As goes California, so goes America. Trends always begin in California. California has a larger GDP than most countries. Pithy little pieces of wisdom we’ve always heard about the great state of California. I love California. I went there to spend the rest of my life right out of college. Went to work for the Bank of America in a management training program. Lived on the beach with three other guys. Drove a classic MG-TD, partied too much, and lived the good life in the sunshine. Reality hit, I got my draft notice and headed back to Michigan.
Stockton California was simply mismanaged. The kind of business Bain Capital would buy for 10 cents on the dollar and turnaround. The management of Stockton made poor decisions on capital investments. Millions for a sports stadium and more millions for a new city hall. The managers of Stockton over paid employees and were far too generous in their benefits. A fireman made $160,000 a year, could retire at age 50 at 98% of the highest year’s pay with cost of living escalators. Health care was free and the best you could buy. The managers who made all these great decisions are long gone. New managers can’t fix the damage. So, a judge will do it for them.
Between running out of money and handing the mess over to a judge, current management tried to save Stockton. They cut employees, but they didn’t go after the real problem. The bloated pensions of retired public workers. Other cities and states have done just that, like Providence, Rhode Island and the state of Michigan. They will avoid bankruptcy.
You see running a city, a state, or a country is like running a business. With one exception. When you run a business you have accountability. You have to answer to shareholders or bankers. If the business isn’t performing to expectations you get fired. Politicians ,who have little if any experience running anything, see Obama, just cook the books. That would be illegal in business, but not in politics.
The entire country is deluded. After Stockton, the biggest city to file, comes Detroit currently being run by the state. The entire state of Michigan would be following Detroit and Stockton down the drain if Jennifer Granholm were serving another term as governor But, Michigan changed management and elected a Republican businessman to replace the spendthrift former governor. In short order he made the changes a businessman who has faced accountability knows to make.
But, the states of Illinois and California are staying on the course of Stockton. And, the big corporation, the USA is at a fork in the road. Keep Obama and Stockton it is. Dump Obama and we make a big turn and follow Michigan onto the road of tough choices. Make the changes to adjust our income to expense ratio, stop the insane practice of giving our future to the unions, and get the economy back on course or face the grim future Stockton faces.
Simple as that.
