The news:
CALIFORNIA Governor Arnold Schwarzenegger has compared his state’s financial crisis to that of Greece and called for scrapping the state welfare system to close a $19.1 billion budget gap.
He said the US state, with an economy that ranks as the eighth largest in the world, faced the same budget deficit crisis as eurozone countries such as Greece, Spain and Ireland.
And it really is as bad as all that – and while this is a strong move by the governor, he still bears his share of blame for “papering over the cracks” in the budget for the past three years. Everyone in CA government seemed to just be hoping that the economy would turn around and thus the various scams they pulled to “balance” the budget these past few years would be ok. Turns out, it wasn’t ok – the economy hasn’t gotten better and now its crunch time.
Outside of Obama getting the Fed to magically create another trillion dollars out of thin air and then handing it to the States, there is no way around massive budget cuts. Democrats would prefer the magic money, but as November approaches it becomes ever less likely that any sort of State bail out will be forthcoming.
Even with such stark realities facing them, it is doubtful that California’s Democrats – who control the CA legislature – will agree to any such cuts. Maybe a little trim around the edges, but cutting welfare is just not something they’ll go for. And, no, its not because they care about poor people – its because if you eliminate welfare you also eliminate the bureaucrats who run it…and that means eliminating people who pay union dues, which are then used as campaign cash for Democrats.
So, California has no easy way out, and only a slight chance that even the hard way out will be chosen – which means that we might eventually see California default on its bonds. We’ll have to see how it comes out.
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