Thursday, June 4, 2009

California's Fiscal Doom and the Federal Deficit (Reason)

Cropped image of Arnold Schwarzenegger.Image via Wikipedia

Reason magazine's Brian Doherty examines California's cash crisis, the massive federal deficit and what all of this red ink means:

"Federal revenues for 2007 ($2.6 trillion) are sufficient to have spent twice as much as federal outlays in 1975, adjusted for inflation, with no deficit at all. While life in these here United States was hellish on many levels in 1975, not least the fashions and food, even those with a much bigger appetite for government than I might agree that a government twice as big as what we enjoyed/suffered that year should be able to manage its necessary functions. (And no, there is no convincing reason that in a growing economy the government’s cash grab as a percentage of GDP should remain stable.)

"When contemplating California’s fiscal present and the U.S.’s fiscal future, it’s not quite right to say that where California is now, the U.S. as a whole will follow. The U.S. is already in a deep hole, much deeper than California's, and has been for some time. Even President Barack Obama knows it. He told C-SPAN recently, with wonderfully disarming frankness, 'we are out of money now.'

"The U.S., unlike the state of California, when faced with a dearth of cash, can just make more, which is in essence Obama’s plan—for a while, at least. As in his most famous movie role as the Terminator, Schwarzenegger is metaphorically a visitor from a dangerous and unpleasant future that awaits the rest of the United States.

"The Golden State is absolutely a political bellwether now in the sense that the crisis-induced fiscal seriousness Schwarzenegger is at least pretending to attempt will be essential to the U.S. in the near future—and should be seen as essential this very second.

"But while California can hold out hope that the federal government might bail it out of its troubles, the U.S. government, alas, has no higher power to which it can direct its own appeals. The buck stops there.

"The only problem, as Obama himself claims to understand, is they are all out of bucks."

Matt Welch: Blame the Voters, Pass the Buck
Watch Welch on Fox News Discussing California's Deficit

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