Sunday, January 25

California is becoming a Pakistan

I read on a hedge fund report which said that California is the Pakistan of USA. The idea being that it is becoming seriously economically mismanaged and is in danger of imploding. That comparison with a country is not that far fetched, whatever you say. You hear statement after statement that California, if an independent country, would be the 6th or 8th biggest country in the world in terms of economic metrics. Since then, I have been keeping a bit of an eye out on that state.

But this state is peculiarly badly governed. Its brand of democracy, the demographics of the state, the high reliance on income taxes, the way the political parties have carved up the state with the constituency units, all combine to make it a fascinatingly amazing place. Because of the fact that the boundaries of the electoral seats are carved out in such a way that they appeal to the extremist wings of the two political parties, the idea of appealing to the centre and doing bi-partisan work is strangely missing. Consequently, the parties are not willing to compromise. Add the "proposition" business and what you end up with is a stream of dollars which are tied ruthlessly to single spending streams. And let us not forget the public sector which is, simultaneously pathetic in terms of efficiency and horribly expensive.

So when faced with a huge economic slowdown, the republicans are refusing to let the governor raise taxes while the democrats are refusing to cut spending. And the credit crunch means that trying to raise money from the markets is nearly impossible because the markets fear the state will not be able to honour its rapidly rising debt. Result? Deadlock. Let me quote some results of this stupid set of circumstances:

California’s state controller said he won’t make $3.7 billion of payments due next month, cutting off income-tax refunds and money for welfare programs amid a record budget shortfall battering the most-populous U.S. state

And from here,

To conserve cash, Schwarzenegger has ordered state offices shut for two days a month and all workers to take two days of unpaid leave each month. The impasse forced a state panel on Dec. 18 to halt funding for $3.8 billion of construction on schools, roads and other public works, a decision officials said might cost tens of thousands of jobs.

And here:

The governor also said he and lawmakers should go without pay for every day they fail to enact a budget past its due date.

(Which might not be such a bad idea).

Schwarzenegger, a multimillionaire, has declined his $212,179 a year salary since he was elected. Lawmakers each make at least $116,208 a year plus $162 per day per diem; legislative leaders make more depending upon their position.

So the bunch of girly men and manly women have effectively driven the state to near fiscal disaster. Some say that people get the leaders they deserve, but surely this isnt the case here? Not sure what is the future of this problem nor the solution, but I can see muchas problemo's in this fiscal train crash of a state.

What do the resident Californians think?

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