California's Bankruptcy of Ideas

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To comment on this or other articles, go to our Facebook page, twitter or our Youtube channel.  James R. Gorrie, Managing Editor, Absolute Wealth.

While in California, I've gotten to see things anew since I left over a year ago. Of course, the recent bankruptcies have been big news. In the past few articles, I have talked about the specter of bankruptcy hitting Stockton and San Bernardino. It’s not great news, but certainly not surprising either.  At least it shouldn’t have been. The triumph of politics over financial realities is as old as Rome itself…and unfortunately, brings about the same end results as well.

What I have noticed for several years now is the ability of the larger cities and counties, and even the state of California itself, to put off facing the financial realities that confront them.  For instance, back in 2008 and 2009, California was in a major financial crunch—just as it is today—but did nothing to improve the situation at the time. With budget deficits growing and the prospect of missing pension payments, what did the state do?

Did the California legislatures hold emergency meetings to slash the budget?  Did the Governor propose radical reduction in union pay, pensions, and benefits, which are twice that of the private sector?  Were the huge and growing costs of social benefits for illegal immigrants cut? Oh no, not your life…

Political bankruptcy

What the state of California did was to raise business, income and sales taxes, and issue RANs—revenue anticipatory notes—that is, short-term bonds based upon future tax revenues that may or may not meet expectations, to bridge the revenue shortfall.

Basically, they issued more debt to fund a system that was already broken.

When I recall those measures and then see what’s happening today, just a few years later, it occurs to me that the causes of bankruptcy really begin with a bankruptcy of the political process and the language that we use to frame the issues we face.

Here’s what I mean…

Every financial system does either one of two things; it either works on a self-sustaining basis or it does not.

Take the system of a local school district where I used to live in Orange County.  Homeowners and businesses would pay local sales and property taxes, which funded the local school district.  The district would then fund the schools.

Pretty simple, right? For many decades, this system worked.  No reason why it wouldn’t.  As the areas grew, more houses were built, more property taxes collected,  more schools were built, more teachers were hired, and class sizes shrank. The system was more or operating smoothly.

And then, things changed.  Politics changed.  The political process degenerated from doing what best for the financial viability of all, to doing what’s best for the unions and special interest groups that receive public money.

Unionized teachers and educators financially backed their candidates of choice for political offices and then negotiated higher salaries with healthy Cost of Living Adjustments when their legislators and governors got elected.  And key here, is that many more administrators were hired with terrific salaries and great pensions.  The ratio of teachers to administrators shrank dramatically as more levels were added with higher salaries.  More and more money went to pay the administrators’ six-figure salaries, and less went to the schools themselves.  The goal of being an educator seemed to shift from teaching to administrating.

And then, added to that was the high level illegal immigration into California. Illegal immigrants put a huge added strain on budgets.  People that paid little or no taxes into the system packed themselves into houses two and three families deep, sucked off the social welfare system, abused the medical system, sent their kids to schools without any language skills and little cultural affinity for education.

As a consequence, schools became over crowded with kids who spoke no English. Standards we're lowered. English as a Second Language classes had to be created and funded, test scores fell, and dropout rates rose.  Therefore, less money became available to handle a much larger demand, paying for so many that put in so little to an already strained financial system.

Bankruptcy of language

This is where the bankruptcy of the language came in very handy.  The problems facing the school districts became politicized.  Language bankruptcy has another name, which is ‘political correctness.’  It removes financial responsibility from the nexus of ideas and solution by derision and accusations leveled against those who want to return to financial viability.  The fact is, with the existence and predominance of political correctness in the public consciousness, there ceases to be any economic correctness.  Fiscal responsibility is replaced by political seduction and smear.

For example, to say that school administrators ought to do more with less, and even eliminate levels of administration altogether, became an accusation of being anti-education.  It is never explained how a school district top-heavy with highly paid administrators improves the education of the children.  In fact, quite the opposite has occurred. My wife and I learned this at a school board meeting in 2011 and listened the council rule on class consolidation because of lack of funds.  We later learned that the 5-7councilmembers were paid over $250,000 a year.  That’s a lot of bread to pay people to meet a couple times per week and vote on cost cuts.

The language surrounding illegal immigration is even more bankrupt, if that’s possible, than it is for education.

To say that reduction of benefits for illegal immigrants is a racial issue instead of what it really is, which is first and foremost a sovereignty issue, as well as a legal issue, a financial issue, and a cultural issue is disingenuous.  To import tens millions of people who are not willing or able to assimilate with the culture of their new “home” is to bring on financial destruction—that is bankruptcy.

The dropout rate among Hispanics in California is about 40%. This is a time bomb for cultural destruction that is waiting to happen.  You can already see it in the emergence of a massive underclass of people with no real skills to contribute to the society.  Thus, Californians face the growing presence of violent gangs of illegal immigrants and growing criminality throughout the land.  And as far as education is concerned, the unrestrained power of unions and massive illegal immigration has resulted in California spending the most per pupil on education with some of the worst results in the nation.

Is there is no solution to these problems?  Not today.  Financial bankruptcy is only the final phase of political bankruptcy. Every system has limits; every system is breakable.  That is the reality.  As we are seeing in California today, the bankruptcy of our political ideas will continue to overwhelm and consume the economic facts, and will continue to do so...until they can do so no longer.

And those are…The Gorrie Details.

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One Comment

1. 

   John

   July 12, 2012 at 9:52 pm

   Excellent article. Sadly, the US is right behind them. Moving to a two class system with the politicians and corporate leaders on top and everyone else on the bottom!

   Reply