California and Greece are both in a world of fiscal trouble. But who's
worse off? Michael Corkery recently posed the question in his Wall
Street Journal column
. For months, business writers and pundits have compared the fortunes
of these two struggling economies. The big takes:
Has More Incentive to Get Finances in Order, writes Michael Corkery at The Wall
Street Journal: "Default risk may have dissipated for Greece in recent
weeks, but the government has been scared into at least trying to get
its finances in order. There is less incentive for U.S. states to
make the same drastic moves [because] Federal support will create
moral hazard….and delay the necessary fiscal adjustment to balance their
Rather Be California, writes James Surowiecki In The New
Yorker: "The comparison has been overblown. Our states’ debt burden,
while sizable, is far more manageable than that of [Portugal, Ireland,
Italy, Greece and Spain] which owe three times as much relative to
G.D.P. as American state and local governments. And though states will
certainly have to cut their budgets again this year, the cuts will be
smaller (and therefore more politically palatable) than those of, say,
Ireland, which is cutting government spending by almost nine per cent.
Most important, the states have a fundamental advantage over euro-zone
nations: they’re part of a country, not an ill-defined union, so they
can count on help from the federal government. Much of the assistance
that the states get from Washington is close to automatic: in normal
times, the government sends almost half a trillion dollars in aid (for
everything from Medicaid to highways and education) directly to the
states...In the E.U., things are very different."
- It's Hard to Tell the Difference, writes
Jeb Hensarling at National Review:
"Thousands of people marching from the city’s main plaza to a plaza in a
neighboring city: Students, faculty, staff, and workers protesting the
budget cuts, fee hikes, and furloughs in public education, chanting
slogans, waving signs and shutting down a major traffic artery. Was this
Greece after the European Union–mandated austerity program was
announced? No, this is California, U.S.A."
Plagued by Politics, writes Harold Meyerson in the L.A.
Times: "It's true that both the Golden State and the Cradle of Democracy
have massively dysfunctional political cultures. Arguably, Greece's new
Socialist prime minister, George Papandreou, has made a more impressive
start at cleaning up his nation's chronic corruption than California
has done in dealing with its political gridlock. But each of these
economies would be beleaguered -- California has lost most of its major
manufacturing and Greece never really had any -- even if their political
systems ran like a Swiss watch."
- One Thing's For Sure,
CA Will Fail Without Pension Reform, writes David Crane, a special adviser to
Gov. Arnold Schwarzenegger, in the Los Angeles Times: "California's real
unfunded pension debt clocks in at more than $500 billion, nearly eight
times greater than officially reported. That's the finding from a study
released Monday by Stanford University's public policy program...To put
that number in perspective, it's almost seven times greater than all
the outstanding voter-approved state general obligation bonds in
California. How did we get here? The answer is simple: For decades --
and without voter consent -- state leaders have been issuing billions of
dollars of debt in the form of unfunded pension and healthcare
promises, then gaming accounting rules in order to understate the size
of those promises."
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