The Great Deconstruction of big government and public unions

The economic downturn of 2008 – 2009 has been labeled “The Great Recession” for good reason. Eight million Americans lost their jobs compared to six million in the last four recessions combined dating back to 1980. The jobless recovery may trigger a double dip recession in 2011. The Federal Reserve Bank of New York estimates that homeowners’ equity has fallen by over 50 percent, or about six trillion dollars, during this period. Some 22 percent of all mortgages are now under water. And, economists predict that between eight and 13 million homes will have been foreclosed before the crisis ends.

The eight million jobs lost during the Great Recession were primarily in the private sector.  While the private sector was ravaged, the public sector was protected and bolstered by the $800 billion Stimulus Bill (3) in 2008 that sent more than $200 billion to the states to keep public sector employees employed. The Stimulus money that California received allowed California to avoid the job cuts demanded by a state budget more that $20 billion out of whack.

Ironically, it will be the actions of the Tea Party, a movement that had no significant affect on California’s 2010 election, that will impact California’s future. While the Tea Party swept more than 60 Democrats out of the Congress in 2010 and replaced them with freshman conservative Republicans, there was no such sweep in California. Democrat Governor Brown easily won his election as did Barbara Boxer and literally every Democrat running for state-wide office.

The vote in the House of Representatives, led by the freshman Republicans, will reduce Federal spending by $2.1 trillion over ten years. The framework would immediately cap domestic and defense spending. These changes will find their way to California and signal the end to Sacramento’s budgetary fiction that the Federal government will bail out the wasteful spending of state politicians.  California will be forced to solve its budgetary shortfalls the same way as their federal counterparts – with less money than before.

The period following The Great Recession will be known as “The Great Deconstruction” and will usher in draconian cuts in public sector jobs and a reduction in size of California’ s government. Deconstruction is defined as the wholesale elimination of entire programs, their permanent funding and the jobs involved.

 

Robert J Cristiano PhD is the Real Estate Professional in Residence at Chapman University in Orange, CA, Senior Fellow at The Pacific Research Institute and President of the international investment firm, L88 Investments LLC. He has been a successful real estate developer in Newport Beach California for thirty years.

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