Tuesday, May 15, 2012

California Jumps Ahead in the Race to Fiscal Meltdown – Illinois Has Some Catching Up to do If they Are Gong to Be Worse than California

A Fascinating Race to Deficit Disaster

A year ago the state of Illinois was at the edge of a fiscal crisis.  This was brought on primarily by bad government and a public pension plan that needed enormous contributions, money that was not available from the public coffers.  As a result Illinois enacted some tax increases and a lot of budget cuts.  The state still tops many lists of states likely to go under.

California has the same problem but for different reasons.  In California citizens can vote themselves great government programs for things like education and the environment, and they can also vote themselves huge tax cuts.  What this means of course is that they can vote themselves huge deficits, and that is exactly what they have done.

California's projected budget deficit has ballooned to $16 billion, much larger than the $9.2 billion estimated in January, Gov. Jerry Brown said, and he warned of more painful spending cuts.

How did this happen?  The basic way these things always happen, greed and stupidity.

California's financial situation worsened this year after the courts and the federal government blocked hundreds of millions of dollars in cuts to healthcare programs, and Democratic lawmakers refused to make reductions Brown wanted in March. In addition, taxes fell short of expectations, particularly in April, the most important month for income taxes.

So what is going to happen?  The usual, massive cuts in social programs, education, law enforcement and the like.

It's a significant setback for Brown, who began his return engagement in Sacramento by promising to get the budget back under control. Advocates expect the state's financial problems to take an even greater toll on welfare and healthcare for the poor; state workers are also bracing for cuts.

And who is to blame?  Well as usual the Republicans shoulder a large part of it. They wouldn't let Californians vote on a tax plan because they were afraid voters would vote the wrong way.  (You just can't trust voters in a democracy can you, which is why Republicans don't really like this democracy thing.)

When he took office last year, Brown wanted to ask voters once again to extend the Schwarzenegger-era tax hikes. But Republicans blocked his effort to place the issue on the ballot in a special election last spring. Those levies, and other tax changes proposed by Brown, would have been worth $12 billion in the current budget year, according to the Department of Finance.

But this deficit gap is large enough so that everyone shares the blame.  Gov. Brown wants to make up part of the shortfall with higher taxes, but here is one answer to that

Jack Pitney, a political science professor at Claremont McKenna College, said the bad news about the deficit could complicate Brown's push for higher taxes. He said voters may think, "You can't even handle the money we've already sent you. Why should we send you more?"

So the state will be enacting policy to cut spending, reduce the quality of life and maybe raise taxes.  Hence the not very optimistic outlook.  And no, this Forum does not have any better suggestions, so don’t ask.

No comments:

Post a Comment