California State Treasurer Bill Lockyer is absolutely right to scoff at accusation in the Wall Street Journal that California is the “the Lindsay Lohan of states”. Ms. Lohan is currently in Court Ordered rehab at the Betty Ford Clinic, whereas wily California is still “at large” and making lots of new Ponzi scheme promises to pay existing municipal bondholder with future borrowings.
Treasurer Lockyer in his Op Ed crows that California has approximately $89.4 billion in revenue and only $36 billion mandated as priority to pay schools, leaving “$53.4 billion available to pay debt service on bonds — more than eight times the $6.6 billion of interest payments the state will need to make this year.” But he conveniently forgets to tell readers that those interest costs are headed to $9 billion, pension costs will double to $8 billion, the State budget has a $24 billion expected shortfall over the next 18 months; and the State must by law pay back $27 billion in short term borrowing from State agencies.
California does have many similarities to Ms. Lohan. Both were America’s premier child stars, but over the last fifteen years they have increasingly been overwhelmed by their addictions. For Ms. Lohan, the addiction is cocktails and drugs; for California, it is shopping and spending. Psychiatrists explain that addictive behavior is any behavior that has become the exclusive focus of a person’s life and physically, mentally, or socially and harms the individual and or others. The addictive behavior produces beta-endorphins in the brain, which makes the person feel “high.”
The medical term for the addiction of shopping and spending is “Omniomania”; it is considered the most socially reinforced of behavioral addictions. The liberal media bombards California Legislators with encouragement that shopping and spending gives Legislators higher social value. Even dour faced economists like Paul Krugman extol the virtue of political spending as a necessary boost to the economy.
Treasurer Lockyer goes on and on in his Op Ed with clever irrelevant statistics that the State of California is only spending the same amount of money adjusted for inflation that they spent in 1995. However, he avoids mention that California has gone from the United States perennial job creator in 1995, to the highest job destroyer in 2010. Over less than a generation, the State’s population grew by 19%, but unemployment has grown by 57%. California’s fifteen years of addictive deficit spending behavior has become the exclusive physical, mental, and social focus of Legislator’s lives and is causing tremendous harm to millions of the State’s citizens.
The Treasurer is correct when he states that general fund expenditures fell by $16 billion over the last three years. Had the expenditures not fallen, the percentage growth in spending would have increased by more than double inflation over the 15-year period.
Very few addicts voluntarily enter rehabilitation, because they become very adept at lying to themselves and others. Addicts lie when they have to, and they lie when they don’t have to. They lie to get out of trouble, and the lies get them into more trouble. They lie to increase their pleasure and they lie to wallow in their self-pity. It has only been Ms. Lohan scrapes with the law enforcement that have encouraged her to choose attending the world renowned Betty Ford Clinic, versus 90 days in jail.
California has avoided entering financial rehab through its crony friends on Wall Street who innovated new and clever methods of multiple borrowings on the same or declining cash flow. With the State on the verge of junk bond status and borrowing costs up 50% this year, it will only be a short time before California’s friends in low places on Wall Street abandon her. When that happens interest rates will spike up, the State’s bond prices plummet, and Legislator’s Omniomania rehab will be a massive “cold turkey” of severe spending cuts.
As we welcome in the New Year, most people are kind enough to say a little prayer that the young and talented Ms. Lohan succeeds in overcoming her addictions. Please consider saying a little prayer that California Legislators turn away from their addiction and make responsible cuts in spending before the debt crash causes millions more pain. Remember, California seemed young and talented just 15 years ago; maybe she can make a comeback.