Illinois and California Show Economic Dangers of a Liberal Agenda

California has become the poster child for bad economics. Surely, Ronald Reagan is turning over in his grave at the thought of his home state straying so far from his policies. California may be the worst offender, but they are by no means the only state whose poor fiscal decisions have drenched their ledgers in debt. Illinois, home to President Obama, seems to be doing its best to give California a run for its money in this race to the bottom.

California is a debacle. In the last decade they amount it has spent on its pension programs has increased by 2,000%. It is no wonder then that a recent study by Stanford University finds that California’s pension plan is unfunded to the tune of $500 billion. Their bloated government has added to the problem. As Carol Liebau, a Los Angeles based political commentator, found

“Forty years ago, the state spent $1,240 for every man, woman and child in the state, in today’s inflation-adjusted dollars. Now it spends more than double that amount – $3,200 per person – even as ordinary citizens’ quality of life has plummeted.”

These problems aren’t going to go away soon.  The state’s Legislative Analysis Office projects $20 billion annual budget deficit in the state all the way through 2015.

Illinois was another state that became enthralled by, and ultimately slave to, liberalism’s promise of shared prosperity through big government. In a New York Times article this week Illinois’ comptroller, Daniel W. Hynes explains the impact of their $12 billion budget deficit for 2010.

“This is what the state owes right now to schools, rehabilitation centers, child care, the state university – and it’s getting worse every single day. . . This is not some esoteric budget issue; we are not paying bills for absolutely essential services. That is obscene.”

The incredible deficit has left lawmakers clueless. Illinois legislators are acting like the problem isn’t there. They left this month without having come up with a plan on how to pay for more than one-fourth of the state’s budget. For every dollar they spend, they only have 75 cents in the bank. Technically states cannot go bankrupt, but that still doesn’t seem like best way to deal with the problem.

Their only solution for this brilliant bunch appears to be putting off coming up with a solution until sometime later. For instance, as the New York Times reports, the University of Illinois hasn’t received $668 million it was promised by the state. Rather the devise some way to pay for this, state legislators merely authorized colleges to borrow the money from somewhere else using the state IOU as collateral. This is akin to kicking the fiscal can down the road of folly. Next year, the university will be back looking for the same amount, only to find that the state is now in twice as much debt as before. Eventually those IOUs will be worthless to investors. What then for Illinois’ college students?

Could there be a better canary in the coal mine for America. It is not pure coincidence that two of the more liberal states, with strong Democratic-controlled legislatures, are facing the most unsustainable deficits. Government programs cost money. Pension plans, regardless of how lavish they are, will eventually come due. Lavish spending is not always met with higher prosperity. It is a system built for the short term, but is crushed under the test of time. Ultimately, spending leads to higher taxes, taxes lead to a difficult business environment, fewer taxes are collected and deficits grow. The house of cards falls down. The result is not merely red ink on a budget sheet, it has real world implications.  As Laurence Msall, president of the Civic Federation, a policy research organization explains

“We’ve borrowed more and pushed larger unpaid bills into the future.”

That future is us. There is still time to avoid a lifetime of paying off previous generation’s unpaid bills. We deserve a chance for our own success, to spend and save our money in ways that allow us to achieve the American Dream. We are America’s future, not American’s credit card.

by Brandon Greife, Political Director of the College Republican National Committee