California, we are told, will have a $25 billion budget deficit over the next 20 months. However, they seem to be caught in a trap. If they were to actually “balance” their budget, that is, actually cut $25 billion dollars in spending, there would be massive layoffs and reductions in services, which would lead to a massive fall in tax revenues. This means that the budget would not, in fact, be balanced. Indeed, it might make the situation worse by collapsing the economy completely.
On the other hand, if they attempt to solve the problem through “revenue enhancement” (wonderful term), they would negatively impact business, leading to a fall in revenues. This means that the budget would not, in fact, be balanced. Indeed, it might make the situation worse by collapsing the economy completely.
Can’t go forward, can’t go back. So what to do?
Dmitri Orlov, that specialist in the mechanics of social collapse, has come up with a rather intriguing idea, one especially intriguing to the readers of this blog: California could secede from the Union.
Orlov doesn’t expand on this, but let’s look at some numbers. In 2005, the latest year for which I could find reliable numbers, California paid the Federal Govmint $47 billion dollars more in taxes than it received in payments. Let’s call this the “State in the Union Penalty,” or SITUP. Let us assume that with the economic problems and whatnot, the SITUP has narrowed by a third, to a mere $30 billion/year. This means that over the next 20 months, the SITUP costs California $50 billion. Were the state to secede, they could appropriate the Federal Taxes to their own ends. They would be able to fund everything the feds fund, clear their own deficit, and still have $25 billion to fix the deficits at the city and county level, and maybe fix a few pension funds besides. And they might still have funds left over to finance a tax reduction, which seems to have become the whole object of our political discussions. Further, as they take over federal programs, they might even find one or two that they don’t really want, squeezing out even more billions.
It is interesting to note that the SITUP is almost entirely a Blue State phenomenon; the Red States, by and large, get a SITUB, a State in the Union Benefit, receiving more than they pay. Note to the Tea Party: Be careful what you ask for; you might get it.
Of course, it is difficult to see Jerry Brown as the next Jefferson Davis. But as Shakespeare—or somebody—said, “Necessity is the mother of strange bedfellows.” And he might have less of a problem than Davis, since right at the moment the Army is off in Dunundastan fighting for whatever it is they are fighting for. And they may even get new tasks in North Africa. Jerry might only face a few companies of the Army Marching Band.
As unlikely as this sounds, Orlov is right about the process. The periphery experiences problems which the center cannot solve, but which the perhiphery could solve by ignoring commands from the center. And California certainly could solve its own problems by itself. On its own, it is the 8th largest economy in the world.
The good citizens of this new Republic would likely call themselves “The Republic of California”; the rest of us would likely refer to them, affectionately or otherwise, as the Left-Coast Republic.