Washington should resist California's path to financial ruin

GOVERNMENTS everywhere are in a race to the bottom in matters of finance. In the lead among U.S. states is California.

A year ago, Republican Gov. Arnold Schwarzenegger was at loggerheads with Democratic legislators. They couldn't agree on a budget. For two months, California was short of cash and paid vendors with $2.6 billion in IOUs.

This year is hardly better. Its general-fund revenue is still only 75 percent of desired spending. Schwarzenegger promises to balance this by terminating spending, a process his spokesman insists will be "terrible." Details are supposed to be unveiled Friday.

Democrats in California resist cuts. Instead, they talk up taxes.

They did that here, and our Legislature has just raised taxes by more than $800 million for the year beginning July 1. In addition, an effort is under way here for a personal income tax.

California has a personal income tax. Its top tax rate of 9.3 percent kicks in at $47,055. California also has a statewide sales tax of 8.25 percent — and, in San Francisco, 9.5 percent. It has a property tax and a corporate income tax. It has the highest gas tax in the nation.

California has an entire medicine cabinet of taxes, and its economy is sicker than ours. Its unemployment rate is 12.6 percent, more than one-third higher than ours. Its bond rating, single-A-minus, is the lowest of any state. It is the Greece among states.

The Greeks can at least claim to be poor compared with the French and the Germans. California is not poor. It is not Mississippi. It is the Golden State, the home of two of the most golden industries on Earth, based in Silicon Valley and in Hollywood. California has the biggest military bases, the best farmland, the most fabulous fortunes. That it is also ground zero for the worst financial wreck among the 50 states is a singular accomplishment of its political class.

Washington has done better — somewhat. In the Great Recession, we have yet to reset our expectations of government to fit the resources available. If we do not do it, this state will follow the Golden State in a race to the bottom.