Here's Paul:
It is worth unpacking this a little. What exactly does "cut spending" mean? For states, remember, it almost always starts with schools and social services. Indeed, in Gov. Arnold's plan to shave the deficit, he calls for $16.5 billion in spending cuts. Almost half of that -- $7.3 billion -- comes from three items: cutting K-12 school funding, cutting UC and CSU budgets, and cutting grants to the federal minimum for the poor, blind and disabled on supplemental income.Instead of seeking federal aid, California should cut spending, rethink some of its unsustainable public pension programs, tame down the expensive and failed drug war, and repeal regulations that discourage economic growth. According to a 2008 piece by The Independent Institute's William Shughart, the state owns more than 20,000 buildings and 6.7 million acres of land, a portion of which is "surplus" property that could be sold to private owners.
I'd like to offer a concurring opinion to Paul. I don't think we should bail out California before we force it to change a broken tax-and-spend system that is uniquely designed to make balanced budgets forever impossible. But that doesn't mean we can't do anything for the state. One idea that's caught my eye is to funnel stimulus money to the state ahead of schedule to help the short-term holes in education and social service spending. We would tell California that they weren't getting any more money now than was originally earmarked for the state, but they were going to get it faster. That way, California would have the not-worst of both worlds: enough short-term cash to keep from floating off into the Pacific, and the understanding that the non-Californian taxpayer wasn't going to pay for mistakes of the California taxpayer and the Sacramentans they elected.
You'd better hope California manages its budget without a bailout. If we can't (I'm in Sacramento), then I doubt the U.S. as a whole will manage any better. We'll just borrow and spend until someone takes our credit card away.
Of course, CA could "cut" education and welfare spending by raising the retirement age of teachers and social workers to 65. Think that will happen?
Also the "cuts" are to budgets that grew exponentially in the first place, with no discernible improvement in results, mostly at the behest of the unions. Every time any state, or locale, tries to "cut" anything, the unions go into all out war mode and try to scare the voters into thinking that the world will all apart.
In the mid 1970s New York City went belly up and President Ford refused to help. Guess what? NYC survived.
California has painted itself into a corner because, for at least fifty years, pressure groups have sold propositions to the public to put spending on auto-pilot, sell bonds for insane, but "feel good" projects like the mag-lev train from Disneyland to Las Vegas. These things are written into the Constitution, and the Governor does not have the authority to say no.
And, of course the business climate is horrid. Big companies like Intel have not built a new factory in California for years. Permitting is very difficult, and it may take years to get necessary permits. California newspapers published an article about some California executives who went to a neighboring state and were greeted by every single permitting authority who furnished the permits they thought were needed, and they finished the whole permitting process in one week, when it might have taken a year, or more, in California. So, companies just leave and highly paid executives leave too. The population continues to grow with illegal immigrants who do not pay taxes.
And, in 2010, the state will start phasing-in the Energy Cap and Trade law which will make California business uncompetitive. So, California is not just suffering from reduced tax receipts it seems the state is committing suicide.
The only thing which will work is to have a Constitutional Convention and rewrite decades of stupid provisions, but, it seems the corrupt Legislature will probably get its way and actually make things far worse. After all, the state has been run into the ground by crooked politicians who have had no shame.
Why change now, what is a hundred billion dollar deficit mean?
"We would tell California that they weren't getting any more money now than was originally earmarked for the state, but they were going to get it faster."
I like that idea. I think we should our money early too in Pennsylvania because things are also pretty tough here.
"We would tell California that they weren't getting any more money now than was originally earmarked for the state, but they were going to get it faster."
Yes, because that worked out SOOOO well with GM...
/sarcasm
Seriously though, before California gets a dime of Federal bailout money they should have to make some tough decisions while the pressure is on them to do so.
Re: "What exactly does "cut spending" mean? For states, remember, it almost always starts with schools and social services."
1 - Its not as if there are not other things that CA spends money on.
2 - Why should schools and social service never be cut? Esp. when your calling what's really a slowdown in growth a "cut", but even for cuts in real (or even nominal) terms? If the state can not afford to spend so much in these areas than it should spend less, esp. in the areas where a lot of additional spending has shown little in the way of practical results.
Instead of seeking federal aid, California should do what every other state should also do and fire a lot of government staff in different divisions. I had a contract with a Division of Oil & Gas for a while. The field office I was at had 20 employees of which 2 or 3 had actual work to do, and the rest played on the internet or gossiped all day, every day. This is typical of most state offices, especially in California. If the state ran all various division offices the way a prudent small business did, we could save billions in the state budget.
Mark, I like your story. Sounds like Gorky's department store in Moscow 20 years ago. Communism Russian style, anyone?