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How the Grinch stole California

by Bob Morris, published

So, what happened? California used to be the promised land, the place everyone else seemingly wanted to move to, especially during the Rose Bowl Parade when it was freezing back East and sunny in SoCal. You could almost hear families saying, 'let's move where it's warm and the economy is booming.' But that was yesterday. Those in North Dakota watching the Rose Bowl this January may wish it was warmer there, but can be consoled by knowing their state is solvent, unemployment is low, and their economy is humming along. They don't really have a recession there. Apparently, they didn't get the memo telling them to go mad with greed on real estate, plus they have a state-owned bank, which almost certainly helped moderate potential excesses.

If that was only the case in California, but it's not. Instead, the financial wheels are coming off as endless stonewalling and recalcitrance by both parties has, for years, blocked any effective solutions. Democrats want more revenue and few spending cuts, while Republicans vow no new taxes and big spending cuts. But it's clear to all but the most obtuse that taxes will have to be raised and spending will also need to be cut. The political ideologues on both sides will squeal, but there is no alternative. And California may still default on its debt anyway.

Incoming governor Jerry Brown is sounding remarkably down to earth as he faces the stark reality.

     "We've been living in fantasy land. It is much worse than I thought. I'm shocked" he says, adding "This is really a huge challenge, unprecedented in my lifetime."

Further cuts in education are almost certainly coming, and in many other areas too.

Our public pensions are woefully underfunded. This problem won't go away. Our unemployment insurance fund will be billions in the hole by the end of 2011. To my knowledge, neither of these shortfalls are factored into the already catastrophic $28 billion state budget deficit.

How did it get so crazy? 

Real estate developer Robert J Cristiano says in a fine and cranky rant, I Opt Out Of California, citing irresponsible spending, high taxes, and a general malaise for his decision to take his millions and move elsewhere. He's hardly the only one. California has had a troubling net population decrease since the 90's. More people are leaving than coming.

So, as you can see, the Grinch has been busy stealing California. Vast and increasing budget deficits, unemployment that is almost 30% higher than the national average, and a dysfunctional political culture are what the Grinch has left for us. And who is the Grinch? In a very real sense, he is all of us. Recent polls have repeatedly shown the public wants less spending, lower taxes - and to keep entitlements like education and health care at current levels and maybe increase them. This view is not only myopic, it is selfish and so out of touch with reality that it borders on lunacy.

Did anyone really think the real estate bubble would go on forever? Actually, yes, many did. "This time is different," they proclaimed. It wasn't, and resultant wreckage cratered the economy at large as well. What the Grinch stole is California's future, as major problems were ignored, bonds which must be paid back for years to come were sold to fund shortfalls now, and the implicit assumption was that the good times will go on forever, so why worry.

But the Grinch changed all of that. 

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