Budget Crisis

This article makes a good case for the over-all strength of the California economy in contrast to the one being made by California government; and it is always good to see another side when crisis clamor is in the air.

An excerpt.

“Humans have been around for tens of thousands of years. And yet, as recently as a thousand years ago, there was a broad consensus — even among the most highly educated — that the world was flat. The problem with “consensus” is that it becomes groupthink. If an idea has no challengers, it becomes difficult to disprove and those who speak against the established orthodoxy are always marginalized.

“There seems to be a consensus in California that we have a “Budget Crisis.” But if “crisis” is defined as a situation where impending disaster is a probable outcome — think Cuban Missile Crisis – then the notion that California is in the midst of crisis needs to be challenged.

“In support of the crisis mentality for California’s predicament is the contention that California is “going to run out of money” by February. This is inaccurate for two reasons. First, even with significant reductions in tax revenues to the state and local governments, California remains a tax producing behemoth. Because of its $1.6 trillion economy, California will generate tens of billions of dollars more than next-ranked Texas.

“The distinct nature of California’s economy reveals the second inaccuracy. It is not California that is running out of money, it is California government that, more accurately, has a cash flow problem. And government is going to run out of money only if one assumes a continuation of the rate of spending based on previous years. But why should we be forced to make this assumption?

“It is not a “crisis” if you are merely driving down the freeway. It is a crisis if you fail to slow down when you get to your exit. Reducing government expenditures when revenues decrease should be as natural as slowing down a car when approaching an off ramp — and we can do it without invoking the “C” word.

“You want a real crisis? Talk to the folks at Circuit City and Mervyns. Except for inventory liquidations, there is no more revenue coming in the door. Could those corporations and thousands of other small and large businesses going through bankruptcy have avoided this fate with a ten or fifteen percent reduction in revenue? Probably.”

About David H Lukenbill

I am a native of Sacramento, as are my wife and daughter. I am a consultant to nonprofit organizations, and have a Bachelor of Science degree in Organizational Behavior and a Master of Public Administration degree, both from the University of San Francisco. We live along the American River with two cats and all the wild critters we can feed. I am the founding president of the American River Parkway Preservation Society and currently serve as the CFO and Senior Policy Director. I also volunteer as the President of The Lampstand Foundation, a nonprofit organization I founded in 2003.
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