Bankrupt California Can Be Saved by Following Puerto Rico’s Example
I’m in Los Angeles as I write this article. Actually, I’m about 35 miles north of LA. It’s easy to understand why so many people dreamed of California. The Mamas and the Papas got it right:
On a winter’s day
I’d be safe and warm
If I was in L.A.
California has become a nightmare. The beauty is still there in the majestic hills, the rolling meadows, and the breathtaking canyons. It’s too bad that the whackos have spoiled the state, turning it into an incubator for all that’s wrong with liberalism. It’s no wonder that California is one of the least business-friendly states in America. On regulations, employment, labor, hiring, tax code, and licensing, it gets an F and a D on ease of starting a business.
While getting ready for a business meeting, I turned to a news channel and saw California Lt. Governor Gavin Newsom and Art Laffer, Supply-Side advocate and author of Eureka!: The Way to Fix California, being interviewed by Larry Kudlow on “The Kudlow Report.” They were talking about how to fix California’s $16 billion budget shortfall.
Gov. Jerry Brown wants to trim some programs (a good idea) and raise taxes (a bad idea).
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Laffer’s comment was on the money: “You can’t tax a state into prosperity.” Kudlow wanted to know how New Jersey could get its budgetary house in order without raising taxes but California couldn’t. Even Puerto Rico was able to do it.
When Luis Fortuno became governor in 2009 the Commonwealth of Puerto Rico didn’t have enough money to pay its bills. The first thing the new administration did was to cut 17,000 government workers, freeze all salaries, and cut government spending by 20 percent.
As expected there were protests in the streets. The governor held firm. He knew that a little pain now would result in great benefits in the future. He didn’t stop with cuts to government employee waste. He went on to cut corporate taxes and state income taxes.
Now that Puerto Rico is a tax-friendly region, businesses are moving in. As John Stossel reports, “Wal-Mart, CostCo, Coca-Cola, and pharmaceutical companies are moving to or expanding in Puerto Rico. Soon, they will provide thousands of new jobs.”
Gov. Brown wants the people of the California to vote for a “temporary” tax increase. The people who will vote yes will be voting to tax the other guy, spending will still go up, and the tax increase will become permanent.
What will businesses do if Californians vote for a tax increase “on the rich”? Move to more tax-friendly states. They might even try Puerto Rico.