California Gov. Jerry Brown announced that his state’s budget deficit will be $16 billion, up from earlier estimates of $9.2 billion, on a budget of $92.6 billion. So what to do?
Brown tells Californians that there will be have to be some cuts in the state budget. That’s Option One. But Brown and politicians of his ilk elsewhere—i.e., Greece and France—generally vilify austerity. See how President Barack Obama, as part of his reelection campaign, denounces the proposed federal budget of Rep. Paul Ryan, who is clear-eyed enough to observe that you can’t consume more than you produce and, thus, that government should curb its ravenous appetite.
Politicos like Brown live to hand out other people’s money, and they hate to anger those on the dole who might turn against them at the polls.
Thus Brown is pleading with Californians for Option Two: "Please increase taxes temporarily." (Temporarily? Please, Jerry, don’t toy with us.) Brown wants government to expropriate more from those already bled dry. In the long run this approach won’t work, and all Californians damn well know it.
California is the poster child for a central theme of Ayn Rand’s novel Atlas Shrugged: If you punish people for the virtue of productivity, they won’t produce as much, and many who can will flee.
California adds to high taxation a tangle of regulations that strangles entrepreneurship. Let’s use this fact to take a historical perspective and point the governor to a third option:
Back in 1994 the theme of first issue of Regulation magazine that I edited at my Cato Institute gig was "California: Autopsy on a Regulatory Suicide." A piece by Joseph Farah and Mike Antonucci highlighted businesses driven from the Golden State:
*An aerospace aluminum manufacturing company, which employed 750 Californians, spent ten months and $360,000 on permits for a new plant. Faced with even stricter air-quality standards, it moved to Nevada.
*The Great American Food Stock Company of San Diego expected to pay $40,000 for a building permit and wait eighteen months for government approval of its planned new facility. So the company built in Rio Rancho, New Mexico, where the same permit cost $2,250 and took four days to obtain.
*Rohr Industries of California decided not to build its new aerospace manufacturing plant in its home state because it could avoid paying $750,000 and instead pay only $750 by building in Arkansas.
So in the two decades since those enterprises shrugged, did California learn its lesson? Hardly! According to business relocation coach?Joe Vranich, in 2011 some 172 companies moved out or were in the process of moving out of California. That’s about an enterprise every two days. At least the moving-van business is doing well.
Which brings us to Option Three, which would burn Gov. Brown’s tongue even to mention: Cut regulations and taxes with a legislative meat axe! Free the producers! Get the hell out of the way! But this would reveal clearly to all that the policies of politicians like Brown have been responsible for California’s plight all along.
Hudgins is director of advocacy at The Atlas Society.