But lo, how the mighty have fallen.
If you thought Washington's stimulus debate was depressing, take a look at the long-running budget spectacle in California. The Golden State's deficit has reached $42 billion, Governor Arnold Schwarzenegger is threatening to furlough 20,000 state workers (go ahead, make our day), and as we went to press yesterday Democrats who control the legislature had blocked lawmakers from leaving until they finally get a deal.
It's sad to watch. The Golden State -- which a decade ago was the booming technology capital of the world -- has been done in by two decades of chronic overspending, overregulating and a hyperprogressive tax code that exaggerates the impact on state revenues of economic boom and bust. Total state expenditures have grown to $145 billion in 2008 from $104 billion in 2003 and California now has the worst credit rating in the nation -- worse even than Louisiana's. It also has the nation's fourth highest unemployment rate of 9.3% (after Michigan, Rhode Island and South Carolina) and the second highest home foreclosure rate (after Nevada)...
The tax increases will continue to chase even more productive people out of the state. For at least two years, the sales tax would rise by one percentage point to 8.25% and the income tax by 0.3% to a top marginal rate of 10.56%. These will both be the highest statewide rates in the nation (see chart).
We used to say, "As California goes, so goes the rest of the nation." I pray that's no longer true.
3 comments:
Now that California's legislature has passed the bill, with the help of Republicans including the governor, to cut spending and increase taxes to close the deficit, what do you see happening?
Considering the huge shortfalls, what were the alternatives? Is it all about spending cuts? Does California spend that foolishly?
It would seem with the high property values and industry, the state would be able to make its budget?
Having read the NYT story on California, I hope we aren't going that way as well. What I find disturbing is that while California's social/welfare/"green" programs have added much to their economic demise, Pelosi and her merry band seem intent, even driven, to Californicate the rest of the United States. Talk about a slow learning curve....
California will continue to go deeper and deeper into debt. Our social spending is out of control, and this budget doesn't stop it.
As far as getting a budget passed "with the help of Republicans", such a comment bespeaks a Democrat bias. The Democrats, which have run both houses of the California legislature as long as I can remember, needed only to get a couple Republicans to sell out in order to pass the budget deal. I'm trying to find the final vote in each house, by party, but so far haven't found it. My guess is it will be somewhat close to that of the federal porkulus vote.
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