California’s bailout plea

When he drove the hapless Gray Davis from the governor’s mansion in 2003, Arnold Schwarzenegger seemed invincible and was actually expected to bring California’s big-spending and -taxing ways to an end. His allies would claim that he tried, and perhaps he did, in a half-hearted sort of way, but in the end the job proved too much for him.

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Arnold didn’t just give up, though; he became a part of the problem he’d vowed to solve. California was once the dream destination for Americans old and new seeking success and the good life. In spite of his and his wife’s paid advertisements, California is no longer a state to move to, as out-of-control spending, rising taxes and regulations on just about everything have combined to eliminate jobs by the millions, force businesses large and small to seek friendlier bases and make life increasingly miserable for those who choose to stay.

California’s taxes are higher than those in 46 other states and its schools are among the worst in the country. The contrast with Texas is striking and makes the point as many Californians and California-based businesses flee to Texas. California has the third highest taxes in the country; Texas the third lowest. California has the third worst public school system; Texas ranks right in the middle. Even in the midst of a recession, Texas is generating jobs, while California “enjoys” the fourth highest unemployment rate and the second highest home foreclosure rate in the country.

Last year 1.4 million more people fled California than moved there and those who left tended to be just the sort of folks a successful state simply can’t afford to lose. They were more highly educated, successful and entrepreneurial than those who were arriving, continuing a long-term trend that exacerbates the state’s problems.

California’s problems are traceable to a government run by liberal do-gooders and public employee unions that have to be counted among the most venal and self-serving in the country. One of these, representing the state’s prison guards, has successfully lobbied to criminalize just about everything, not because the union’s leaders care all that much about crime but because more prisoners equate to more jobs and more power for the union. The prison budget alone, as a result, is approaching 7 percent of the total state budget.

Last summer, state leaders considered actually doing something about the crisis everyone knew was coming, but decided instead to pay vendors with IOUs and continue to do business as usual in the hope that the Obama administration and Congress would ultimately deem California “too big to fail” and come to their rescue. They must have been encouraged by the various bailouts of purely private entities supported by the new administration and now want theirs.

I grew up in a small Midwestern town where whenever there was a local budget crunch, the town’s leaders would argue that they would either have to be allowed to collect more tax money or to order the high school to eliminate the football team. There was never any real discussion of other ways to save money, since the motive was to get more money via what amounted to taking the team hostage.

That’s exactly what Schwarzenegger and his cronies are doing now. The difference is that they know they can’t raise taxes significantly without further destroying the state’s economy to generate jobs. With that option virtually eliminated, the governor is looking for help from outside the state; from the rest of us. Bail us out, he says, or we will end our welfare-to-work program and eliminate services for the elderly and the disabled.

The Obama administration has yet to signal a willingness to give in on this one, perhaps fearing that if it does, other states, freed from the discipline of having to order their own houses, will seek a bailout of their own. But then, the Governator hasn’t arrived yet to argue that the rest of us have to bail him out both out of compassion and for our own good.

The question is not whether California is too big to fail, but whether a bailout would result in a national crisis too big to bear.

Keene is chairman of the American Conservative Union and a managing associate with the Carmen Group, a Washington-based governmental
consulting firm.