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May 27, 2010
Californication (as in the Act of, and the Series)
Posted by The MaryHunter at May 27, 2010 4:25 PM
The financial collapse of Greece threw a huge wrench into the European economy and confounded global stock and bond markets. Greece has an economy that is only 3% that of the EU. But what about California? With an economy fully 17% of our national economy, might California's failure result in the financial collapse of U.S. markets?
Far-fetched? Consider the similarities.
California and Greece have roughly similar GDP output ($333 billion and $343 billion, respectively), as well as similar debt levels ($500 billion and $552 billion, respectively). But that only includes state debt for California. When you factor in California's 17 percent stake in the U.S. economy, which is saddled with $8 trillion in debt, the state's total debt liability is over $1 trillion.
But wait, there's more.
Both California and Greece suffer from a huge number of unionized government employees accustomed to large defined benefit packages, including annual salary increases and lifetime pensions. Much has been made of the ability of Greek government workers to retire at the age of 53. In California, government workers can retire at 55. As Republican gubernatorial candidate Meg Whitman has noted, the amount California spends on its pension programs has increased by 2,000 percent in the last decade to over $7 billion annually.
The Greek unions took to the streets when asked to contribute to minor austerity programs. California's 350,000 government employees are also likely to resist any effort to cut their entitlement packages, much less their jobs. The best scenario political leaders plan for is modest attrition.
And there's plenty more, detailed in this article.
We saw what decades of fiscal irresponsibility have led to in Greece: Fiscal collapse, billion-dollar bailouts and violent riots. In late February, the Telegraph reported that JP Morgan head Jamie Dimon said that California is a bigger risk than Greece.
There's a name for what California is doing to itself financially, and what it could well do to our nation. It's fitting that this is the same name given to a series on Showtime that centers around a guy who just can't say no to decadence and excess. I don't watch Californication but I can still ponder what fate will befall the show's protagonist and just how allegorical it will prove to be for the once-proud state that co-stars.
