As California’s budget deficit returns to the front pages, and with the financial crisis in Greece already getting global attention, it was only a matter of time before people started to make the careless “California is America’s Greece!” connection. When one of those people is Jay Leno, you know the idea is getting traction – and is complete BS:
California’s budget woes were the butt of yet another joke last night.
This one comes from Jay Leno’s opening monologue. The late-night host compares Greece’s financial crisis to the situation in the Golden State:
“See Greece is a relatively small country, it would be like a state over here. But it overspends, it over borrows, it promises expensive pension plans, it over taxes, it over regulates business. So the state it would be would be California.”
Dan Walters examines the comparison and, though noting that California’s current debt is FAR lower than Greece’s a fraction of GDP, says California is on track to become another Greece:
California’s official debt, mostly bonds, is not particularly high. State and local governments might owe something north of $100 billion in bond debt, around 5 or 6 percent of the state’s economy.
When unofficial debt is factored into the equation, however, the number climbs rapidly. That would include billions owed to the federal government for unemployment insurance loans, commitments of future spending on schools to make up for recent spending cuts and, most of all, the unfunded liabilities for public employee pensions and retiree health care.
But that future debt is paid out over a LONG period of time. It’s not due immediately. Some of the money owed to schools and local governments IS owed very soon – 2012 or 2013, depending on the creditor – but that sum still won’t push California’s deficit significantly higher.
More importantly, that money can be repaid through higher taxes. California annually leaves tens of billions of dollars on the table in lost revenues that we can get from the rich and large corporations. Doing so would not only avoid damaging our economic recovery, but would in fact fuel economic recovery by enabling more sustainable economic growth, powered by small businesses and a broader economic stability, rather than ever-greater dependence on a few large companies and wealthy folks to feel like giving jobs to the rest of us schlubs.
California also has resources Greece simply doesn’t have, besides the fact that our economy is much, much larger than theirs. California is not only part of a single currency, but has financial and monetary institutions to match that single currency (that’s what the US Constitution was all about – facing a situation in 1787 very similar to what the eurozone faces now, the US chose greater integration). The US government has the power to backstop California debt, and although the Obama Administration has been reluctant to use such power, they have been willing to help send financial aid to Sacramento and appear willing to do it again.
Ultimately the “California is Greece” comparison obscures the deeper problems we face. California isn’t facing a debt problem and we’re not facing a spending problem. Austerity has been tried for 3 years here in California and has merely deepened our recession and in turn worsened our budget deficit. It’s time we tried something else – like getting our money back from the rich through progressive taxation.
Dan Walters and Arnold Schwarzenegger agree on keeping the tax option off the table, even though it’s the most fiscally responsible solution we have. Let’s hope Californians demand that option be not only taken seriously, but actually employed, in order to avoid the economic catastrophe that further austerity would cause.