California's Other Deficit

As the resurrected governor of California, Jerry Brown, readies himself to take control of the state for his third term, news of yet another deficit comes out of Sacramento.

The Legislative Analyst’s Office has just released a report that shows that the unemployment benefits fund is now running a $10.3 billion deficit. The causes are the ongoing recession in jobs (caused in turn primarily by California’s viciously anti-business climate) and the decision of last year's the state legislature to raise unemployment benefits. So far, the feds have loaned money to the state to cover the deficit, but next year they are set to charge California $362 million in interest for that loan. The Legislative Analyst’s Office has proposed that the state cut benefits — and raise unemployment taxes on business.

This is very problematic. The unemployment taxes paid by California businesses are already among the highest in the country, and jacking the rates up even further will only result in yet more businesses fleeing the state. In addition, Brown and the Democratic legislature — elected by a tsunami of public employee union money — are not likely to be willing to cut unemployment benefits.

No, it is obvious that Brown and his myrmidons will turn to Obama and beg for bail-outs. The rest of the country will be pressed to cover for the fiscal follies of California (as well as New York and Illinois, no doubt). My advice to the citizens of the other states is to tell the fiscal drunkards in California what the pub keeper in My Fair Lady told Eliza Doolittle’s drunken father when he asked for money: “Not a brass farthing!”