I’m pretty sure I know how California will fail.
I don’t know exactly when it will happen, but after the result in the Democratic primary in New York’s 14th Congressional District two weeks ago, the Golden State’s rendezvous with fiscal perdition is going to happen sooner than we think.
Let’s talk about the “how.”
California’s foundering won’t be precipitated by a single catastrophic event. Apart from the threatened CalExit, voter initiatives to partition the state, or the Big One shaking us into the Pacific, it won’t be the equivalent of a sudden, unexpected stroke on a random Tuesday that brings the state down.
Instead, California will fail in the way an elderly person with pneumonia fails. It will be a systemic, protracted, and spiraling demise; a sniffle becomes a fever that leads to a cough that turns into a chronic wheeze that results in - The End.
A couple of facts make me certain of this.
First, California’s Democratic Party rulers, already in an apoplectic lather about the Trump administration, are going to boil the statistics and demographics and distill exactly the wrong lessons from the young “Democratic Socialist’s” victory in Brooklyn.
They will conclude that the big “S” socialism Uncle Bernie dragged out of history’s root cellar is a more broadly sellable political commodity if properly packaged. Like a political Rorschach test, those who want to see it will view the results and determine voters energized by the wild-haired Vermonter are still out there and will turn out on Election Day to support an openly socialist candidate, particularly if that candidate is a new, young, Latina face.
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And like someone who loves chocolate suddenly learning that eating more of it might be good for them, California’s uber-liberal Democratic vanguard will infer that universal healthcare, guaranteed government jobs, and an open border are winning issues. They will perceive a liberal riptide running just beneath the political surface and will be encouraged to do more of what they’ve already long-aspired to do.
For example, nothing that transpired in Brooklyn is likely to convince the odds-on favorite to be California’s next Governor that his plan for universal, state-run healthcare isn’t a political winner. On the contrary, the lesson will be that moderation isn’t the path forward. California’s liberal elite will see it’s finally time for the Socialist full monty.
But these promises, like universal healthcare and its $400 billion price-tag, will accelerate California’s demise because to paraphrase Prime Minister Thatcher’s famous quip, California’s aspiring new Socialists have already run out of other people’s money.
Which brings us to the debt bombs.
The cities, counties, school districts, and myriad other local government agencies across the state have unfunded pension liabilities that by some estimates now total nearly $1 trillion. This sum represents money that has been promised to public employees in pensions and benefits that local governments simply do not have, and but for taxes, cannot get. The deals elected officials made with the public sector employee unions for labor peace or political advantage have compounded over time and now represent a liability of more than $60,000 for each household in the state.
The problem is that these obligations continue to compound and grow, and money needed to service them are consuming ever-increasing portions of local municipalities’ budgets.
It’s a debt bomb, and cities up and down the state have them.
These bombs will explode when the money needed to pay pension and other legacy obligations exceed revenue.
Maybe you’ve already seen the effects where you live.
Like passengers on a sinking ship, cities are throwing the non-essentials overboard first. Maybe programs for seniors and after-school activities for kids in the town where you live have been cut. The problem is these things represent only a tiny fraction of most city budgets and will never be enough to stop the inevitable detonation.
Maintenance and capital will go overboard next. Service lives for police cruisers, city vehicles, and equipment will be extended. Ever wonder why the computer systems at City Hall are somewhere between ancient and East German surplus?
What about capital projects? Road maintenance, for example.
Forget about them.
If you’re reading this in California, how is the pavement of the streets in your neighborhood?
Your city may be closer to The End than you know.
Unlike the state, California’s cities are effectively cash businesses. They can’t borrow like the politicians in Sacramento can, so there’s a straight-line correlation between money spent on pensions and benefits and a city’s ability to pave streets and repair sewers.
Cities aren’t learning how to do more with less, they’re learning how to do less with less.
Which brings us full circle to the Golden State’s newly-emboldened Socialists.
Cash-strapped cities and local governments are already being forced to raise local taxes to maintain services while supporting their growing pension obligations. Voters are being asked to support parcel taxes to raise money to pay for new teachers because school district budgets have been overwhelmed by the pension obligations to the retired ones. Add another $400 billion program for universal health care and California’s sky-high taxes will become stratospheric. Other currently popular ideas like guaranteed government jobs and free college education will only add to that burden.
Economist Herbert Stein once said: “If something can’t go on forever, it won’t.” California, on its current trajectory and with its new Socialist-inspired leadership, cannot go on forever. There simply isn’t enough money. The state will ultimately fail because the math says it has to.
Unfortunately, the city where you live is going to fail first.
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