Dynamics
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After years of increased state spending, thanks to bloated tax revenues from the bubble economy, California has been increasing spending on new programs.
But now, as the real estate bubble is collapsing and the credit bubble is leaking, tax revenues are slowing, while expenses are increasing.
The result is a $1.9 billion shortfall in this fiscal year, and an anticipated $14 billion shortfall next year.
Nothing can be done immediately, since the California state legislature hibernates, just like bears do. The winter recess began in September and ends in January.
When the legislature convenes in January, Schwarzenegger will declare a state of fiscal emergency, under a little-known provision in Proposition 58, a balanced-budget measure that voters approved in March 2004.
Apparently this is going to be very dramatic. Schwarzenegger will declare a state of emergency, after which the legislature has 45 days to solve the problem -- either by raising taxes or cutting programs. If they haven't succeeded, then they're not allowed to conduct any other business until they do succeed.
For some reason, this story reminds me of a remark by one of my school teachers in the 1950s. Her name was Miss Shepherd, and she had a wooden leg -- I assume she lost her leg in the war, but I don't know. Anyway, one day out of the blue she said, "People think that if you have a job as a schoolteacher, then your job is safe, because they always need schoolteachers. But that isn't what happened in the 1930s. They would put two or three classes together in a single room, and replace three teachers with just one teacher." That's all I remember, except that she was very emotional when she said it -- a combination of anger and sadness.
Generational Dynamics predicts that, unfortunately, those days are
coming again. The situation in California is hardly unique among the
states, and it's only going to get worse as the bubbles continue to
deflate. There are some hard days ahead, and there's no way to stop
them. As I always say, treasure the time you have left, and use the
time to prepare yourself, your family, your community and your
nation.
(17-Dec-07)
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