This is an old piece, but worth revisiting. Especially listen to the part about Unions.
---California as a warning for America
If you wish to see what is in store for America under the vision
and plans of the current Administration, look no further than
the troubled Golden State.
Bit of a long read, but very much to the point. Not precisely what
Californian's wish to hear but the rest of the nation should heed:
California as a warning for America
July 13th, 2009, 4:59 pm
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 California - but I can tell
you right now that despite all of its problems, California remains one
of the best places in the world to build a successful small business.
All you have to do is start with a successful large business."
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 California now being passed with reckless abandon in this
We passed a "Cash-for-Clunkers" bill the other day - we did that years
ago in California.
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 Golden State in its
Golden Age. A generation ago, California spent about half what it does
today AFTER adjusting for both inflation and population growth.
And yet, we had the finest highway system in the world and the finest
public school system in the country. California offered a FREE
university education to every Californian who wanted one. We produced
water and electricity so cheaply that many communities didn't bother to
measure the stuff. Our unemployment rate consistently ran well below the
national rate and its diversified economy was nearly recession-proof.
One thing - and one thing only - has changed in those years: public
policy. The political Left gradually gained dominance over California's
government and has imposed a disastrous agenda of radical and retrograde
policies that have destroyed the quality of life that Californians once
took for granted.
The Census Bureau reports that in the last two years 2/3 of a million
more people have moved out of California than have moved into it. Many
are leaving for the garden spots of Nevada, Arizona and Texas. Think
about that. California is blessed with the most equitable climate in the
entire Western Hemisphere; it has the most bountiful resources anywhere
in the continental United States; it is poised on the Pacific Rim in a
position to dominate world trade for the next century, and yet people
are finding a better place to live and work and raise their families in
the middle of the Nevada and Arizona and Texas deserts.
I submit to you that no conceivable act of God could wreak such
devastation as to turn California into a less desirable place to live
than the middle of the Nevada Nuclear Test Range. Only Acts of
Government can do that. And they have.
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
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
Like Obama today, Brown lost little time in pursuing his vision of
California - an incoherent combination of pastoral simplicity, European
socialism and centralized planning. At the center of this world view was
a backward ideology that he called his "era of limits" - the naïve
notion that public works were growth inducing and polluting and tha
stopping the expansion of infrastructure somehow excused government from
meeting the needs of an expanding population. Conservation replaced
abundance as the chief aim of California's public works, and public
policy was redirected to developing irresistible incentives for the
population to concentrate in dense urban cores rather than to settle in
suburban communities. Brown infused his vision into every aspect of
public policy, and it is a testament to his thoroughness and tenacity
that its basic tenets have dominated the direction of California through
both Republican and Democratic administrations.
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 California's economy:
agriculture, baking, distilling, cargo and passenger transportation,
cement production, manufacturing, construction and energy production, to
name a few.
We, too, were promised an explosion of "green jobs," but exactly the
opposite has happened.
Up until that bill took effect, California's unemployment numbers
tracked very closely with the national unemployment rate. But since
then, California's unemployment rate began a steady upward divergence
from the national jobless figures. Today, California's unemployment rate
is more than two points above the national rate, and at its highest
point since 1941.
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
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, California would be enjoying a budget
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 Wilson administration began
using it to justify spreading out a single year's budget deficit over
During the 1980's, Gov. Deukmejian began employing a legal fiction
called a "lease revenue bond," to circumvent constitutionally required
Although Proposition 13 still protects property owners from
unsustainable increases in their property taxes, most of the other
fiscal constraints are now gone, and California has entered a period of
unprecedented public debt to finance an unprecedented expansion of state
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
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.
Today, California is like the shopkeeper who leased out too much space,
ordered too much inventory, hired too many people and paid them too
much. Every month the shopkeeper covers his shortfalls with borrowing
and bookkeeping tricks. Ultimately, he will reach a tipping point where
anything he does makes his situation worse. Borrowing costs are eating
him alive and he's running out of credit. Raising prices causes his
sales to decline. And there's only so much discretionary spending he can cut.
That's the state's predicament in a nutshell. California's borrowing
costs now exceed the budget of the entire University of California and
it is increasingly likely that it will fail to find lenders when it must
borrow billions to pay its bills at the end of this month. Ignoring dire
warnings, Gov. Schwarzenegger and legislators from both parties earlier
this year imposed the biggest state tax increase in American history.
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 California's
Sadly, California has reached the terminal stage of a bureaucratic
state, where government has become so large and so tangled that it can
no longer perform even basic functions.
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
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
California's failed leadership: "too late."
A federal loan guarantee or bailout may be the only way to buy time for
the restructuring of California's bureaucracies to take effect, but the
discussion remains academic until and unless the state actually adopts
the replacement structures, unburdens its shrinking productive sector
and presents a credible plan to redeem the state's crushing debt and
Without these actions, federal intervention will only make California's
problems worse by postponing reform, continuing unsustainable spending
and piling up still more debt.
In short, if California won't help itself, the federal government
cannot, should not and must not.
And before anyone gets too smug at California's agony, remember this:
Congress is now enacting the same policies at the national level that
have caused the collapse of California. So whistle past this cemetery if
you must, but remember the medieval epitaph: "Remember man as you walk
by, as you are now so once was I; as I am now so you will be." The good
news is there is still time for the nation to avoid California's fate.
If anything, the collapse of California can at least serve as a morality
play for the rest of the nation -unfortunately in the form of a Greek