With the State Senate adjourning for the night, a $14.4-billion package of outrageous tax hikes remains precariously close to passage.  This got me thinking about how good a thing it is that California doesn’t have certain tools the federal government has.

Things like simple-majority legislative approval for tax increases, or its own currency.  With control of money supply, the feds are currently preparing to try to spend our way out of a recession with money they don’t have.  Of course California has tried that, in a way, by borrowing just to get by.  This has resulted in postponing structural reforms to the point that California’s tainted credit will limit further borrowing.

So what other options does California have?  Well, there’s tax increases, which are only an option when approved by the voters or two-thirds of the Legislature.  Yet even the federal government realizes that increasing taxes can have destructive effects on a weakened economy.

The other tool California government still has is budgetary and governance reform.  If state leaders had the will – inspired by the threat of bankruptcy perhaps – they could fundamentally reconfigure the size, scope and role of said government.

Imagine building infrastructure on a pay-as-you-go basis, instead of funding things like in-state college tuition for illegal aliens and then asking the voters to borrow to pay for infrastructure they actually already paid for.

We’ve become a state that insulates people from the consequences of bad decisions and spreads that misery among those whose only questionable decision is remaining in California.  The result is devastating, sociologically and financially.

There are myriad examples of this culture.  It’s a culture that encourages wasteful spending.  Two recent faces of this culture are the “Octuplet Mom” and Clark Kelso, the federally appointed California prison “Receiver”.

Nadya Suliman’s recent birth of eight children has given her a running total of 14 kids.  Her $165,000 settlement with the State of California is allowing her to live her “dream” of having a large family.  The State, no less, has enabled her to have 14 kids with no father.

When asked if she was wrong for having so many kids while on welfare, she responds simply that she will go back to school and live on student loans that she doesn’t consider to be “welfare”.  Three of her prior six children collect disability from the State – disabilities resulting from birth defects likely caused by being born prematurely.  The State of California will most likely have to support these children for the rest of their lives.

Meanwhile, in Sacramento, Attorney General Jerry Brown is arguing in court (He’s got this one right) against Receiver Kelso’s prison “reforms”.  The $8-billion plan would include regulation-size basketball courts, and music, art and yoga therapy rooms.  The most likely alternative, according to a three-judge federal panel, would be to let tens of thousands of criminals out of prison early, without parole.  Because of the specter of San Bernardino County’s share of those criminals (about 5,000 to 7,000) running loose, the state and counties like San Bernardino are vigorously opposing early releases, arguing that the state is on track to build adequate prison capacity.

These are only symptoms of the root problem.  From welfare abuses to luxury prisons to not enough prisons, our state will not get its fiscal house in order while its resources are being squandered, and often beyond the control of elected policymakers.  Even while the current budget year dragged on, with full knowledge of the ballooning deficit, welfare benefits were allowed to increase.  So again, without fundamental reform, the state will be in this same situation, only worse, next year.

Even with Republican Senators holding out against the current proposed budget deal that includes $14.4 billion in tax increases, I wonder how long the public will tolerate what it mistakes for pointless legislative gridlock when the state actually runs out of money.

The state Controller is already (probably illegally) withholding federal welfare dollars from counties that are required to provide those services.  Some counties are threatening to retaliate by withholding the property taxes they collect on behalf of the state – the majority of which goes to schools.  Counties are strapped due to downturns in sales and property tax revenues, lost jobs and unfunded mandates.  San Bernardino County’s current nut to crack is about $140 million.

In the end, when the pressure becomes too great, spending reforms probably won’t have the teeth to fix the chronic structural deficits, while the tax hikes will chase more productive businesses and citizens out of the highest-taxed state.  This will likely leave behind a spiraling cycle of more welfare, less jobs, less opportunity, less wealth, less freedom, and less hope for economic recovery.

As for the next hours and days in Sacramento, the dice have been rolled and our money is riding on a razor-thin margin of Republicans denying the two-thirds vote for tax hikes in the Senate.  Let’s hope they hang in there for the long-term good of the state. 

Opportunities like this don’t come along often.

This entry was posted on Sunday, February 15th, 2009 at 12:00 am and is filed under Blog Posts.