I wish I had a way of measuring rhetoric from southerners about the California economy over the last six years.
Here in Georgia, for a number of years before we felt the worst of things, state and local officials maintained a pretense of immunity from the housing bust and the inevitable collapse, while at the same time holding up California — which was hit early and hard by the recession — as an example of liberal profligacy.
I got a little weary of warning my readers here that Georgia was in line for a much harder hit than most of them realized and of saying that California — a state rich in resources and human capital — would sort out its problems sooner than many imagined.
In his post States: Mo Money Mo Problems, Calculated Risk’s Bill McBride quotes from the NYT about disagreement among California officials on the size of this year’s budget surplus — somewhere between $1.2 billion and $4.4 billion — and on what to do with the extra money.
And this improvement has come despite the fact that California still has one of the nation’s highest rates of unemployment, but it’s down dramatically from the peak and falling steadily. That seems to guarantee increased revenues for the foreseeable future.
From McBride, a California resident:
The article notes three possibilities for the small surpluses: “restore programs cut during the recession, finance tax cuts or put into a rainy-day fund”. With the surpluses just starting, I think tax cuts should be off the table (they are too hard to reverse if revenue falters). My suggestion would be to pay down debt (rainy-day fund) and cautiously restore some cuts.
McBride also notes that the economic drag from cuts to state and local government has likely ground to a halt nationwide. The declines in government spending and the cuts to the labor force have slowed the recovery. Here in Georgia, about half of all state and local job losses in recent years have come in education — a policy that raises serious questions about Georgia’s competitiveness going forward.
Here’s Calculated Risk’s updated graph on employment in the U.S. by state and local governments:
If we consider that demand for many local government employees — e.g., teachers, sanitation workers and public safety officers — is a function of population, then this graph is even more problematic. As the nation adds people, the demand for workers in those fields should increase.