Commentary: Do California's budget woes make it like Greece? | McClatchy Washington Bureau

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Opinion

Commentary: Do California's budget woes make it like Greece?

Dan Walters - The Sacramento Bee

May 12, 2010 02:23 PM

The term "failed state" often pops up in discussions about California's evident governmental dysfunction, a malady most obvious in its chronically unbalanced state budget.

More than one commentator has likened California to Greece, whose chronic deficits and soaring public debt have driven it to virtual insolvency, requiring massive bailouts.

Is it a fair comparison? Yes – and no.

There certainly are similarities, at least in the broadest sense. Like Greece, California has chronically overspent its revenues. Voters and politicians have made spending commitments that are unsustainable even when the economy is healthy.

They have even slashed taxes for special interest groups, reducing revenues further and thus making the chronic deficits even worse.

Like Greece, California has covered its deficits with bookkeeping gimmicks and massive debt, some formal and some informal or even hidden; and the state is seeking a federal bailout.

USA Today published a chart recently, listing public debt for several nations as a percentage of their economic output.

Zimbabwe, whose debt is three times its economy, topped the chart, followed by Japan (192 percent). Greece has the eighth highest percentage, 108 percent, and the U.S. is 42nd at 58 percent, lower than Great Britain, France and Germany. In contrast, Russia is 124th at just 7 percent.

Where would California fit into that list? It depends on what you consider debt.

California's official debt, mostly bonds, is not particularly high. State and local governments might owe something north of $100 billion in bond debt, around 5 or 6 percent of the state's economy.

To read the complete column, visit www.sacbee.com.

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