The self-imposed Greek financial tragedy has rocked the world economy and brought the European Union almost to its knees, but you ain’t seen nothing yet. The parallels between what has caused Greece to get to this point and the looming disaster in California go way beyond the surface. Whether California will have the same effect on America that Greece has had on Europe is yet to be determined.
Governor Chris Christie makes an effective argument for New Jersey being America’s Greece. In fact, the New Jersey state deficit exceeds California’s as a percentage of its overall budget, and no one would argue that the public employee unions in New Jersey are less entrenched than in California or Greece. But at least New Jersey has the newly-elected Christie, who speaks with honesty and candor about the state’s challenges, and provides a slice of reality to its residents. California, in contrast, has the hapless Arnold, who has been in La-La land for six years with no end in sight.
To hang these financial calamities on the public employees alone would be misguided. In a recent study of 183 countries regarding ease of doing business, Greece came in 109th – but at least they can be comforted that Somalia and North Korea were worse. Like Greece, California lags in comparison to other states; it is ranked 47th for business environment. Having oppressive public employee unions certainly adds to the challenge, but both Greece and California suffer from the same anti-business mix of high taxes, overwhelming government regulation and high labor costs. One could say Greece is in the middle of the pack, compared to California which is near the bottom of the state rankings.
Greece does even worse with its protection of investors, where it ranks 154th. Similarly, there are few states which do worse protecting investors than lawyer-rich, lawsuit-happy California. Los Angeles has more lawyers than the country of Japan. Californians are not only moving their businesses to other states, but almost anyone who can is registering the entities elsewhere to protect themselves from lawsuits.Starting a business can be pretty ugly in Greece. Their rank is 140th out of 183. Even Botswana makes it easier than Greece. Of course, California is no longer the shining city on the hill either – in fact, its big cities are pretty dismal when it comes to job growth. Of the largest cities in America, the highest ranking California city comes in at #42. Shockingly, it’s the bastion of left-wing politics, San Francisco. Of the 66 largest cities in America, four of the bottom ten are located in California. The Golden State seems more like pewter these days.
Yet, California ignores all the hints from across the sea that it needs to change its ways. Scandinavian countries have increased their retirement age to 67 while California dithers. There was some talk of pension reform in a recent deal that Arnold cut with four government unions, but it was smoke and mirrors that didn’t fool anyone. With a $19 billion budget hole, cutting possible pensions for employees who haven’t been hired yet won’t really slice too much from that crushing amount. The state payroll has grown 31 percent in ten years, and now stands at 356,000 employees. Significant employee reductions need to be made and fast.
There are now 12,000 state employees receiving pensions over $100,000 per year, and that number will only grow in the near future. A real leader has to step up and threaten to take California into bankruptcy over these outrageous pension and health benefits. The people of California should be unwilling to pay them. Why should hard-working Californians pay their public employees benefits that far exceed anything the residents themselves have any hope of receiving? If the matter goes to court and a judge says that we have to pay it, the Governor should tell the judge to go out and collect the taxes himself.
We will see in November whether Californians have come to their senses. We have a contest for Governor between someone who has perpetuated this problem for 40 years, Jerry Brown, and a new face ready to confront the challenges, Meg Whitman. If Brown wins, Greece may be looking like an attractive place to relocate.