The California Pandemic

Timothy Birdnow

Writing at City Journal, Joel Kotkin discusses California's post Wuhan situation.

Not all the pain will be felt by the working classes, though. The pandemic is likely to stall or even derail some of the new IPOs that the state relies on for revenues. A reversal in real-estate price inflation, another key source of state funding, also seems likely. California faces a likely scenario of falling revenues and soaring demand for government services.

Citing a series of annual budget surpluses, some progressiveshave argued that California has developed a "fiscally responsible” form of sustainable capitalism. Yet, as even former governor Jerry Brownpredicted, the state’s "Johnny one-note” tech economy would eventually stumble, reducing the huge returns on capital gains that remain critical to state revenues. Even before the coronavirus, this lapse seemed imminent, given the recent poor performanceof tech IPOs and the $100 billion drop in the value of privately held "unicorn” startups, once seen as destined to become the next great source—a la Google and Facebook—of income for state coffers. Capital-gains payments, which doubled last year to over $15 billion, could now drop by a large margin, as occurred in 2008, drilling a big hole in the budget.

The coronavirus-induced recession will make clear how tenuous California’s financial condition has become. The state’s much-touted $21 billion operating-budget surplus is likely to disappear entirely under the weight of declining revenues and rising welfare costs. Since March, California’s chronically underfunded unemployment-insurance claims grew by 1.6 million filers.

Coupled with a drop in revenues, expanding demand for services will prove catastrophic. More than two-thirds of California citieshave no funds set aside for retiree health care and other retirement expenses; the budgets of 12 of the 15 largest cities are in the red. The state overall owes $1 trillion in pension debt, notes former Democratic state senator Joe Nation. Truth in Accounting in 2019 placed California, despite the tech boom, 42nd in fiscal health among the states.

He goes on to discuss how California's restaurant industry, low paid but vigorous and vital to tourism, is going to go down. And international trade - another big source of revenue for California - is trending for a definite permanent dropoff.

California's day of reckoning may be at hand.

It's terrible news for Conservatives, I might add. I doubt anyone will learn a lesson from it, and what will happen is many of the people who caused the disaster in California will move away, to Colorado, Arizona, Montana, Nevada, bringing their infection, one far worse than COVID 19, with them. They will destroy their host states like Wuhan virus destroys people's lungs. Only they will not be mostly benign as is the Chinese virus.

The real disease in California is Progressivism. And that is largely incurable.

Posted by: Timothy Birdnow at 08:36 AM | Comments (2) | Add Comment
Post contains 500 words, total size 5 kb.