NCPA - National Center for Policy Analysis


January 29, 2009

The Golden State expects a record $42 billion deficit over the next year and a half, the largest pool of red ink ever in a state.  Can it plug such a big fiscal hole?  Maybe, says Investor's Business Daily (IBD).

Gov. Arnold Schwarzenegger has pushed a wide range of new taxes on everything from golfers and car repairs to veterinary care and tickets to sporting events.  And now, the $825 billion stimulus bill may bring billions more to California, says IBD:

  • The stimulus will dole out about $200 billion to the states to help shore up their budgets.
  • California is slated to get $22 billion of that.

Is that a good thing? Probably not.  It's not aid, per se; it's a bailout.  Basically, California's irresponsible legislature has spent the state into near fiscal oblivion.  Now it will get bailed out by its big-spending friends in Washington, says IBD.

So expect more fiscal irresponsibility in California, not less., says IBD:

  • According to the Milken Institute, California's business costs in 2006 were 22.9 percent higher than the average state; taxes were 21 percent higher.
  • Now, new green rules to cut C02 emissions will only make things worse for businesses, which are leaving the state in droves.
  • As for the budget, California's debts are already at junk status after a decade that saw spending soar 134 percent to $131 billion.
  • Last year, 132,000 people -- many of them middle-class entrepreneurs -- pulled up stakes and left the state.

Source: Editorial, "Money For Nothin'," Investor's Business Daily, January 28, 2009.


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