Ignoring the Obvious

Yesterday, the state of California announced that it expected a $15.2bn budget deficit - an amount the Financial Times compares to the total budget revenues of Bulgaria. Funny how Bulgaria is on everybody's mind, although the relative size of the nation's tax revenue is hardly the most important comparison that can be made.

California's economy is shrinking, its tax base is shrinking, even its population is shrinking and the best solution the state has to offer is cutting state employee pay and a scheme for increasing lottery revenue (sound familiar?) Certainly, reducing spending is a good place to start. However, saying you'll reduce employee pay is no more serious a proposition than saying you'll reduce costs through employee attrition – political resistance will never allow either to happen.  What none of these solutions offer is a response to the systemic problems that caused the deficit to begin with.

Like Vermont, the state of Californian tries to pass responsibility off onto the waning economy. As plausible as this may seem, it doesn't explain why eighteen states in the union do not anticipate budget deficits this year. Even a casual look at the recently released Federal Reserve Biegebook graph of state budget deficits suggests a pattern.  The states in red are perennial members of a club of states that show up together on just about every performance measure. So what is it about the Northeast and the left coast that bind them together in misery? And why is it these states refuse to learn from the overwhelming success of places like Bulgaria, New Zealand, Ireland, and even Texas? Why do they choose to ignore the obvious?

Comments

[James Rude]

I believe the answer has to do with mental malady of "doing the same thing over and over again and expecting a different result".

[Dennis Lukas]

Socialist states reep socialist rewards, high taxes, high spending on social programs.