Tuesday, January 27, 2009

California's Cluster**** Is A View Into America's Future Under Obama

California is a microcosm of the federal state under the policies of Barack Obama.

When economic turmoil hit the tech and tourism economy in 2001 and 2002, California's answer was to increase spending and borrowing to "stimulate the economy." Government payrolls surged, new departments sprang up like weeds, regulations and tax increases choked commerce, and California became a pariah for the productive -- with the highest level of net outmigration of middle class workers of any state in the country (including basket cases like Michigan).

California, like Obama, believed that government could create "green jobs" with borrowed money.

California, like Obama, borrowed cash to spend on lavish public works projects.

California, like Obama, created "free" health care for everyone.

California, like Obama, made college "free" for most residents.

California, like Obama, increased taxes on "the rich," implemented environmental taxes on different classes of cars, penalized driving, and cranked up fares on public transit in the Bay Area once that became a monopoly form of transit for many commuters.

Fast forward to today -- California is bankrupt.

I received a letter from the state informing me that my estimated $2,000 tax refund will be delayed and effectively, I'll be getting an IOU from the state for the money.

State contractors, companies and individuals owed money by the state, and state employees will also be receiving IOUs -- many in lieu of paychecks.

Try as the Governator might, he cannot convince banks to take California IOUs as "same as cash" instruments. And nobody is lending money to California because, well, it's broke and unlikely to pay the money back.

California will probably demand, and receive, a large bailout from the rest of the country. It will probably blow through that and be back in crisis in a year or two, as the massive growth of the state's government continues to crush its poor citizens. It will likely persist in its deadbeat status for a long time.

But when America as a country reaches the same point, who will provide IT with a bailout?

You cannot continue spending trillions of dollars that you don't have and not eventually go broke. California is illustrative of that.

If Obama wants "change," he should start by changing his policies, which as implemented in California have led to the ruin of that once-dynamic economy.


Anonymous said...

"...he cannot convince banks to take California IOUs as "same as cash" instruments...."

Someone might litigate that there is a constitutional ban on states issuing paper currency.

Tyler Nixon said...

"You cannot continue spending trillions of dollars that you don't have and not eventually go broke."

I think spending trillions you don't have is the definition of being well past broke.

The problem is that they don't want to stop the runaway train from steaming ahead, until it derails into the big hole they have dug...right on top of all of us.