by Patrick J. Buchanan – November 27, 2002
That 70 percent fall in the NASDAQ and 25 percent decline in the Dow, and the recession and unemployment they produced, have begun to cause major collateral damage to municipal and state budgets.
The Empire State and the Big Apple are staring at a combined deficit of $15 billion, “a crisis of historic proportions,” says the Washington Post. Rudy Guiliani’s successor, Michael Bloomberg, has watched his popularity plummet to 41 percent, as he proposes raising property taxes 18 percent, piling $3 billion in income taxes on commuters, raising subway fares a third and putting tolls on the Brooklyn Bridge.
The salad days of the Clinton Decade, when the tough decision facing mayors and governors seemed to be whether to spend surpluses on raising teachers’ pay or cutting taxes, are over.
The 2001 recession cost 2 million Americans their jobs. It has bitten into tax revenues nationwide and forced higher spending on social services. The bear market has killed the goose that laid those golden eggs called capital gains. And with the U.S. trade deficit over $450 billion, the U.S. manufacturing base – a cornucopia of tax revenue – continues to hollow out.
NAFTA and GATT, the trade deals beloved of the Beltway elite and the multinationals, continue to suck out of America the manufacturing jobs that were the on-ramp to the middle class. This is a central cause of the crisis of upstate New York, over which our pro-NAFTA politicians so copiously weep.
The fat years are over; the lean years are here. While congressmen may have managed to draw up districts so safe that only one in 20 House races is competitive, governors of both parties will spend this present decade on the endangered species list.
New York’s crisis, however, pales beside that of the Golden State. Having spent California’s cut of Big Tobacco’s future profits – to close a $23 billion deficit in this election year – Gov. Gray Davis is now staring at deficits stretching to the end of his new four-year term.
“Hold onto your wallet,” warns Nancy Sidhu of the Los Angeles Development Corp. LADC projects “a deficit of $6 billion this year, at least $21 billion in 2003-04 and between $12 billion and $16 billion annually for the next six years.”
Adds the Financial Times, “The near-term deficit, approaching 25 percent of California’s annual spending, is the most extreme example of the fiscal blight spreading through other states and down to local authorities.” Davis’ budget crisis can be traced to two causes: loss of 200,000 manufacturing jobs in two years and the devastation wrought to the software industry of Silicon Valley.
But something more ominous is happening to California, akin to what happened to New York after the war. Folks are simply packing up and pulling out. Middle-class Californians, uncomfortable with the radical ethnic changes reshaping the state and weary of the tax load, are leaving for good. In the 1990s, for the first time in history, there was a net out-migration of native-born Californians. Two million left. And as high-income Californians depart, to be replaced by low-wage Latins and Asians who consume more in services than they pay in taxes, California’s deficits will explode. And as Gray Davis tries to salvage social programs by squeezing taxpayers even more, even more taxpayers will join the exodus.
California is inexorably headed for Third World status. Tax rates will have to be raised again and again, but immigrant folks picking fruit, working in kitchens and washing cars do not pay the same amount of taxes auto and aerospace workers did. Somebody has to make up the difference. And that somebody is packing up and heading east.
There is no end in sight to the substitution of a new and different California for the old California we all knew. California remains the first choice of final residence for one-third of the 1.5 million aliens who break into this country every year. In the counties of Los Angeles, San Bernardino, Riverside and Orange, poverty levels soared throughout the 1990s.
Meanwhile, the grandchildren of the Dust Bowl Okies who came west in the 1930s, and the grandkids of the veterans of World War II who came after 1945, are moving to Nevada, Colorado and Idaho. In the last decade, 225,000 left for Arizona. And as those states become more Republican, the Golden State becomes as reliably Democratic as Washington, D.C.
The 1990s were good years for Big Government. In Washington and state capitals, politicians bought popularity and re-election with their unanticipated windfalls of tax dollars. Now the spigot has been cut off. The coming budget wars in state capitals should make for some interesting politics.