President Obama has proposed a number of initiatives that will cost trillions of dollars. The question is who will pay for it.
by Jim Iannuzo
California has a chronic overspending problem resulting in a current fiscal year deficit of at least 25 billion dollars. In reality it is higher than this but accounting gimmicks, some spending cuts and federal stimulus money mask the true largess. Next year it is already projected to be around 40 billion with regular upward revisions.
Governor Arnold Schwarzenegger presented California voters with six ballot measures to partially shore up their irresponsible spending. The only initiative approved by voters limits legislative pay, the other five which would have raised taxes, failed by super majority margins. The results are clear, voters rejected proposed tax increases. Further, voters indicated their distrust of the politicians and bureaucrats in Sacramento and Washington D.C.. What happened to President Obama's call for change? It seems voters in California don't have very much left.
Credit rating agencies have cut California's debt rating to A (lower medium grade) which is the lowest among the 50 U.S. states. With 70 billion dollars in outstanding state general obligation bonds, each California resident (man women and child) must write a check for $2500 to retire their share of the debt. The typical family of four is on the hook for $10,000 at the state level without any consideration of federal and local debt.
According to Frederic Bastiat, "Government is the great fiction through which everybody endeavors to live at the expense of everybody else." Should Californian's be able to use the federal government to pass their debt on to other states? Let's look at one example.
|2009 Deficit (Billions)
|State Income Tax
|State Sales Tax
|Per Capita Income
As you can see, a resident of Wyoming has no interest in emulating California. It's actually hard to imagine that both states are geographic cousins. What's obvious is that Wyoming has chosen to limit taxes while California has not. Wyoming is fiscally strong while California is weak.
Becoming your brother's keeper is not the solution to California's budget problems. Closing Sacramento and substituting Cheyenne is the first step in fixing California's problems. Rejecting socialism, eliminating coercive government policies, promoting free markets with individual liberty would begin to maximize prosperity. Lastly don't forget California, you do have a Total Recall option http://totalrecall2009.com/ .
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