California’s budget woes combined with poor economic results have long made it a poster child for poor fiscal management. The state’s credit rating has been downgraded to an A- by S&P, the lowest rating for any U.S. state, and its budget and pension shortfalls are infamous. Even more so than in other states, the main political challenge for California’s politicians will be to put the state on firm fiscal footing. Given the state’s poor current condition the rotten condition of its non-Hollywood, non-Silicon Valley economy, this process is bound to take years.
Governor Jerry Brown returned to the state house in 2011 with a plan to at least begin to tackle the state’s deficit. Like many other Democratic governors in similar straits, Brown has had to break some hoary blue taboos and made serious (though evidently not serious enough) cuts in spending and public sector employment.
Brown has fought, but progress has been short-lived, and on Sunday he was forced to to deliver some sobering news: State revenues have come in much lower than expected, some of his budget cuts did not work as well as hoped, and the projected $9 billion budget deficit will instead be $16 billion. Brown is now asking California voters to support a tax hike, aimed mainly at the wealthy.
Via Meadia has long thought of California as a failing state. A mix of tight regulatory and environmental restrictions that satisfy the aspirations of rich Californians with an influx of low skilled immigrants who desperately need a wide open economic environment even if that means lax regulations would be difficult to manage under the best of conditions. California’s powerful public unions with their culture of entitlement makes it all much harder; so too does the state’s messy governance with referendums and legislative deadlock combining to produce a truly dysfunctional system.
It is all getting worse in a dismal cycle. New business is stifled even as many employers and successful people flee the state or opt not to go there in the first place. The housing bubble covered over some of California’s starker problems, but it will be some time before the residential construction industry picks up again — especially if the rest of California’s economy continues to languish.
Behind it all is the reality that California is too large and too diverse to be effectively run as a single state. The regional and economic differences among the voters produce political gridlock and the huge size of the state with its many expensive media market make the power of special interests even greater than in most of the rest of the country.
Governor Brown is now asking Californians to pay more for less: to raise taxes even as services decrease. In effect, he is behaving like the Greek and Spanish governments — offering voters nothing good, reduced to arguing that all their choices are worse than the swill he is asking them to drink.
He may well be right in the short term, but you cannot lead a state like this. California needs leadership that can offer a way out of the state’s current dead end. That involves a clean break with much of California’s current orthodoxy and it inevitably means a grudge match with the unions — or at least with some of them.
Currently, Californians seem bent on marching down the road to ruin; at some point, however, they will have to change direction. Via Meadia would like to see more public policy groups and others starting to work out the plans for a turnaround; California will needs ideas because sooner or later Californians will wake up, look at the wrecked state around them, and realize that big changes are needed.