Thursday, August 19, 2010

CALIFORNIA CLASSIC: "PAYING" BILLS WITH IOU'S

California is on the cutting edge of America's slow but creepy slide into the dark side of the welfare state. The politicians in Sacramento are once again bringing the state to the point where it has to resort to a California classic and "pay" its bills with IOUs. This is the result of Golden State legislators having acquired a bad spending addiction they cannot pay for any more than an alcoholic can pay for his daily bottle of scotch without ruining his family. But instead of joining Spendoholics Anonymous, the elected officials in the California state capitol run away from their responsibility straight out on the campaign trail to try and get re-elected:

California will be forced to issue IOUs to public workers and other creditors in lieu of cash in the next two months if a budget deadlock cannot be broken, the state’s financial controller has warned. America’s most populous state faces a repeat of 2009, when a slumping economy and its failure to agree a budget caused an unprecedented fiscal crunch and the issuing of $2.6bn of IOUs, which damaged California’s credit rating and forced it to scrap some social programmes. John Chiang, California’s controller, told the Financial Times that the state was once again flirting with IOUs because of a budget stalemate between Arnold Schwarzenegger, its governor, and the state government. The budget is two months late. “If the governor and the legislature act responsibly and pass a budget then we won’t have to issue IOUs – it’s as simple as that,” said Mr Chiang. However, Mr Schwarzenegger and the state legislature do not appear to be close to agreeing a new financial plan for California, which issues more municipal debt than any other US state. The governor has outlined drastic spending cuts to close a $19.1bn deficit, which many in the state legislature have opposed.

Maybe the people of California should start sending IOUs to the state instead of property taxes, car taxes and other taxes that the state is not immediately grabbing at gunpoint. And maybe this time they should elect legislators and a governor who are actually going to put a leash on the state's madly out-of-control budget.

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