Get your act together California

Admittedly it is a strange year in California. Tornado warnings in Los Angeles are an infrequent occurrence, yet it happened this week. Will someone please explain to me why Governor Arnold Schwarzenegger thinks the federal government owes California $6.9 billion? The logic I have heard is that since, he claims, Californians send more to the federal government than they receive back they are owed the money? Even if I accept the disputed claim and ignore the benefits all citizens of the country receive (e.g., defense of the nation, common currency), what is the basis of the argument? Where does it say we are to receive what we pay in? If that were the case, where is my money? Why is there a progressive income tax? Yes, I understand California has incurred a huge deficit and seems unable to take action to control spending or increase state revenues. Yes, I understand it is possible the federal government may not be reimbursing the state as it is obligated to do. Yes, I understand California by itself is one of the world's largest economies and bankruptcy threatens its foundation and would have adverse impacts on the nation. I also understand forty-five other states are facing a budget shortfall this year. For all states, I say, yes, the federal government should be held accountable to pay what it is committed to pay. Beyond that, though, I urge we accept that the nation, not just the states and local governments, are in financial crisis. We cannot afford to do what we do. Furthermore it is going to get worse, because when demand (technically the quantity demanded) starts to increase inflation will accompany it, the weakened dollar will not be financed by the foreign governments indefinitely, and interest rates will rise. The state and local government budget projections I see are based on the false assumption the cost of our debt (financed at artificially low short term rates) will remain constant. It cannot. There are no bailouts for any of us, and when political expediency grants them it is simply reallocating from, and probably shrinking, the pie. Our objectives must be to stabilize (e.g., do not spend more than you make) and then enlarge the economic pie.

Reference:

http://www.csmonitor.com/USA/2010/0120/Schwarzenegger-goes-to-Washington-to-collect-6.9-billion