California Governor Brown Admits: “We have lived beyond our means”

I came across nice example, albeit on the state level, of what I outlined a little while ago regarding which party would shrink and which party would expand government spending:

The government will not grow or shrink or exist because you voted for it. You voted because there is a government. The government will not grow and wage wars or shrink and get out of wars because you ask it to. The government grows as long as it can borrow from people and tax you. It will shrink once the interest payments on its debt eat up everything else it can still afford and people are too broke to get taxed. And luckily, what I’m saying here is testable. Observe events moving forward and watch what happens. I would gladly stand corrected if objective evidence proves me wrong! :)

One could arguably say that Governnor Brown got lots of support from Californian public sector and labor unions, and other Democrats who are usually not particularly keen on cutting benefits and welfare programs.

Over 3 years ago, back then under Republican Governor Schwarzenegger, I wrote:

California has to wake up to reality. Whether we like it or not, the state needs to stop paying unionized workers outrageous wages. Instead of reducing expenses for some departments and programs, it needs to dismantle and abolish entire departments and programs. It needs to stop funding unsustainable pension plans. In return it needs to drastically cut the overwhelming taxes and fees that are stifling its economy.

Now look what Brown said the other day (emphasis mine):

California Governor Jerry Brown and lawmakers have reached a deal to raise public employees’ retirement ages, have them pay more into their pension accounts, and cap retirement payments in a vast overhaul of the state’s pension system that he says will save $30 billion.

California faces a huge liability for funding the nation’s largest public pension system, but other states and cities also have enormous pension funding gaps and will be watching the state closely.

Brown did not get everything he wanted from lawmakers, such as a hybrid plan that would funnel some contributions into 401(k)-style accounts, and some of the deal’s measures will not affect current employees.

“We have lived beyond our means,” he said. “The chickens are coming home to roost and this is just one in a series of countermeasures that will be required over the next decade.

True that, Jerry. Glad you’re catching on to the obvious. Expect much more severe yet necessary cuts in the years to come on the state level, and at some not too distant point in the future on the federal level as well.

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California’s Looming Public Pension Crisis

Other state pensions are in a similarly bad shape. The choices for them will be one of the following, or a combination: raise taxes, cut “services”, lower pension payouts, or raise pension contributions.

As far as I know the only one who has actually started confronting public sector unions, teachers, and the like is governor Christie of New Jersey. I doubt he’ll succeed in the long run, but it’s interesting to see someone try.

Of course a good sign that he is taking steps in the right direction is that Paul Krugman, who is of course as always incapable of predicting any government induced crises in time, has nothing better to do but to bitch about governor Christie’s cancellation of a tunnel project.

Yes, this is not a joke. There are state governments passing budgets on one junket after another, making outlandish pension promises, putting future taxpayers on the hook for billions upon billions of dollars, paying public union workers outrageous wages, and Krugan’s really big concern is the cancellation of a tunnel project … he never fails to amaze me! :))

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