" ...before they lost their bearings, were the party of 'No we can't' and 'Actually we shouldn't' and 'Not so fast' and 'Let's think this through.'..."
-George F. Will
In all of the recent gnashing of teeth and rending of garments with regard to the Golden State's latest fiscal distress, one pertinent and revealing fact keeps leaping out at me...
California's tax revenues have returned to 1999 levels...Obviously, state government spending has grown by leaps and bounds in the subsequent decade, hence, the latest bout of gross insolvency...but bipartisan budgetary incontinence aside, there's something truly significant about that date, 1999...
Recall, if you can, what was happening economically a decade ago...The nation, and especially California, was in the grips of dot-com boom fever...all the smart economic minds were telling us that we were entering a "New Economy," with eternal mega-prosperity ahead of us...dot-com riches were producing geysers of tax revenue for the states and the feds...
Then-governor Gray Davis was quite happy to unleash massive spending increases and create fresh government programs for the state to finance with these supposedly never-ending revenues...
Come the end of 2000, start of 2001, dot-com prosperity evaporated, and the gusher of tax revenues that had been its happy offspring dried up...California confronted a massive deficit...Governor Gray was dispatched in favor of Everybody's Favorite Austrian Action Hero, who foreswore such short-term fiscal bingeing for California's future...
Well, by 2004, 2005, California's economy was apparently roaring again, this time with the real estate boom...everybody would get rich forever and ever because housing values would only soar, lifting tax revenues with it...more uninhibited spending, more state government program creation, because, after all, the housing boom, unlike the dot-com boom, would last forever...
Until it didn't...once again, tax revenues vanished, but the spending and government services remained...Thus, our present dilemma...As of this writing, there appears to be rare bipartisan consensus that the only solution to the current fiscal apocalypse is what Jack Kemp used to disparage as "root-canal economics." Conservatives used to call it common sense...Government has unwisely overspent, so it must painfully pare back...
But my point here is that we here in California have overbuilt state government on an economic foundation of guano for TEN YEARS...Our economy has been B.S. for at least a decade...the riches, and accordingly the revenues, were always illusory...
And now we confront the stark reality of an unaffordable welfare state built on the sand of an unreal and unsustainable prosperity...
