GREENHUT: Will financial mess offer some hope for California?

GREENHUT: Will financial mess offer some hope for California?


Americans have a deep-seated sense that things have gone awry in our Republic, and they’re struggling to give voice to their frustrations.

The victory of Scott Brown —- an unabashed Republican in the liberal Democratic bastion of Massachusetts —- might not be the equivalent of the “second shot heard round the world,” as a caption to an Internet-circulating Revolutionary War drawing is claiming, but it’s big news. Really big news, and a relief to those of us who know the destruction that government health-care “reform” will wreak on our nation.

One telling interview, aired on National Public Radio, was with a Democrat from a Boston suburb who described himself as a proud liberal, who nevertheless voted for Brown because of his fears of an American future soaked in debt. I’m naturally pessimistic about the fiscal future of our country and especially of the state of California, but such statements give me a glimmer of hope.

Then again, I already expect Republicans to draw the wrong lessons from the Brown victory. Writes Andrew McCarthy in the conservative National Review: “Scott Brown went out and made the case for enhanced interrogation, for denying terrorists the rights of criminal defendants, for detaining them without trial, and for trying them by military commission. It worked. It will work for other candidates willing to get out of their Beltway bubbles.”

In NR’s world, the public mainly wants a return to the Bush administration’s national security policies —- and the main failure of Bush and other Republicans was their unwillingness to sufficiently defend these anti-terror policies.

Never mind that the Bush administration was punished in part for those same policies with a stunning, well-deserved loss in the presidential and congressional elections.

Still, the public is testy, and that’s a good thing.

The TEA parties have been an encouraging movement, to the degree that they have not been co-opted by mainstream Republican politicians. I appreciate the protests, and especially the focus on opposing the bailouts and the growth in government, even if I am left wondering where these people were during the long eight years of government expansion and out-of-control debt under the last Republican president.

I am hoping to see a new, nonpartisan coalition bubbling up from the grass roots that will coalesce around the financial devastation being wrought on this country by Democratic and Republican politicians alike. It’s hard to overstate the financial problems we’re facing at a federal, state and local level.

The government has been spending like crazy, running up debt and unfunded liabilities that eventually must be accounted for. In a 2008 speech (before the Obama spend-a-thon), Federal Reserve Bank of Dallas CEO Richard Fisher took a look at what it would cost for Americans to directly address the unfunded liabilities from Social Security and Medicare: “With a total population of 304 million, from infants to the elderly, the per-person payment to the federal treasury would come to $330,000. This comes to $1.3 million per family of four —- over 25 times the average household’s income.”

Given that most American families don’t have a spare $1.3 million lying around to fork over to the federal government, Fisher points to the alternatives: a 68 percent increase in revenues (not rates, but revenues) or a permanent 97 percent cut in discretionary federal spending.

“That discretionary spending,” he added, “includes defense and national security, education, the environment and many other areas, not just those controversial earmarks that make the evening news. All of them would have to be cut —- almost eliminated, really —- to tackle this problem through discretionary spending.”

Fisher isn’t even accounting for the massive unfunded liabilities to pay for public employee pensions, estimated at above $2 trillion nationwide. He’s not looking at structural problems in states such as California.

Obviously, California cannot get its fiscal house together, and shows few signs of moving in the right direction given political realities in Sacramento. Local governments are struggling, with Vallejo’s bankruptcy being the “canary in the coal mine” for other localities trying to figure out how to get out from underneath crushing burdens posed by salaries and pensions for public employees. Vallejo is now looking at raising taxes, freezing bond payments and cutting spending.

My biggest fear is that the economy will recover too quickly —- before more governments have been forced to get a handle on their financial mess. A booming economy will allow them to continue to kick the can down the road and avoid the tough choices that eventually must be made.

Writing in the San Diego Daily Transcript, San Diego Councilman Carl DeMaio points to another one of my fears —- officials will fix things just enough to get by. Noting that his city’s annual payment of all retirement-related benefits consumes 69 percent of payroll, DeMaio decries city leaders who have declared victory and demands deeper reforms if the city hopes to ever get its fiscal house in order.

We’re a long way from a solution at any level of government. Still, the public is restless. More people understand that governments cannot continue to spend more money than they have and that massive debts and unfunded liabilities are basically tax increases on our grandchildren.

I’ll try to stay optimistic, at least for this week. If Massachusetts voters can hand “Ted Kennedy’s” Senate seat to a Republican, then maybe even California voters can stage a little rebellion of their own.

STEVEN GREENHUT is director of the Pacific Research Institute’s www.calwatchdog.com journalism center and is CalWatchdog’s editor in chief. He was a deputy editor and columnist for The Orange County Register for 11 years and is the author of the new book, “Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.