Living Within Your Means: California Edition

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Charles Dickens

“Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”
H. L. Mencken

Californians turned down their governor’s attempt to right the wreck that is California’s state government:

SAN FRANCISCO (Reuters) – California Gov. Arnold Schwarzenegger and lawmakers will likely face the arduous task of closing a state budget gap in excess of $21 billion with a clutch of ballot measures aimed at bolstering the state’s finances poised for defeat.

The Republican governor last week said the government of the most populous U.S. state faced a shortfall of $15.4 billion for its next fiscal year even if the measures were approved — underscoring the severe downturn in state revenues with personal income in California shrinking for the first time since 1938 amid recession and double-digit unemployment.

Without voter approval for the measures, California would face a $21.3 billion deficit, according to Schwarzenegger, who with the state’s Democrat-led legislature put the measures to voters as part of a February budget compromise to close a nearly $42 billion shortfall through June 2010.

Initial results for Tuesday’s special election posted by California’s secretary of state showed voters soundly rejecting the five fiscal measures on the ballot. A sixth measure barring pay increases for state officials amid deficits was winning.

Some, like Michael Finnegan, writing in the LA Times are quick to blame the voters:

Californians are well known for periodic voter revolts, but on Tuesday they did more than just lash out at Gov. Arnold Schwarzenegger and the Legislature over the state’s fiscal debacle.

By rejecting five budget measures, Californians also brought into stark relief the fact that they, too, share blame for the political dysfunction that has brought California to the brink of insolvency.

Rightly or wrongly, voters in the special election refused either to extend new tax hikes or to cap state spending. They also declined to unlock funds that they had voted in better financial times to set aside for special purposes.

Many are blaming only the voters but IMO that’s a bum wrap. First and foremost in the list of those to blame should be California’s governor and state legislators. There’s more to leadership than doling out largesse. Neither Gov. Schwarzenegger nor California’s state legislators succeeded in making the case to the voters of California that the additional taxes were necessary. That’s their job. Deciding to spend money is easy. Paying is harder.

The idea California should receive a federal bailout is poppycock. When somebody is in the process of shooting themselves in the foot if we’re moved by pity to do something about it the proper approach is to take the gun away from them, not to let them fire away, then dress their wounds and shoot them full of morphine.

Megan McArdle points out that letting California go bankrupt will have consequences:

I am not under the illusion that this will be fun. For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you’re going to pay as a result. Your states and municipalities will pay higher interest on their bonds if California is allowed to default. Also, the default is going to result in a great deal of personal misery, more than a little of which is going to end up on the books of Federal unemployment insurance and other such programs.

Ultimately, not just Californians but all of us must learn to live within our means. One of the things that means is that when there aren’t the tax revenues to pay them government employees must not expect raises and, indeed, may even face pay cuts. I’ve read California’s budget (which is probably more than most Californians, even California legislators, have). The state’s expenses aren’t just growing faster than revenues, they’re growing faster than the streams on which the state’s revenues depend: income, real estate values, retail sales. They’re growing faster than the state’s population and faster than the rate of inflation. And most of those expenses are wages, current or deferred.

11 comments… add one
  • I disagree with one part of your analysis: California voters ARE to blame for this crisis. It is a democracy, after all. Now if this were a situation were everything had happened suddenly, with bad decisions only by the current crop of elected officials then the voters might not be entirely responsible. But since this has been brewing for years and years and election cycle after election cycle then the voters shouldn’t be allowed off the hook.

    The same holds true, of course, for the country as a whole.

  • Of course California voters are partially to blame. But the blame lies elsewhere, too. Neither California nor any other state in the Union has a democracy. They are all representative democracies dominated by two major political parties and regulated to keep it that way. No real competition is possible and the two major parties are in implicit collusion (thanks again) to keep it that way.

    The voters in California don’t have a choice between one party that’s in favor of a fiscally prudent government that can provide the services the people of California need and another that isn’t. They have the choice between two parties, each of which is profligate and doesn’t believe in limited government.

  • Eric Gersh Link

    As I native Californian, I’ve watched my state descend into this morass over many years. I’ve lived elsewhere for many of those years but have despaired of a solution since returning home over 10 years ago. The roots of our problem lie in our insane state budget process whereby we require a super majority to simply pass a budget. That combined with a sclerotic political system that exists to protect the safe seats of the existing legislators gives little to no impetus to creatively solve our fiscal and other problems.

