NCPA - National Center for Policy Analysis

CALIFORNIA'S WINTER OF DISCONTENT

December 18, 2007

California's budget is broken, and its economy looks troubled.  The Golden State's governator, Arnold Schwarzenegger, could have done something about this.  Instead, he's made it worse, says Investor's Business Daily (IBD).

The state's nonpartisan legislative analyst has warned that California's budget deficit will soar to $10 billion over the next two years.  Schwarzenegger's own estimate puts the black hole at more than $14 billion and now he wants an emergency legislative session to deal with it:

  • The governor has asked state agencies to prepare for 10 percent budget cuts and vows no tax hikes; no such cuts will ever be made, instead, he and the legislature soon will "compromise" and ask for tax hikes to plug the gap.
  • Some recent Schwarzenegger proposals would only make things worse, like his aggressive new global warming caps on California's economy and proposed 4 percent tax on small businesses to fund universal care for the state's 6.5 million uninsured.

Meanwhile:

  • The minimum wage in California is set to hit $8 an hour on Jan. 1 -- highest in the nation; thousands of low-wage jobs will be lost as a result, leaving many young Californians without a ladder of opportunity to climb.
  • The American Legislative Exchange Council recently ranked California 41st of 50 states for economic performance and noted that the state's tax system, in particular, is a mess; in a 2005 survey of 458 CEOs by Chief Executive Magazine, 182 called California the worst state in which to do business based on "tax rates, regulations, work force attitudes and quality of life issues."
  • Companies such as Intel already have said they no longer will build in California; over the past five years, the state has lost some 155,000 factory jobs. Some went overseas, but others went to booming neighboring low-tax states -- like Nevada, Oregon and Arizona.

Source: Editorial, "California's Winter Of Discontent," Investor's Business Daily, December 17, 2007.

 

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