CALIFORNIA, ILLINOIS BRING GREEK-STYLE FISCAL TRAGEDY TO AMERICA
The Eurozone isn’t the only economy reeling from “failed states.” The United States has several of its own – most notably California and Illinois.
According to the CIA’s world factbook, California’s economy is the ninth largest in the world with a gross state product of $1.9 trillion. Illinois’ economy is the world’s 23rd largest economy with a gross state product of nearly $630 billion.
These are impressive figures, to be sure, but both states have seen their global position slip in recent years – and further erosion is likely thanks to poor fiscal stewardship and anti-competitive tax increases.
Both California and Illinois are hoping that tax hikes will bridge gaping deficits created by politicians’ failure to rein in government growth – including expanded entitlements and exorbitant public sector pensions.
Does any of this sound familiar? It should. This is precisely the sort of unchecked public sector growth that has landed Greece in its current predicament – a worsening crisis that has pushed the entire euro zone to the brink of collapse.
“Public payroll expenses (salaries and pensions of civil servants) rose in Greece from 38 percent of state revenue in 2000 to 55 percent in 2009,” reports Antonis Kamaris of the Council on Foreign Relations. “Compounding this trend, local elites became hostile to any coherent national reform effort, precisely to preserve the system that now privileged them.”