California Commits Economic Suicide

By William L. Garvin

A tidal wave of historic proportions swept across America on November 2d. The tsunami was fueled by currents of fiscal conservatism and a repudiation of irresponsible government spending. Unfortunately, the economic wave crashed and receded when it reached the Not-So-Golden State. California voters chose to reelect the same old tired faces with the same old tired tax and spend liberal philosophies.

Apparently voters in this Deep Blue Democrat state don't understand just how serious California's fiscal crisis really is. They should know there is a $19 billion state debt. They should know that California has had to borrow $8 billion from the broken federal treasury just to pay the current unemployment insurance debt load. They should know that California is ranked 48 out of 50 states when it comes to being "business friendly." They should know that 170 businesses left the state in the last year. Countless others just shuttered their doors and windows and closed up shop. They should know that unemployment in this state is over 12% and there is no relief on the horizon.

They should also know that the California Public Employees Retirement System, the California State Teachers Retirement System, and the University of California Retirement System have combined liabilities of $89 billion for the year beginning July 1. According to the Milken Institute study, these three systems alone will have combined liabilities of over 5.5 times the TOTAL state tax revenue by 2012! Some estimates are that unfunded pension liabilities are over one-half TRILLION dollars! Bloomberg News reported at last month's Cities and Debt Briefing that fewer than half the pension funds had sufficient assets to cover even 80% of promised benefits in FY 2009.

So given these dire financial straits, what did SEIU, AFSCME, CTA, and the other public employee unions do? They poured hundreds of millions of dollars into the campaign to insure they would continue to have a Santa Claus legislature and a Sugar Daddy governor. They also turned out the vote to reduce the requirement for approving the state budget from two-thirds to a simple majority. Accordingly, the resistance to increased spending and higher taxes offered by the Republican minority is now rendered null and void. Taxpayers can kiss their wallets goodbye!

After shooting themselves in one economic foot, the voters turned around and shot themselves in the other foot. California could have suspended its self-imposed "Global Warming Tax" until the economy improved but decided not to…even though the tax will do absolutely nothing to prevent global warming! If a business needed another reason not to relocate to California, there's a huge one. If homeowners were worried about making ends meet in a stagnant economy, how about an increase of nearly $3,800 per year for gasoline, natural gas, electricity, and food prices as a result of this feel good foolishness?

Of course the Prop 23 opponents trumpet that 500,000 new green jobs will be created. What a pipe dream. That would only be believable if Prop 19 had passed. For instance, when the government mandated fluorescent light bulbs, the last GE plant making incandescent bulbs closed down and tossed two hundred workers out on the streets. Who makes the fluorescent bulbs? Naturally, it's China, where hundreds of workers have been hospitalized because of exposure to and subsequent mercury poisoning while manufacturing the bulbs.

Then there's Solyndra, "…touted by President Barack Obama as a model for a green energy future." The President proudly announced $535 million in taxpayer loans in 2009 to Solyndra to open a second plant in California, hire 1,000 new workers, and make solar panels. Keep in mind that Solyndra has never shown a profit, cancelled their Initial Public Offering, and had their CEO quit. Not too surprisingly, they have now closed their East Bay plant, stopped expansion on their Fremont plant, and instead of hiring another 1,000 workers, they are laying off between 155 to 175 members of their current work force. They can't compete with other manufacturers in China or the United States. Given the global warming tax coming up, expect them to fail completely or relocate to Texas.

Given our current path to financial ruin, we'll soon be revising the lyrics to an old country song. "All the gold in California…is in a bank in old Shanghai…in a Chinese hedge fund's name."