California, trend setter and cautionary tale

The budget mess in California is a sight to behold. They are the poster child for spending run amok. Well, they still aren’t as bad as the federal government, but there’s a big difference between states and the feds. The states are not allowed to print money in order to pay for their expenditures.

I hear that the state legislature of California has come to an agreement on what to do with their budget. I’m always amazed at how government programs suddenly become “essential” when it comes time for cuts. Things worked OK before the program started, but we are told that all hell will break loose if it is cancelled. The problems in CA can be boiled down to this; it is very easy to add spending but it is very difficult to cut it. Even the compromise that they have worked out depends on CA jumping out of the recession quickly. They rationalize that they can afford this budget in the future. Of course, they don’t want to acknowledge that they can’t afford it now.

I do hope that the powers that be can navigate the tremendous amount of debt that has been accumulated, both in budgetary matters and with the central bank. I’m hopeful, but not optimistic.

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