The View From 1776
Thursday, May 21, 2009
California to Become U. S. Treasury Subsidiary?
Voters having rejected big tax hikes, California looks to the U. S. Treasury for bailout funds. If GM was too big to fail, California seems also to qualify.
Read about it (Is California Too Big To Fail?) on the CBS News website.
An article in Tuesday’s Bond Buyer newspaper reported, citing congressional sources, that the U.S. Treasury and Federal Reserve are considering loan guarantees and “other assistance” to state governments. A House of Representatives committee is holding a hearing Thursday on a bill to provide federal guarantees; House Speaker Nancy Pelosi, a San Francisco Democrat, is in a position to make that happen.
Now, it’s true that California’s fiscal woes are serious, but they’re the result of politicians’ poor decisions over many years. No matter how it’s concealed, a bailout could jeopardize the nation’s AAA credit rating - and invite 49 other governors to queue up outside the Treasury building. (The incentive is perverse: The worse shape your state is in, the more cash you get from the Feds.)
Between the 2004 and 2008 fiscal years, total state spending increased by around 44 percent, far outstripping tax revenues. Debt has tripled in six years. All this is true even though Californians enjoy one of the heaviest income tax burdens in the nation…
Not helping is that neither Schwarzenegger nor Democrats in the legislature are willing to confront public employee unions, including teacher’s unions that enjoy the highest pay anywhere in the country. The Obama administration’s decision to support demands of the Service Employees International Union, which opposed California wage cuts for home health care workers, is no better.
There is, among other things, a Constitutional issue. The readiness and presumed need for states to prostrate themselves before the collectivized imperial power in Washington, DC, is one more in the long chain of steps making the Bill of Rights 10th amendment meaningless. Beginning with President Franklin Roosevelt’s imposition of welfare-state socialism in the 1930s, the tax base, and local police powers with it, has been taken from states and local governments and collectivized under bureaucratic control at the Federal level.
California’s plight exemplifies the disastrous confluence of Baby Boomer self-indulgence, socialist labor unionism, and the socialist welfare state. They combine in a baseless, blind assumption that taxes and extortionate union wages and benefits packages can be increased indefinitely to fund never ending, unearned welfare-state benefits, an evidently inescapable self-delusion that is the essence of liberal-progressivism.
Unfortunately, that neurosis is prevalent to some degree in all 50 states of the Union. As in California, New York public employee unions have trashed Governor Patterson, because of his commonsensical stand that the state’s budget crunch requires spending reductions and elimination of some programs, along with public employee union give-backs or layoffs. Both in California and New York, chief among those labor unions are the teachers, whose educational output quality continues to decline steadily, while their pay and benefits increase at a rate that is several multiples of real economic growth..
In “public be damned” declarations that make 1882 railroad magnate William H. Vanderbilt look benevolent, labor union leaders in New York and California simply ignored economic reality and declared that no spending cuts or union givebacks are needed. They want to keep it all, no matter what the cost to the general public.
Democrat/Socialist Party politicians knuckle under, because the unions are their biggest campaign contributors and biggest source of free campaign workers. And it they don’t knuckle under, the unions will guarantee to defeat them in the next election. When the Mafia does this, it’s called criminal extortion of “protection” money.
Among the liberal-progressive delusional elements, none is more destructive than the belief, which resists every presentation of economic fact, that welfare-state handouts can continue to increase indefinitely, if “the rich” can be compelled to shoulder their “fair share” of taxes. In fact, both at the Federal level and in the states, the top 10% of income earners generally pay more than 50% of all income taxes. At the Federal level, the bottom 50% of income earners pay no income taxes, or very little.
A recent news headline in upstate New York newspapers (Rochester billionaire Tom Golisano changes address to Florida to avoid New York taxes) illustrates the lunacy of this liberal-progressive hardy perennial. The net result of liberal-progressives’ “soak the rich” predilection, which dates back to the inception of socialism in mid-18th century France, is that states’ biggest individual taxpayers leave, taking with them many of the jobs that lower-income citizens need (see Income Tax Destroyed Connecticut Jobs).
California, New York, and other liberal-progressive states are suffering net emigration and steady job losses. The explanation is no mystery to those who are not delusional liberal-progressives: high taxes, miles of regulatory red tape, and strong, socialist unions drive productive individuals and jobs to states that still believe in the ethos upon which the colonists warred for independence and crafted the Constitution in 1787.