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The Fresno Bee

Having run up a national debt of $16 trillion, where is the federal government leading us? We don’t need to speculate, because our home state provides a real-life example of where this path leads.

California was once a model for the nation – a prosperous, well-functioning state that attracted migrants from across America who sought their fortune in gold prospecting, agriculture, start-up businesses, high-tech ventures, and other enterprises. Now, the Golden State is becoming a different kind of model – an example of how to ruin one of the world’s most advanced economies and put millions of people on the pathway to poverty.  

If you want to wreck an economy, chronic government over-spending is a good starting point. Consider this:  

• Although Governor Jerry Brown has cited a $28 billion “wall of debt,” the State Budget Crisis Task Force found California’s real debt is far worse, somewhere between $167 billion and $335 billion.

• Three California towns filed for bankruptcy in 2012, and the state Controller predicted more municipal bankruptcies lay ahead.

• California has the worst credit rating of any state and the worst credit rating record over the last eleven years, according to a July 2012 Pew study.

As seen in the recent passage of Prop. 30, raising taxes is the usual “solution” to the problem. According to the Tax Foundation:

• California’s top individual income tax rate is the second highest of all the states.

• California ranks 40^th in the sales tax burden, 45^th in the corporate tax, and 48^th in the overall business tax climate.

• The state’s taxes on small businesses are “some of the most burdensome in the nation.”

But even these exorbitant tax rates have not brought nearly enough money to cover all the government spending. A growing private economy could help by expanding the tax base and boosting government revenues, but California has taken a different route, over-regulating businesses and seeming to do all it can to drive them away:

• California ranked 40^th in CNBC’s 2012 survey of top states for business, placing 43^rd in business friendliness and 48^th in the cost of business.

• The state recently introduced its own cap-and-trade scheme – essentially a global warming tax that will chase more businesses out of state, drive up energy prices, and eliminate private-sector cash that could otherwise help expand businesses and create jobs    

The result of this debt, over-taxation, and over-regulation: California’s 10.2 percent unemployment rate is the third-worst in the nation,and a new Census Bureau report found California has the highest poverty rate of all fifty states.

Perhaps more than any other state, California used to represent the American dream. People moved here for a fresh start, uprooting themselves and their families simply for the chance to improve their lot in life. But due to the state’s anti-growth policies, this sense of eternal hope is giving way to bleakness and despair. According to demographer Joel Kotkin, California has suffered a net loss of four million residents to other states over the past two decades. Most of those leaving are young families, while nearly 40 percent of those who remain pay no income tax, and one-quarter receive Medicaid.

Who will be left in the California of tomorrow?

• The super-rich and the elites in Hollywood and San Francisco, who have so much money that they can survive any economic conditions.  

• The old and the poor, who can’t leave.

• People who work in agriculture, oil refining, tourism, and other industries tied to California’s particular land and climate.  

And one more group will stick around: members of government unions, whose unsustainable benefits will continue to break local and state budgets. Meanwhile, their union leaders will continue to ensure the election of politicians who will protect and expand these rewards.

At least, that will continue for a while. In the long-run, California government employees will suffer like everyone else, because at the current trajectory, the debt will eventually overwhelm everything. Government employee pensions will be one of the many casualties of California’s coming fiscal and economic meltdown. Here’s the evidence:    

• The total unfunded liability for California’s public pension systems is now estimated at $300 billion. That assumes a 6.2 percent rate of return, compared to the actual return of just 1 percent in the last fiscal year.

• Assuming a lower rate of return, the total pension hole reaches an astounding $498 billion.

We are now living through the twilight of the Golden State. To turn things around, we need to thoroughly overhaul the state’s economy and its tax, regulatory, and spending policies. But our leaders are not ready for these sweeping reforms. They’re too busy fantasizing about legal marijuana, public nudity, and high-speed rail lines to realize that a day of fiscal reckoning is coming.