    Yes, there are other issues as well but these two problems are mirrored everywhere else. It’s as if they are cancers that have metastasized throughout the state in most of the state organs, including education. I’ve been teaching part time in the public school systems for the past five years so I know from whence I speak.

    I was in favor of the package of propositions routed at the polls yesterday but only because I felt the short term alternative was clearly worse. Tossing this back to our stalemated and ineffectual legislature is unlikely to result in a workable solution. It may truly come to default and a collapse of the system before we can rebuild.

    And I will place most of the blame for that at the door of republican legislators. They refuse to even consider the revenue side of things. Their position is clearly that the current system should come crashing down rather than be reformed. They see taxes and government services as an unalloyed evil. I think they will find themselves boiled in the stinking brew they’ve helped cook up for the rest of us. Their constituents will be less than amused when their already declining services begin to disappear.

  • Drew Link

    Eric –

    As I understand it, California spending trajectories far exceed comparisons to reasonable benchmarks like population growth and inflation. Why do you conclude that the evil is to not capitulate and continue raising taxes? (without bound)

    Icepick –

    During the election season I authored a piece for another blog site the essence of which was your question: “why do the voters continually fall for politicians empty promises, election after election after election?” As I wrote: (I think it was after the Pennsy primary debate) “Obama tells you if elected he’ll give you cake. Clinton responds, if elected, I’ll see the cake and raise you ice cream. Obama: Oh, yeah? Cake, ice cream and 3 candy canes…..” “….the embarrassing and crass process of escalating promises made you want to avert your eyes….”

    And yet this is our political process and practice of outrageous populist promises since William Jennings Bryan, if not before. And the actual results? “Poor” would be generous. Personally, I just don’t get it.

    Dave responds, I think largely correctly, (paraphrased) “what do you expect when your choice of parties is really bad vs really, really bad.”

    However, that always leads me back to the same theme. Yes, each party is pathetic, but that is simply the prime argument for limiting government, and therefore their influence.

    If you bother to read my musings here or over at OTB you’ll sorta, kinda catch that drift………square in the face like a punch.

  • Dave, I apologize for my sloppiness. You are correct that the states have representative democracies, not actual democracies. I should have been more careful after years of trying to explain to people that the US has (or had) a republican form of government and not a democratic one.

    Still, whether it be a pure democracy or a representative democracy, ultimate blame rests with those who are voting. We have two bad governing parties because we don’t want a GOOD governing party. The elected officials can rig the process in all manner of ways, but third party and no-party candidates can still get on ballots, and they could get elected if a significant number of voters actually wanted to listen to them and vote for them. (Everyone says they want good government, but very few mean it.)

    But instead of acting like we should ideally, we act as we must according to our nature. And that means that people will always vote for bread and for circuses, and for the government to supply everyone with a lollipop-farting unicorn. (Representative democracy and pure democracy will both fall to this curse. The differense is that in a represetative democracy it’s easier for the well-connected to steal more than their fair share of ill-gotten goods.)

    Drew, I’m very aware of the pluses of limited government, but that hardly matters anymore. Americans haven’t wanted limited government since the early 1930s, at the least.

  • I have to agree with Icepick. Since getting fed up with lack of sincerity and integrity in our 2 party leadership decades ago I committed myself to a strict philosophy: voting anti-incumbent. Let ’em serve and vote ’em out. If people would stop being so complacent and give it a shot for a few sequential elections we’d start seeing some change.

    I got a kick out of my stepfather, who swore I was wasting my vote on independents, third parties, and alternating main parties. I rebutted that the real wasted vote is the one that perpetuates a corrupt status quo. And then not but 2 weeks later he was complaining about the “stupid voters who keep returning the same crooks to office”.

    US citizens want it both ways: they want the system to be corrected, but they don’t want to be the ones doing it while still griping about everyone else…

  • Brett Link

    Could they break up the state into smaller pieces? That’s not an option I particularly enjoy (and it’s obviously not going to be on the table), but consider that California, at 37 million people, is essentially the size of a decent-sized country, and it shows in the political arrangements (even taking away the rampant gerrymandering, the average state representative represents, what, a million people – more than the national representatives?).

  • Brett, considering that California is the size of a decent-sized country, perhaps we ought to consider breaking up the US as a whole. (That’s not sarcasm, BTW.)

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