Wednesday, May 20, 2009

California's Budget Problem

Yesterday, my fellow Californians defeated a series of ballot measures aimed at "fixing" the budget crisis that California now faces.  Sadly, this is the second budget crisis California has faced in the last several months.  Just a few months ago, our government proclaimed we had a $40 billion budget deficit and enacted a bunch of new measures to close the gap.  This included a 1% increase in the sales tax.  Something I wasn't too happy with.

But now California supposedly has another crisis on its hands and the only solution this time is going to be to make spending cuts.  What a novel idea.  Gee, we don't take in as much money as we used to, what should we do?  Seems pretty logical to me but I guess logic is not one of our goverment's defining characteristics.

I'm not saying budget cuts are easy.  I'm not saying that I want to see large class sizes and less police on the street.  But at the end of the day, you have to face reality.  I'm sure it was pretty painful for your average Joe to have to give their dream home they "worked" so hard for (notice the quotes since I don't think many American's worked all that hard for their house) but when the pink slip came and the money was no longer coming in, Joe had to give up the house.  Joe probably had to give up many other things to and I'm sure it hurt.

I've never found living within my means to be a hard thing, but that's probably because I never lived above my means.  I only wish our federal government had to be more like our state government.  I only wish they had to find a way to trim the fat rather than just print money.  I know some people may think that printing money sounds like a nice painless solution but believe me its not.  It just delays the problem until later.  It not only delays it, it actually grows it.   Money only has value if there is real value behind it.  Unfortunately for all of us savers, our dollars are starting to lose their vlaue.

1 comment:

  1. Government spending should be steady over the long haul. Over some arbitrarily long period (say 10-15 years) spending and tax collection should net out to zero. Reducing government spending during a bust cycle just adds to the problems. Increasing during booms is just as bad. Both reflect poor short term thinking.

    Sadly, we elect officials for much less time than the economic cycles of our economy. Therefore, when times are good, we at best "balance the budget". During a bust, we're stuck with either massive debt or reducing spending and prolonging the economic recession.

    Although far, far, far from perfect, the Canadian federal government over the last 15 years has done a decent job of paying down the debt during the boom years. People may point to the high tax rates in Canada as a problem, but those issues shouldn't be confused with the basic math of matching government spending and collection over the long run.