Monday, March 12, 2012

A list does not an argument make

I received an email from a friend today. It contained a message that had undoubtedly been forwarded a thousand times. At the top was the heading "The Reason California is Broke and Will Remain Broke". Below the heading was a long list of California state agencies.

And below the list were twelve words:

 "This, and all the pensions that go along with them! Any questions?"

Yes, I did have a question: What is the actual relevance of this long list of agencies to our current financial crisis? I mean, a list (even a great big long list) does not an argument make.

It shouldn't surprise anyone that a state whose economy is bigger than all but seven countries in the world has a large bureaucracy, and no doubt there is waste somewhere in the system. But is the mere fact that there are so many state agencies "the reason California is broke"?

To quote a friend: "It's a longstanding canard that waste and inefficiency are the at the root of our budget problems." But there's no denying the fact that, as a state, we're broke.

So how did we get that way? I mean, we have Hollywood and Silicon Valley. We have aerospace, tourism and a thriving wine industry. We're an agricultural super-power, and we have fantastic and diverse natural resources. Hell, We have Disneyland and the Lakers!

So why are we broke?

First of all, those industries and resources are all hurting, or threatened, in one way or another. We still have a fantastic economic infrastructure, but it's taken a few body blows lately.

In the past few years, we've seen real estate tank (2007) and financial markets implode (2008), both  symptoms of a massive and over-arching credit crisis that was born, not in Sacramento, but on Wall Street. [Watch this.]

And we're not out of those woods yet. The credit crisis kicked our state where it hurts, and we responded by borrowing yet more money, while still maintaining high expenditures (to please the left) and low tax rates (to please the right). As the economy continued to suck, unemployment went up and consumer spending went down. Fewer dollars from both consumers and investors meant even more people lost their jobs (and their employer-provided health benefits), and consequently the cost of social services (including but not restricted to unemployment insurance benefits) went up, leaving even less money for re-investment and job creation.

Plus, more Californians are retiring than ever before. All those post-war baby-boomers are hitting retirement age right now, and a lot of them receive state retirement benefits. Coincidentally, our retirement system investment portfolio got taken to the wood-shed just like everyone else. (See financial market collapse, above.) As a result of both factors, state contributions to pension and retiree health programs have had to be increased substantially.  Call me a socialist, but I don't think we should stop paying retirement benefits to long-serving state employees just because Wall Street masturbated itself into collapse a few years ago.

State contributions to pension and retiree health programs for state employees, as well as contributions
to the teachers’ pension program, have increased substantially in recent years. [Src: CA LAO]

But who is the biggest culprit of all? I hate to be the one to say it, but... It's you.

Beginning with 1978's landmark Proposition 13, California voters have passed several major ballot initiatives that restrict the state's ability to collect revenues from taxes. Our state has caught the anti-taxation fever, while maintaining a crazy-high standard of living. As a state, we are spending money we don't have.

And THAT is why California is broke. I think. (Maybe not. Ask an economist.)

Look... California is an immensely large and populous state, with the nation's second highest unemployment rate. (Congratulations, Nevada.) We have an immense, beautiful and fragile coastline. We have nuclear reactors, oil fields, particle accelerators, weapons laboratories and more colleges and universities than any other state in the union. We have the nation's biggest and most complex highway system, and three of its busiest sea ports. And I'm pretty sure we have  the most toilets in America.

My point is... there's a lot of shit to manage.

We need a variety of effective government agencies to monitor, regulate, patrol, educate, facilitate, protect and improve our state's population, infrastructure and natural resources. We also need to reduce spending, state-wide. But it's complicated. Slashing and burning a long list of state agencies just because you don't personally think you need them, or don't even know what they do... That is not the solution.

The problem, frankly, is much bigger than that.

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