If anyone has been paying attention lately, California is in big trouble. They are basically bankrupt, but without the legal means to declare bankruptcy. One of the glaring missteps in California's long list of financial mismanagements has been its capitulation to the outrageous demands of the public employee unions, which are now crippling the state.
An enlightening article on the topic:
The unions’ political triumphs have molded a California in which government workers thrive at the expense of a struggling private sector. The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries. State workers routinely retire at 55 with pensions higher than their base pay for most of their working life. Meanwhile, what was once the most prosperous state now suffers from an unemployment rate far steeper than the nation’s and a flood of firms and jobs escaping high taxes and stifling regulations. This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises in Sacramento and in virtually every municipality in the state.
The article is long, but well worth reading in its entirety. It highlights some of the perils of unions in the public sector. Private sector unions walk a delicate tight-rope with the corporations with which they bargain. If they aren't careful, they can bargain themselves right out of a job. The market has a means to correct such over-zealous bargaining: bankruptcy. Bankruptcy is costly for everyone involved, but it wipes the slate clean and allows the economy to rid itself of inefficiencies and misappropriations.
But if your boss is the government, and bankruptcy isn't an option, what do you do when the state ends up with an empty wallet? California is about to find out.
That is, California will find out if they don't first get bailed out by the federal government (And let me tell you, as a Florida taxpayer, there's nothing I'd love more than to spend a portion of my day working to subsidize California's over-stuffed union coffers!) Will the federal government do it? I don't know. If you listened to Obama's recent fundraising speech in California, you would have heard him extol the state as the role model that the other states should follow in hoisting ourselves out of the recession.
I guess if spending your way into insolvency is the method by which we can achieve economic prosperity (and all evidence suggests that Obama himself believes that is is), then perhaps with their own irresponsible spending, the other great states of this union can also look forward to a 12.6% unemployment rate.