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The Day(s) of Reckoning

Yesterday was the first day of reckoning.  Not in the biblical sense, but in the sense of having to live within our means on the community front.  As July 1, 2009 came and went, 46 states had to begin living with greatly reduced income due to falling tax receipts and anticipated further declines.  So what did legislatures across the country do?  They lived up to their reputations by pursuing a policy of denial.

California (OK, it’s getting old to keep beating on them, but it’s so easy!) has now begun issuing I.O.U.’s in leiu of payments in order to preserve cash.  At the same time, the state is trying to play down the notion that it represents a heightened credit risk.  The governor and several legislators keep repeating, ‘The state of California has never defaulted on a payment.”  Hmm.  I wonder if the recipients of the I.O.U.’s would agree.  Last time I checked, if I were to send my mortgage company/credit card issuer/utility provider an I.O.U. they would promptly send me back a late payment notice and eventually a default notice.

California of course is not alone.  Many states have deficits and I believe seven are still unsettled in their budgets even though the deadline has passed.  However California has the biggest gap and is one of the biggest deniers of the basic principles of accounting, so it is worth continuing to point out their bizarre statements.

It seems a universal truth that we must spend less in the days ahead while working to deleverage our economy at every level.  This is a self-chosen situation, where we as consumers and citizens spent more over the last 25 years and are now choosing to spend less and save.  It’s not bad in a moral sense, but it is painful.  In order to achieve balance, there must be cuts.  Big ones.  And yet the very people we put into positions of political power (and we pay very well, by the way, with straight income and very generous benefits) are unwilling to do the tough part of the job.  It’s easy to spend more.  It’s easy to create programs with other people’s money.  It’s hard to cut programs that by-and-large go to assist the least among us.  But, to paraphrase Willy Sutton, that’s where the money is, so that is where each level of authority, from cities up to the US government, will have to look for cuts.

This is the time where we live up to the rallying cry of “Don’t burden our children with this debt.”