Wednesday, April 11, 2012


Los Angeles, California has just announced that unless they immediately change their entire financial set-up, they will have to file bankruptcy. They are facing a budget shortfall of hundreds of millions and that deficit is growing every day. The city officials have proposed tax increases as well as privatizing many of the city’s services. Unfunded liabilities such as retirement funds are facing massive shortages. Of course, as you would imagine, there are still some who are fighting this inevitability. The “kick the can down the road” crowd is alive and well. The state of California is in no better shape though. They are facing many of the same problems as their most populated city. Unlike the Federal Government, state and local governments cannot operate with deficit budgets. They have to balance. It would appear that Greece has come to California.

Now, lest you begin to feel smug, many states and municipalities are in the same boat. For the past several years governments have spent as if the money would never dry up. They have not even considered the possibility that the gravy train could come to an end. We used to say they have spent like a “drunken sailor.” I was told recently, however, that the difference was that drunken sailors spent their own money while governments spend other people’s money. Regardless of how we got to this point, we are here.

It is simple enough to look across the sea to countries such as Greece to see what is on the horizon for us. The Federal Government has already told many states that there will be no bail-out. Apparently all that money has already been spent for political favors and other phony/baloney “green” projects under the guise of stimulus.

Greece has had to initiate new austerity programs and completely change their tax and spending in order to be bailed out by the European Union. Otherwise they would now be in default. Greek citizens are having a difficult time dealing with their new normal. They are still today rioting in the streets. Is that the future for Los Angeles? When retirement checks bounce, will those recipients, teachers, policemen, and firefighters, hit the streets and march in protest?

Margaret Thatcher once said that the trouble with socialism is that eventually you run out of other people’s money. Liberalism and socialism are intimately related and clearly the money is drying up. Governments have to understand that there are limits on how much they can tax and spend. The producers among us will not continue to support the non-producers. We cannot continue to live with massive budget deficits.

What is it going to take for us, all of us, to realize this is a dead end street? Will we have to face countrywide bankruptcy? Who would bail us out? We are the last bastion of free enterprise left on earth. If we go under, the world goes under.

Two things have to happen immediately. Number one, we have to get our economic engine back on track. That can only be done by the government getting out of the way and allowing it to occur. We must eliminate onerous regulations and restrictions. Rein in the EPA. Reduce the tax burden on business to allow for their growth. It is really simple. For government revenue to increase, we must have more contributors to the tax system. The second thing is that governments have to understand that they cannot be all things to all people. Politicians have to realize that they absolutely cannot continue to try to buy votes with spending programs. Spending has to coincide with revenue. Quit spending tomorrow’s revenue for today’s programs. If the money isn’t there, don’t vote for the program, period.

Quality California businesses are packing their bags and moving to Texas where the business climate is far more to their liking. Productive citizens are leaving that beautiful state as well.

California voters, you surely know what your problem is and yet you seem to ignore it. You keep electing liberal politicians who will never fix your situation. If you think the rest of the country is going to bail you out, you are sadly mistaken.

Ron Scarbro April 11, 2012

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