Wednesday, July 01, 2009

Happy [Fiscal] New Year?

July 1 is the start of the fiscal year for many businesses, as well as the state of California and our neighbor, Arizona. Besides a border and fiscal year, CA and AZ share another thing in common: they will each begin issuing IOUs to their employees, vendors, contractors, and others due to the inability of our elected representatives to agree on a state budget. In fact, 19 states are on the verge of such financial calamity.

Some cheer this as a bit of political anarchy and showmanship. I, however, am not alone in finding this grandstanding mockery of the democratic process to be an irresponsible dereliction of duty.

My friend in Arizona, JR Snyder, Jr., has blogged about his thoughts on the state government shutdown. Although from the opposite side of the political spectrum on many issues, JR and I are agreed on this fact. From JR's blog:
If you choose to take the position that the state needs a shutdown to get it's house in order, know the consequences no matter which side you're on. Social services may be distasteful but the answer is not abruptly halting them without some thoughtful unwinding. The chaos ensuing affects all citizens, because the ripple of destruction will run through the state economy on all levels.

Destruction is not the same as Disruption.

There are good reasons why even a partial shutdown is a very bad idea right now. A shutdown will destroy the state's credit rating. We are already insolvent and any money borrowed to operate will have to be paid back at higher interest rates due to bad credit. The entire state economy is in a precarious position and even a 24 hour shutdown will have a negative impact and far worse if protracted. The law suits against the state alone will hinder us for decades.
Many find these state shutdowns to acceptable because of the assumption that it will only hurt either "welfare queens" or faceless bureaucrats. And wouldn't it be fun to think of this as our way of getting revenge on that idiot at the DMV who kept me waiting in line for three hours?

But, as I commented on JR's blog, the IOUs will be going to more than just these usual political scapegoats. They'll be going to suppliers and contractors to all sorts of state run or funded institutions and offices. The companies that supply food to the prisons, or who have maintenance contracts with the universities, or provide linens to hospitals (etc., etc.).

Those suppliers, in turn, cannot pay their staff with IOUs; they need money. Many of them are small, local businesses that will be forced to lay off staff, and possibly shut their doors for good, if the budget impasse continues for more than a couple of weeks. This will slow down local spending and hurt the economy in communities up and down each of the 19 budgetless states, and far beyond the state capitals or the homes of bureaucrats from the other party.

Demand your representatives do their jobs and pass a budget! Whichever side of the political fence you're on, our legislators have a duty to run their states in a responsible manner. Political grandstanding that costs regular citizens their livelihood is wrong, from the left or the right.

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