California as a warning for America
Congressman Tom McClintock offered remarks in Washington , D.C. , on Friday to the Competitive Enterprise Institute and Pacific Research Institute that clearly illustrate why California is facing such a large fiscal mess. His beginning joke is so funny because it is so true:
"I know that everybody likes to poke fun at
Here is the rest of the speech:
Laugh if you will, but let me remind you that when these policies finish wrecking California, there are still 49 other states we can all move to - and yours is one of them.
I should also warn you of the strange sense of déjà-vu that I have every day on the House floor as I watch the same folly and blunders that wrecked
We passed a "Cash-for-Clunkers" bill the other day - we did that years ago in
Doubling the entire debt every five years? Been there.
Increasing spending at unsustainable rates? Done that.
Save-the-Planet-Carbon-Dioxide restrictions? Got the T-Shirt.
To understand how these policies can utterly destroy an economy and bankrupt a government, you have to remember the
A generation ago,
And yet, we had the finest highway system in the world and the finest public school system in the country.
One thing - and one thing only - has changed in those years: public policy. The political Left gradually gained dominance over
The Census Bureau reports that in the last two years 2/3 of a million more people have moved out of
I submit to you that no conceivable act of God could wreak such devastation as to turn
You can trace the collapse of California's economy to several critical events: the rise of environmental Ludditism beginning in 1974; the abandonment of constitutional checks and balances that once constrained spending and borrowing; and the rise of rule by public employee unions . There are other factors as well: litigation, taxation, illegal immigration - but for the sake of time let me concentrate on the big three.
The first was the rise of environmental Ludditism with the election of a radical new-age leftist named Jerry Brown as governor of the state - an election that also produced overwhelming liberal majorities in both legislative houses.
Like Obama today, Brown lost little time in pursuing his vision of
He cancelled the state's highway construction program, abandoning many routes in mid-construction. He cancelled long-planned water projects, conveyance facilities and dams. He established the California Energy Commission that blocked approval of any significant new generating capacity. He enacted volumes of environmental regulations that created severe impediments to home and commercial construction, empowering an incipient no-growth movement that began on the most extreme fringe of the environmental cause and quickly spread. This movement reached its zenith with Arnold Schwarzenegger and the enactment of AB 32 and companion legislation in 2006. This measure gives virtually unchecked authority to the California Air Resources Board to force Draconian reductions in carbon dioxide emissions by 2020.
This has dire implications to entire segments of
We, too, were promised an explosion of "green jobs," but exactly the opposite has happened.
Up until that bill took effect,
The second problem is structural: the collapse of the checks and balances and other constitutional and traditional constraints on government spending and borrowing.
Let me mention a few of them.
The State Supreme Court decision in Serrano v. Priest severed the use of local revenue for local schools and invited the state take-over of public education. AB 8 of 1979 - the legislature's response to Proposition 13 - essentially did the same thing to local governments generally.
This means that vast bureaucracies have grown up over the service delivery level, wasting more and more resources while hamstringing teachers in their classrooms, wardens in their prisons and city councils in their towns.
Next, constitutional constraints on fiscal excesses began to fall. In 1983, Gov. George Deukmejian approved legislation to remove the governor's ability to make mid-year budget corrections without having to return to the legislature. The loss of this provision exposed the state to chronic deficit spending by removing any ability of the governor to rapidly respond to changing economic conditions. In 1989, Deukmejian sponsored Proposition 111 that destroyed the Gann Spending Limit that had held increases in state spending to inflation and population growth. If that limit had remained intact,
The disastrous tax increases by Pete Wilson in
1991 and Arnold Schwarzenegger this year were made possible by this tragic blunder. Finally, we've watched the constitutional budget process that had produced relatively punctual and relatively balanced budgets for nearly 150 years collapse in favor of an extra-constitutional abomination called the big five.
That new process, that began under Pete Wilson and has culminated under Arnold Schwarzenegger bypasses the entire legislative deliberative process in favor of an annual deal struck between the governor and legislative leaders behind closed doors and handed to the legislature as a fait accompli.
This short-circuits the separation of powers that is designed to discipline fiscal excess and it literally bargains away the line-item veto authority of the governor. It is a process that allows legislative leaders to extract concessions from the executive that would not be possible if the separation of powers were maintained. With the checks against excessive spending broken down, borrowing became the preferred method of public finance. The Constitutional requirement that all taxpayer-supported debt be approved by voters began to erode in the 1930's, when a depression-era Supreme Court decision allowed the state to run a temporary deficit in the event of an economic down-turn - as long as the shortfall was addressed in the following fiscal year. This practice was narrowly construed until the
During the 1980's, Gov. Deukmejian began employing a legal fiction called a "lease revenue bond," to circumvent constitutionally required voter approval.
Although Proposition 13 still protects property owners from unsustainable increases in their property taxes, most of the other fiscal constraints are now gone, and
The third factor that also can be traced back to the 1970's was the radical transformation that took place in the nature and power of the state's public employee unions. Until that time, state law prohibited public employee strikes against the public and prohibited collective bargaining or closed shops.
During the Jerry Brown era, a series of collective bargaining acts handed to public sector unions all the rights and powers of private sector unions - but without any of the natural constraints on private sector unions. The unions soon brought these newly-won powers to bear to elect hand-picked officials to state and local office.
Today, political expenditures by public employee unions exceed all other special interest groups, while they hold compliant majorities in the state legislature and most local agencies.
The result has been radically escalating personnel costs and radically deteriorating performance.
The impact on governmental services has been devastating. Despite exploding budgets, service delivery is collapsing. Firing incompetent teachers has become a virtual impossibility, adding to the deterioration of educational quality. Essential services can no longer be performed because labor costs have made it impossible to sustain those services.
That's the state's predicament in a nutshell.
And I can assure you that the Laffer curve is alive and well. In the first two months after the tax increase took effect, state revenues have plunged 33 percent.
Although there are many obsolete, duplicative or low priority programs and expenditures that the state can - and should - do without, there aren't enough of them to come anywhere close to closing
Fortunately, we have a model that we know works. A generation ago, it produced a high quality of public service at a much lower cost. It maximized management flexibility and it required accountability at the service delivery level. It recognized that only when commerce and enterprise flourish can we finance the basic responsibilities of government.
Restoring this efficiency will require a governor and a legislature with the political will to wrestle control from the public employee unions, dismantle the enormous bureaucracies that have grown up over the service delivery level, decentralize administration and decision making, contract out services that the private sector can provide more efficiently, rescind the recent tax increases that are costing the state money and roll back the regulatory obstacles to productive enterprise.
Alas, we don't have such leaders and even if we did, the systemic reorganization of the state government can't be accomplished overnight. Restructuring the public schools would take at least a year; prisons at least two; and health and welfare three to five years before serious savings could be realized.
This brings us to the fine point of the matter. What Churchill called history's "terrible, chilling words" are about to be pronounced on
A federal loan guarantee or bailout may be the only way to buy time for the restructuring of
Without these actions, federal intervention will only make
In short, if
And before anyone gets too smug at