As we approach the 2012 general election, I think it is important to pay attention to what is happening in California and Greece. Both have severe budget problems that will continue to play out in the near future. This process has implications for the U.S. as a whole and the decisions that voters will face this fall. We can see our future in these two governments.
At the root, all budget crises are the same — more spending than income. California and Greece face similar problems with an unaffordable large public workforce and the promise of an unsustainable pension system when these workers retire. Further, California has a welfare safety net that supports not only citizens of the U.S. but also large numbers of noncitizens who overwhelm that system.
The budget crisis in California grows larger and more difficult each year. The previous governor (a Republican) proposed tax increases to help with the budget. These were firmly rejected by the voters. The current governor (a Democrat) recently said the budget crisis in California was the result of longstanding deficit spending that California and the federal government have engaged in for many years. This seems to be justifying bad behavior based on other bad behavior. Anyway, California’s day of reckoning is approaching rapidly, and our national time is probably not far behind.
The proposal to raise taxes in California is worth further consideration. Even if it had been accepted, it would have been a short-term solution. Currently, California is experiencing an exodus of individuals and businesses for more tax-friendly, functional states. As Greece has learned, at some point, higher taxes generate more avoidance than revenue.
President Barack Obama campaigned on a balanced budget by the end of his first term. He appointed a deficit commission (Simpson/Bowles) and then took no action on its recommendations. He does not take our deficit problems seriously.
We need to stop the partisan bickering and elect candidates who understand the dire straits the country is in with a $16 trillion debt and an annual deficit of $1.3 trillion. These candidates should be leaders committed to getting control on the unsustainable spending and reforming the tax code so it is simple and fair and so all Americans have some skin in the game and are paying taxes. We need leaders who will achieve a balanced budget within a short time, not 10 or 20 years from now. We need to hold them accountable if they don’t. The direction of the country is in the hands of the voters this fall. Do we want to follow California and Greece or get our budget under control?