EU, California’s Fiscal Demise: Red Flag for Washington

May 14, 2010

Global news events should be a catalyst for government reform in Washington state.

For example:

My son, Brian – an IT consultant who lives in the San Francisco Bay Area – regularly sends me articles. Today, it was proved to be an interesting blog from www.washingtonexaminer.com. However, this particular article dealt with an ominous prediction made several years ago.

The blog mentioned a five-year-old forecast from the National Intelligence Council on the state of the planet in 2020, including the European Union.

In citing the EU’s economic turmoil, which was prompted largely by overspending on welfare entitlements, the article was entitled, “FLASHBACK: In 2005, U.S. intelligence warned of Euro econ crisis and EU’s demise unless welfare states downsized.” It was written by Mark Hemingway.

The writer included a link to the report: “Mapping the Global Future: Report of the National Intelligence Council’s 2020 project.”

Sure enough, the unthinkable is actually happening as Europe labors to contain its debt crisis. 

“It’s five years later now, and a major economic crisis is has already engulfed Greece, is spreading to Spain and could potentially drag down the whole EU,” Mr. Hemingway wrote. “Mervyn King, the head of England’s central bank, now says that the EU must undergo dramatic changes in order to survive in its present form.”

Mr. Hemingway’s article and government report were quite an eye-opener.

Then, an hour later I received a news alert from a newspaper 80 miles from my son. The headline in The Sacramento Bee read: “Schwarzenegger budget would eliminate welfare.”

Yes, the governor asked lawmakers to kill California’s welfare program, reduce in-home care for disabled and elderly residents, and slash state workers’ pay.

That’s what Gov. Schwarzenegger feels he must do to solve the state’s $19.1 billion budget shortfall.

Ordinarily, it would be hard to feel sorry for a wealthy-movie-star-turned-governor. But that’s not true in this case. Instead of cutting spending, which is 25 percent higher than revenue, he faces politicians who want to increase taxes.

California already has an income tax as high as 9.3 percent for taxpayers who earn about $47,000 a year, and an 8.25 percent sales tax. In San Francisco, the sales tax is 9.5 percent. Yes, California has a corporate income tax and a property tax.  And California’s gas tax is even higher than we pay in Washington state.

Despite all its beauty and economic advantages, California’s unemployment rate is a whopping 12.6 percent, and the state has a miserable bond rating of A-.

That means California and the EU, not to mention America’s budget woes, are headed down the same fiscal path. And it’s a bumpy, treacherous ride.

Unfortunately, Washington state is headed in the same direction.

Washington will soon face another massive deficit even after the Legislature hiked taxes by $808 million in 2010. Voters will have some difficult choices to make. Currently, activists are trying to qualify 77 initiatives by July 3 on the Nov. 2010 ballot. Washington’s fiscal challenges, too, are mostly exacerbated by unnecessary spending. Remember, the Legislature spent even more money this year than last. Let’s hope voters drink some strong, Seattle-style coffee.

Otherwise, our collective economic and political freedoms will continue to disintegrate as public policies continue to exacerbate a local, state, U.S. and global fiscal crisis.

From the Coach’s Corner, for more information on developments in Washington’s business public policy, consider:

www.awb.org, Association of Washington Business

www.enterprisewashington.org, Enterprise Washington

And watch for continuing news here. We are quietly but diligently working to improve Washington’s economic climate.

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.