Reminder: Shit Gets Better
- Joshua M Brown
- May 26th, 2013
There’s a school of thought that says because we’ve come so near to real crisis during this cycle, it’s forced us to get our act together in a way that political wrangling and wishful thinking never could have accomplished.
I think there’s some merit to that. Procrastination and working better under pressure are the norm for the species.
My inbox this morning had a New York Times story about California’s latest economic woes. The problem is, you see, that they simply have too much money now.
LOS ANGELES — After years of grueling battles over state budget deficits and spending cuts, California has a new challenge on its hand: too much money. An unexpected surplus is fueling an argument over how the state should respond to its turn of good fortune.
The amount is a matter of debate, but by any measure significant: between $1.2 billion, projected by Gov. Jerry Brown, and $4.4 billion, the estimate of the Legislature’s independent financial analyst. The surplus comes barely three years after the state was facing a deficit of close to $60 billion.
Now of course, this is a “problem” in the way that a girl having excessive thigh-gap in a pair of yoga pants has a “problem” – too many men staring at her in the gym while she works out (actual problem I’ve heard a friend complain to me about). There’s no support group for these types of issues that I’m aware of.
And it’s not just California that finds itself in this unexpected position – seven other states are also facing down surpluses this year.
This is not to say that California is somehow “out of the woods.” There’s still plenty of debt and another brutal recession puts it right back on the hot plate. But still, people are living their lives. The worst hasn’t happened yet and the troubles – while still very much there – get easier to deal with thanks to the healing properties of elapsed time.
It’s important to remember that the basic arc of the American storyline these last 250 years or so is this: Shit gets better.
We fix things. We endure hardships and change our behavior – even if not until the absolute last moment. And also, there are bigger cycles at play here revolving around pent-up greed and age-old fear that carry us through to the next episode kicking and screaming – whether we’ve “paid for our sins” or not.
I’d like you to think back on what the prevailing wisdom was re: California just a few short years ago:
Can California Declare Bankruptcy? (Slate)
Greece or California: Who’d You rather Be? (Los Angeles Times)
California’s Debt: Now Riskier Than Kazakhstan’s – And A Bigger Worry Than Greece? (Huffington Post)
California is a greater risk than Greece, warns JP Morgan chief (Telegraph)
Will California Be Our Greece? (Daily Caller)
California is America’s Greece (American Thinker)
Who Will Default First: Greece or California? (Deal Journal)
16 Reasons California is the Next Greece (Business Insider)
Motherf***er, Greece isn’t even the next Greece!
But that’s what we thought. That’s how it felt. It was impossible to escape this kind of pessimism, it was everywhere. Everybody needs pageviews, especially in a recession.
But maybe this kind of scare is what they had to go through. That was the wake-up call for the Fed to do more and California legislators to do more. Maybe these were the type of headlines needed to slap the gluttonous unions and the tax-breaks-at-any-cost nutjobs. Perhaps this brush with fiscal finality was the only spark up a game of harball. Maybe this was the kind of context necessary for tougher budgetary decisions at all levels of government – inside California or in other geographies where the Golden State was being used as a cautionary tale.
And then the sun comes out over the Sierra Nevadas and the long night is ended. And now the fights are about what to do with excess money – rather than how to pay off $3 billion in IOUs or a $20 billion annual deficit.
I want to tell you a quick story about Colorado Springs…
In 2010, the media painted it’s condition as so bad that it looked as though “Mad Max Times” would soon upon us, apocalypse emanating outward in concentric circles of despair from the suburban towns of the Rockies.
Here’s the Denver Post in February 2010 (Colorado Springs cuts into services considered basic by many):
COLORADO SPRINGS — This tax-averse city is about to learn what it looks and feels like when budget cuts slash services most Americans consider part of the urban fabric.
More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops — dozens of police and fire positions will go unfilled.
The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.
Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.
Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero.
City recreation centers, indoor and outdoor pools, and a handful of museums will close for good March 31 unless they find private funding to stay open. Buses no longer run on evenings and weekends. The city won’t pay for any street paving, relying instead on a regional authority that can meet only about 10 percent of the need.
“I guess we’re going to find out what the tolerance level is for people,” said businessman Chuck Fowler.
Bad, right? Scary – what if that happens to our towns? Our cities?
But then 15 months passed and Tina Turner hadn’t quite gotten around to construction on the Colorado Springs Thunderdome.
Here’s CNNMoney in June of 2011, less than a year and a half later (Colorado Springs Enjoys Swift Revival):
However, just as Colorado Springs’ leaders were imposing big budget cuts, the economy started to turn around. Residents are spending more again, fueling a steady climb in tax revenue.
Sales tax revenue has increased steadily since Nov. 2009 and is up 3.25% year-to-date compared with the same period in 2010. It is still running below pre-recession levels though.
But the recent uptick in sales tax revenue, along with the savings from trimming the city’s payroll and other cost-containment measures, have allowed officials to restore many of the services they had eliminated only 12 months before.
The buses are rolling again on Saturdays, and the streets are now illuminated at night. The police and fire academies are training new recruits. The parks are being re-seeded and will be watered once again.
The moral of the story?
Colorado Springs didn’t devolve into a debris-strewn hellscape complete with Snake Plissken running around wearing an eye patch.
And California didn’t “become Greece.”
Shit gets better.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.