California, America’s answer to Greece, is continuing to unravel. Via Meadia readers are already familiar with the state’s unaffordably lavish pensions and collapsing housing bubble, as well as the bankruptcies in Stockton, San Bernadino and Mammoth Lakes, but now even more cities are on the verge of bankruptcy.What may finally break the back of local governments? The state government itself. As Businessweek reports:
Municipal budgets already strained by surging pension costs and declining real-estate tax revenue were stripped of more than $1 billion in local redevelopment funds and vehicle-license fees to cut California’s deficit. . . .“We will start to see more bankruptcies, not necessarily because of pension issues,” [state Controller John Chiang] said yesterday at a conference in San Francisco. “We need the state to participate in trying to prevent these bankruptcies.”
Like the Greeks, Californians can’t print their way out of bankruptcy. And as in Greece, balanced budget rules have proven completely ineffective. Meanwhile, California, which can’t scrap together a measly $1 billion to keep its city governments in the black, is getting ready to build a $68 billion train between LA and San Francisco.Although the Federal government already sends plenty of money toward the Pacific coast, there’s no guarantee that it will bail out broke state governments.A reviving national economy could give California some breathing room, but unless the state changes course, the grim slide toward insolvency looks fated to continue. California can’t afford to go on without embracing change.