Train Wreck

California Governor Jerry Brown announced that the projected budget deficit has risen to $16 billion (on a $96 billion expense budget). Therefore, more cuts to education and more tax increases are on the horizon. California will fall to the bottom on per-capita education spending and rise to the top on tax burden courtesy of a legislature held captive by state employee unions. And it will only get worse as taxpayers and businesses see the writing on the wall and vote with their feet.

And this says nothing about the Calpers/CalSTRS fiasco that is coming when markets inevitably roll over. Even if Ben manages to generate more inflation they will still be in big trouble because of the indexation of state pensions.

The only interesting question is, will the federal government bail out California? Only if the Democrats sweep the House, Senate and presidency in the fall, I suspect. If not, then California state employees and pensioners may have to make some decisions:

I’m reviewing the situation:
If you want to eat — you’ve got to earn a bob!
Is it such a humiliation
For a robber to perform an honest job?
So a job I’m getting, possibly,
I wonder who the boss’ll be?
I wonder if he’ll take to me?
What bonuses he’ll make to me?
I’ll start at eight and finish late,
At normal rate, and all, but wait!
I think I’d better think it out again.

— “Oliver” by Lionel Bart.

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Comments

  • Tyro  On May 14, 2012 at 11:37 am

    If they don’t, they’ll have to turn out the lights. But they won’t be paying back any of the money they owe. Not now, not ever. As ol’ Julius said, alea iacta est.

    • reality  On May 14, 2012 at 11:41 am

      Quite. But California isn’t supposed to run a deficit and doesn’t have the huge debts that Greece owes.

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