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A Blog about Public and Development Economics

As California’s Finances Go, So Do Programs for the Less Fortunate

The Economist has a good summary of California’s financial distress and what it means in real terms. In essence, Californians have been voting their way to more and more spending funded by greater borrowing. Triggered by the recession, that debt has become unmanageable, and California has started losing its good credit rating. At the same time, California is reluctant to increase taxes to help ease the shortfall. That leaves viable only one option to mitigate the fiscal mess—cutting back social programs. The article reads:

The largest part of the budget, and thus the biggest target for cuts, is education. Mr Schwarzenegger has proposed suspending a spending formula that voters explicitly chose at the ballot box. In response, the powerful teachers’ union sent a gesture, in the form of 10,000 protesting postcards, to one of Mr Schwarzenegger’s branch offices. But teachers and schools will suffer, which hurts children and thus parents.

The next largest part of the budget is the state’s social safety net, including its health-care programme for the poor. Mr Schwarzenegger wanted to eliminate entire programmes wholesale, but now appears ready to settle for shrinking them. The debate, such as it is, is now about how many children will lose coverage, how many elderly Alzheimer’s patients will stop receiving visits from nurses, whether to treat drug addicts and so forth.

The pain thus seems likely to flow to the bottom of the social hierarchy. But all Californians will notice. Their parks may close, their neighbourhoods may become less safe.

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Filed under: Fiscal Policy, Health Care, Public Economics

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