Why Is California Issuing IOUs? Remember Enron

Why Is California Issuing IOUs? Remember Enron


After I read Matt Taibbi’s piece about Goldman Sachs gaming the oil/gas marketplace and wrote my own response, I started to think about the massive $24.3 billion budget deficit in California, and I wondered, “How could they get that far in the hole?”

Sure, the global economy has tanked the past couple years and revenues aren’t coming in like they were, but how can the gap be so vast? Because we’re not talking a couple billion dollars. This took some doing and I had a really hard time believing this was due to simple revenue shortfalls or excess expenditures on infrastructure, health care, welfare and schools.

Read more at True/Slant.

  • the Word

    It’s difficult to remember—wasn’t there a Presidential candidate who used their corporate jet?

  • kranky kritter

    Don’t forget where the epicenter of the collapse of the real estate bubble was.

    If the enron guys were the smartest guys in the room, who were the dumbest guys running the state of CA? How much signing off did various responsible agents of the state government do to enable the CA fiascoes with energy? How many government agents approved things that they didn’t really understand?

    IMO, looking at all of our nations problems from the perspective of the evil corporatists versus the virtuous government misses the point a bit. It takes 2 to make up the ugly tangos we have seen between business and state. Crony capitalism crosses party lines like, well, a M—F___er.

    We need elected representatives who are reasonably honest and who have fundamental expertise in economics and finance. There are no innocents, but there are plenty of ignorants. We won’t solve these problems simply by electing charismatic ideologues who blame business for everything and promise to increase regulations as a matter of principle.

    I fully expect that to fall on deaf ears. Progressive charismatics who don’t really understand economics and finance will employ simplistic approaches that have failed in other places and at other times. And economic recovery will take longer because of it. WE can’t borrow and tax our way out of this, though some folks are determined to try. But jobs don’t come from the government, they come from profitable enterprises that produce desirable products that other people will trade things for. That’s the bottom line. Money is just a medium.

    IMO it’s a shame how many liberals and progressives are determined to undertake approaches and “solutions” that are primarily ideological in nature.

    If and when this is all over, we will all see that it never should have been about ideology, but rather about the most simple and basic tenets of classic economics: we need to consume less and produce more. We need to save more, and borrow less. We need to live within our means as individuals and as a nation. We need to temper our desires to come in line with our available resources. And none of these aforementioned ideas should be a matter of liberal versus conservative ideological debate. They just make mathematical sense.

  • rob

    Have you seen the math scores coming out of our schools?

  • kranky kritter

    I wonder if this has anything to do with CA’s budget problems:

    the state’s annual pension fund contribution vaulted from $321 million in 2000–01 to $7.3 billion last year. According to public databases, more than 5,000 people are drawing pensions in excess of $100,000 from the state of California each year.

    From a Matt Welch article at Reason

  • kranky kritter

    Wait, here’s more, from the Sacramento Bee:

    California’s cost of guarding, feeding, clothing, medicating and supposedly educating its nearly 170,000 prison inmates and supervising 110,000 parolees is about $10 billion a year. And it’s very easily the fastest-growing segment of the deficit-ridden state budget over the past decade.

    It is, by a very wide margin, the costliest prison system among the largest states, with a per-inmate cost that prison officials tag at around $45,000 a year, roughly what it costs to send a youngster to one of the more prestigious private universities.

    The average among the nation’s 10 most populous states, according to one recent calculation, is $27,237 per year per inmate, including states with substantially higher incarceration rates, such as Texas. Therefore, prisons consume a much-higher portion of California’s general fund budget than those of other states – more than 10 percent.

    45 grand per inmate is an astonishing figure, isn’t it? If they spent at the average rate, the projected cost savings would be in the neighborhood of 4 billion dollars. How about that?

  • superdestroyer

    What the politicians in California forgot about is the ratchet effect. California went through two boom cycles and the state government made long term obligation based upon short term economic conditions. The budget decisions made by the politicians in California were almost certain to cause massive budget deficits. California should have been cutting the budget and putting aside funds during the good times.

    Also, the changing demographics of California did not help the budget. Replacing middle class whites with poor Hispanics was bound to cause budget problems.