Thursday, December 18, 2008

California: A Warning for All Other States & Provinces

More California Dreaming [Victor Davis Hanson]

One of the strangest things about the current California meltdown is how no one in state government here ever pauses to ask simple questions like: Why do we have the largest annual deficit with one of the highest sales tax and income tax rates in the country?

Anyone who charted the annual state budget increases over the last 10 years and adjusted for population and inflation rises would conclude that the state has decided to take over all sorts of previously private responsibilities and to ensure state employees and various dependents a level of compensation that is not sustainable.

It is not as if California decided about 10 years ago to invest to ensure we had state of the art freeways, university campuses, ports, airports, dams, canals, and power infrastructure. Instead, it was too often redistribution rather than investment. It is not like we can get out of the mess by simply stopping all construction when a vast public work force with pension and salary claims, along with entitlements and welfare, take the lion's share of the budget.

Meanwhile, tens of thousands whom we used to count on to pay our nearly 10% state income rates continue to flee the state. All the past sleight-of-hand borrowing, reliance on inflated real estate, lotteries, bonds, etc. have already been tried. Now we hit the wall of reality, whose iron-clad law — when you have no money, you really have no money — cannot be so easily demagogued away.

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