FRED WOLFERMAN: For Our Future, Look Toward California
"California, here we come, dum dum dum dum dum dee-dum "
The dum dee-dum part is only there to make the line scan properly. The entire message is contained in the first four words.
Out there in the very tarnished formerly Golden State, something bad is probably going to happen very soon. It will likely be one of two things. Either services will dissolve into something between confusion and chaos, as the government runs out of money to maintain the bloated and overpaid public sector, or, even worse, the federal government will figure out some means to funnel money into Sacramento's treasury, and you and I will become vicarious Californians. It may be very well to look to the feds to backstop a bankrupt state. But with New York, New Jersey, Michigan and who knows who next, it could get very expensive. Besides, with the federal government looking more like a giant California every day, its only available backstop is the printing press.
We all know by now how California attained its present condition: safe, gerrymandered political districts, government by referendum and Hollywood, high taxes, illegal aliens. Yet, even now, government and citizenry alike seem to be in denial. They apparently expect the feds to come to the rescue.
I don't think even this Congress will do that. Californian Co-President Pelosi might ram something through the House, but there are too many senators from states on the paying end of such a proposition to allow it past the Senate. They like their jobs too much to aggravate the folks back home by sending dollars westward. If Congress won't do it, how can the president come up with a deal for California?
The obvious means would be for the Treasury to guarantee California's debt. That would keep it off the federal budget, like all those other trillions of dollars worth of unfunded liabilities. Is that politically possible? Is it constitutional? I don't really know, but if the government can fund banks and automakers, why should California be out of reach?
The problem with guaranteeing debt, whether it is California's, Social Security's, or Uncle Charlie's, is that the guarantee is only as solid as the currency behind it. If you're just going to print money as you need it, you might as well use Monopoly money. California is actually doing us all a big favor. By serving as the proverbial canary in the coal mine, it is offering a foretaste of what we can look forward to when our fiscal house of cards collapses.
On a related subject, I spoke the other day to an executive in Chicago who works at the headquarters of a company with locations in every state. He told me that every employee in the company has taken a mandatory pay cut between 2 and 12 per cent. Welcome to the real world, government employees. Is anything like that happening in California? In Washington?
The rationale for maintaining or increasing government employment levels during a recession is that it replaces lost jobs in the private sector and keeps money going into the economy. Well, yes, but whose money is it? By definition it comes from the private sector, which responds by eliminating more jobs or, like the Chicago company, reducing wages.
This cycle is presently being broken by borrowing money to keep the public sector fat and happy without taxing the private sector to death -- yet.
California is in the process of demonstrating that this cannot go on forever. Even the ability to print your own money will take you only so far. While most states and local governments are struggling to live within the limits of diminished incomes, the biggest spenders play on as if the game will never end.
California, here we come
Fred Wolferman lives in Southern Pines. Contact him by e-mail at firstname.lastname@example.org.
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