Why a Huge Budget Deficit Might Be Good News for California

As someone who watches the governor and Legislature fairly closely, I find it rare to see good news coming out of the Capitol. The state's leaders spend money wildly on every imaginable progressive priority, concoct myriad tax and fee increases, lavish handouts on public-employee unions, and rail against the "greed" of private companies.

But, finally, we're seeing an encouraging development. According to the Legislative Analyst's Office (LAO), the state is facing a $68 billion budget deficit, which is 50 percent larger than the general fund budget of Florida. In normal states, red ink isn't something to cheer about. In California, however, a money shortage is the only thing that imposes any fiscal limits.

Stein's Law says, "If something cannot go on forever, it will stop." Named after the late economist Herb Stein, its point is government is not going to stop doing whatever it does until external factors force it to do so. Obviously, California officials aren't going to restrain their spending addiction on their own. States must (on paper, anyway) balance their budgets, so a deficit is the external constraint we need.