctor's orders, while California is still in denial.

There are actually a lot of similarities between the two states, chiefly the dichotomy of the urban industrial and the rural agricultural, with the latter actually producing more value. I have long said that Los Angeles is Detroit with palm trees, and I believe that California is headed for a "payless payday" as happened in Michigan in 1959, and which led directly to the revised state Constitution in 1963 that Ronnie refers to.

The real problem in California is due to gerrymandered safe seats in the legislature, which has allowed the development of a political class that is anything but answerable to the voters, and instead is beholden to special interests such as the teachers' union and the prison guards' union. California has been an eager participant in the Nation's credit binge which led to the economic collapse of last fall, but unlike most of us, the state of California continues to live beyond its means. Even now, with the fiscal crisis in the state coming rapidly to a head, the legislature will not consider reducing spending or laying off a single state employee. Term limits didn't help, because each legislator leaving office due to term limits is replaced by a clone who is owned by the same special interests and holds the same political philosophy.

I believe that raising taxes in an already high-tax state is not the answer, because in response companies and people will relocate to more economically friendly states like next-door Nevada and Arizona, and even Texas and Idaho. Cutting spending and removing restrictions on how existing funds are spent is the only answer, and the people of California will have to get by with fewer State services. Unfortunately, the politicians' mindset is to extort higher taxes from the populace by first cutting things like police and fire protection rather than paring back unnecessary pet projects and easing stifling regulation.

Just watch folks -- in a couple years California will no longer be known as the Golden State, but rather as the New Jersey of the West. Or maybe the Mexico of the North. (Cross posted to my blog.)

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