California running out of other people's money

Larry Kelly:

While Karl Marx believed that socialism—and ultimately communism—would replace capitalism as the morally superior societal system, it was Margaret Thatcher who observed, “The trouble with socialism is that it always runs out of other people’s money.” Now, after 50 years of steady indoctrination by California’s media and education establishments, acquiescence to the soft tyranny of socialism dominates the culture, business climate and legislature. A byproduct of this is California’s massive government spending machine, where wealth redistribution is the organizing principle. Despite being home to the eighth-largest economy in the world, California is also teetering on insolvency.

Consider California’s perfect fiscal storm. Although Arnold Schwarzenegger came to the governorship in 2003 as a populist reformer, California’s cost of government has risen 40 percent since his election. California’s current budget includes $103 billion in spending. And due to the contracting economy, its shortfall over the next 18 months is projected to be a staggering $41 billion. This shortfall, if financed, would represent $1,108 of new indebtedness for every one of its 37 million citizens. Yet California is already the most indebted state in the union with a half-trillion dollars in outstanding debt obligations.

Milton Friedman observed that one can’t have an open-border policy and a welfare state—the incentives are all wrong. Despite the 1996 federal Welfare Reform Act, California is one of the few states that still provides lifetime welfare benefits. In the mid-1990s, the National Academy of Sciences found that each native-born household paid $1,100 in additional taxes to accommodate new immigrants and illegal aliens. That study is more than 10 years old. Now, if President Barack Obama and the Democrat-led U. S. Congress do grant amnesty to the millions of illegals throughout the country, through chain migration, millions of new welfare recipients will pour into California.

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There is much more, but this article was worth reading for the Thatcher quote alone.

One of the lessons of California is for Republicans who think that making deals with Democrats on spending can solve a crisis or make "government work." That is how Gov. Schwarzenegger reacted to the rejection of some of his better plans by voters. The compromises he made resulted in an ever worsening situation for California and a cascading downward spiral of the state's economy.