Tuesday, July 12, 2011

California Assembly Advises Other Governments on Responsible Budgeting

Quiet! Geniuses at work.
We wouldn't believe this if it weren't coming from a reputable source: Katy Grimes is reporting at Cal Watchdog that the California Assembly has passed a resolution urging the U.S. Congress to raise the debt ceiling "without delay." That's right: California's Legislature is giving other governments advice on how to balance their finances.

We can see where they're coming from. If the federal government would just assume that it was getting an extra $10 trillion or so in tax revenues, then everyone in Congress could pretty much call it a day and head home. After all, preposterous assumptions about revenues that don't exist has worked like a charm in balancing California's most recent budget. And if that doesn't work (it is, admittedly, hard to see how it wouldn't), then the federal government can just defer billions in payments until it has more money, right? Again, if it's good enough to balance California's budget, why isn't it good enough for the feds?

We'll be surprised if no deal is reached to allow the federal government to keep borrowing money. But it doesn't surprise us that the nuances of the debate on Capitol Hill are lost on the Legislature. The federal government, much like the one in Sacramento and in cities and counties throughout California, needs to make a choice about the fundamental direction of its fiscal policy: strangling the private economy for the sake of a utopian vision of society created by government fiat, or turning away from the unrestrained bloat of the past decade in favor of greater economic freedom. Since California's Democrats, who voted overwhelmingly for the resolution, are so hopelessly dedicated to the first path, it's unsurprising that the point is lost on them.


  1. I really do think, at some basic level, the elected Democrats -- or some fraction of them, anyway -- genuinely understands the dilemma they are set against:

    1) The base believes in big government with lots of services.
    2) But nobody wants to pay for them.

    There is a saying that Republicans fear their base, while Democrats loathe theirs. It's this dynamic that fuels that contempt.

  2. Good point, Rob. I would only differ with your first sentence; I don't think they grasp their dilemma. Insofar as California remains the country's most populous state in spite of heavy (and very regressive) taxes, its residents have shown themselves willing to pay for a pretty big government. The problem is that lawmakers refuse to acknowledge a couple of very basic economic principles. First, to echo the insight behind the Laffer Curve, if you tax too heavily, you can suppress economic activity to the point that tax revenues actually start to go down. And second, regulation of economic activity means less economic activity, which also tends to lead your tax revenues down. In other words, they might complain that no one wants to pay for their vision of government, but they really don't see their own role in creating that dilemma.

    In other words, in their minds, there's simply no practical limit to the size of government, when in reality the government has considerable power to destroy the resources it needs.