As California Goes so Goes the Country

Many states are feeling the crunch of the current economy. If you are having as much trouble as California. Quach reported, "California legislative analyst's office released its fiscal outlook... Showing the states General fund deficit could be about $20.7 billion." Closing is deficit gap is causing a California state legislature to make many hard decisions.

Last fiscal year Governor Schwarzenegger and the California Legislature was able to close a $24 billion budget deficit. Unfortunately, this required utilizing many budgets cuts that were only available once. Buchanan explains that Governor Schwarzenegger in the California legislature close this gap by utilizing cuts such as, "state worker furloughs, partial closures of state parks, and funding cuts to the California State University and University of California systems and many health and welfare programs."

Governor Schwarzenegger in California Republicans are determined not to raise taxes. This plan is in line with good economic practices. History has shown that raising taxes decreases the amount of money that families have to spend, decreasing the amount of money retailers bring in, decreasing retail profits, and causing job layoffs. This cycle leads to even less taxes.

While not increasing taxes may be good economic practice, California still has to find a way to close the $20.7 billion budget deficit. Governor Schwarzenegger has come up with many ideas to ease the deficit. Buchanan explains that Governor Schwarzenegger has proposed, "cuts to health care, education and prisons, although Taylor warned that further cuts to schools would jeopardize federal education money for California."

For California state politicians, the budget crunch is hitting in their own pocketbooks. Lagos reported:

"Legislators and other elected officials in the capital will see their salaries slashed by 18 percent next month under an opinion issued Thursday by state Attorney General Jerry Brown, who decided that officials' pay can be cut in the middle of their elected terms.

The decision means the state will cut the pay of all 120 lawmakers and nine constitutional officers a year earlier than expected, saving the state $2.8 million next year.

A spokesman for state Controller John Chiang said he will cut the salaries Dec. 7, the start of a new legislative session. Brown is among the officials whose annual salary will be cut, from $184,301 to $151,127."

California has long been a vestige of progressive political opinions. California is home to such progressive think tanks as Berkeley University in California Polytechnic. California's first implement such liberal policies as:

California's liberal institutions have even tried to identify human services spending is good for the economy. Haveman, Fisher, and Tseng produced an economic report that stated human services spending actually made money. Haveman, Fisher, and Tseng wrote, "The report finds that, on average, human services expenditures generate 1.32 dollars of economic activity for each dollar spent. Further, because of federal matching dollars, particularly the enhanced matches newly available through the American Recovery and Reinvestment Act (ARRA) multipliers for specific programs currently range up to 5 or 7 for a single additional dollar of state expenditures."

At first glance, Haveman, Fisher, and Tseng's statement seems solid. After all, the math seems to work out. What Haveman, Fisher, and Tseng did not calculate is the domino effect that the system sets up. Human service spending bringing in money is largely dependent upon federal government matching funds. Should the federal government also face budget cuts and then this money may not be there. Which is exactly the situation a California is currently facing.

For people not living in California, an important lesson should be gleaned from California's current budget crisis. Our federal government is currently endeavoring to enact many policies that there are dependent upon questionable funding sources.

Insurance for Children is funded on the backs of smokers. In the Spring of 2009, the federal government raised tobacco taxes to fund the SCHP program.Pegram reported:

"Titled the Children's Health Insurance Program Reauthorization Act of 2009, the bill intends to raise upward of $31 billion over the next five years for low-income families who are not eligible to receive Medicaid but cannot afford to purchase private insurance. And Centre County is sure to benefit, Congressman Glenn "GT" Thompson, R-Howard, said."

This bill raised the cost of cigarettes another $1.01 per pack.

Green initiatives funded on the backs of energy companies. While not yet passed, federal legislatures are endeavoring to pass a Cap and Trade bill. House of Representatives recently passed a Cap and Trade bill. Carey described the bills effects as, "If it becomes law, the measure would require a massive switch to cleaner sources of energy over the next four decades."

The Cap and trade bill achieves fossil fuel reduction by capping the amount of fossil fuels that a company can admit and requiring additional carbon credits to be purchased. This system would increase the cost to industry such as power plants, electric companies, and the few manufacturers that United States has left. Many legislators contend that these increased costs will just be eaten by the companies. However, history is taught us the more likely results is for these cost to be passed on to the consumer.

California's current budget crisis has taught us that these actions are bult on a very shaky foundation. Higher cigarette taxes produces less smokers. Which produces less income for the programs they support. Higher energy costs costs American citizens more. Decreasing the amount of money available for other purchases. Reduced purchases causes companies to layoff more workers further decreasing the size of the economy. If federal policies continue, the United States as a whole may face budget deficits equal to or greater than California's current situation.

References
Quach, Hoa. California budget crisis diaries: new guess for state deficit tops $20 billion. November 2009. San Diego news network. Retrieved on November 20, 2009 from http://www.sdnn.com/sandiego/2009-11-19/politics-city-county-government/california-budget-politics-city-county-government/california-budget-crisis-diaries-new-guess-for-state-deficit-tops-20-billion
Lagos, Marisa. State elected officials' pay to be cut. November 2009. San Francisco Chronicle. Retrieved on November 20, 2009 from http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/11/20/BAP21ANDMA.DTL&type=politics#ixzz0XQ9FiwTc
Buchanan, Wyatt. State budget drowning in red ink for next year. November 2009. Separate Cisco Chronicle. Retrieved November 20, 2009 from http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/11/19/MN3H1AMPFL.DTL
Pegram, Trevon. Increased cigarette tax to fund families' insurance. March 2009. The daily collegian online. And retrieved November 20, 2009 from http://www.collegian.psu.edu/archive/2009/03/20/increased_cigarette_tax_to_fun.aspx