To say the current California budget is irresponsible is an understatement at best. It relies wholesale on accounting gimmicks and borrowing to create the illusion of a budget in place. Some key components, like the $1.2 billion in corrections savings—are not even specified, just targeted. It sells off precious, long-term assets in the worst real estate market ever to pay for current operations. It even sells a financial services operation at a time when everyone is suspicious of their value. Clearly prudence and wisdom flew out the window.

It cuts higher education, welfare, health and K-12 education, and leaves almost no one happy. But it misses the real problem facing the state—the irresponsible way in which public employee salaries and benefits are set.

For decades, city councils, county boards of supervisors, school district boards and the state have cut deals for public employees dramatically expanding their benefits and salaries while limiting their work responsibilities (the so-called “work rules”). When the governor allowed the pension rules to be removed from the table, he gave away the one positive development of the last round of negotiations.

This year’s elections brought out some of the worst in people on both sides of the equation, but on the balance the left wing appears to have won the title. This really was an election about winning at all costs to them. And win they did.

First, there were the skirmishes over signs and bumper stickers. My own yard sign was vandalized once, and those of many of my neighbors and friends experienced similar mishaps. Reading the news across the state, there appeared to be many instances of “hate” actions by members of both the left and the right. Perhaps most visceral and visual was the hanging of Governor Palin in effigy and the depiction of Senator McCain in flames. Ironically, similar depictions of Obama and Biden would likely have resulted in criminal action.

Second, there was the rotation of mudslinging and mailbox stuffing. This was bad enough—and probably close to a draw, although as a resident of the 19th Senate and 37th Assembly districts, the mailers ran about 3:1 Democrat to Republican, with many of the nastiest (of the “this guy/gal hates animals and beats/kills innocent children” variety) coming from the Democratic candidates in the district. On top of that, Democratic leaders pumped thousands of extra dollars into my unfortunate district to make sure there were plenty of these to go around.

It was just under 19 years ago that the Berlin Wall came down and the last official vestiges of Soviet-led communism seemed to disappear. Even Maoist China began to open its doors and markets to trade, signaling the final defeat of this blight on the world’s history. The world, and Americans, thought that victory was in reach. But something happened on the way to the final victory—we forgot. We have forgotten that government is not the best arbitrator of the complex negotiations necessary to allow fair exchanges between individuals.

We have forgotten the discipline of putting community and the nation ahead of ourselves and our rights in order to show down evil. We have forgotten that government redistribution creates perverse incentives that undermine opportunity and freedom and eventually the very framework of social order. We have forgotten that rights, such as freedom of speech and freedom of religion, come at a price and a sacrifice.

Most critically, we have forgotten that Karl Marx’s words “from each according to his ability, to each according to his need,” became the rallying cry to a regime and government that killed tens of millions of its own citizens and imprisoned many more—a government that bankrupted its people in order to spread, through military force, its corruption and influence around the globe.

The youth are excited and united behind a new charismatic leader! There is electricity in the air as students and young patriots swarm in the footsteps of their dedicated leader—a young lawyer who whose books and ideas are energizing the nation with his careful and revolutionary message—Now is the time for change! This leader stands boldly against an expensive and painful war and argues that, instead of fighting a war with imperialistic undertones, we should wage a war on the classes that divide us. Academic elites also step forward in support.

This leader brings to his nation a commitment to hope. His first priority: to get his nation out of the war. His other priorities included creating a free universal health care system for all; strengthening the rights of women and teaching the illiterate to read. Workers across the nation are angry and frustrated at their plight in the sputtering economy. The existing government is demonized and vilified. People are ready to step out for change.

According to the Fannie Mae webpage, the Federal National Mortgage Association was chartered in 1938 “at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.” Sounds like today, huh? And it is.

Creditworthy borrowers, both in the mortgage and small business markets, are not able to obtain credit today due to a “lack of liquidity.” Specifically, banks are hoarding what reserves they have in anticipation of having to realize billions of dollars of losses associated with mortgage-related assets.

The resulting credit crisis has seen banks collapse, mortgage banks collapse and consolidate, insurance companies go under and the overall global credit market and interbank loan market evaporate. So what is the best approach to addressing the credit crisis? Why not restore liquidity to the markets directly?

Since the current bailout bill has failed in the House of Representatives, leading to a very scary market day today, why not look at another model. The bailout approach planned to buy the worthless and risky mortgage-backed securities held by investors and banks. This in turn is hoped to (1) provide the now almost worthless securities with a positive value and (2) make banks would feel better about the world and thus cause them to start lending again.

California’s Republican Party is losing ground dramatically across the state. In the Fresno Bee, John Ellis describes how it is even failing in one of its last bastions of power-—the Central Valley. There are three dimensions to the collapse of the party of Ronald Reagan in the Golden State, and all three reflect a collapse of leadership at the highest levels.

First, there is an abject failure to reach out to the youngest voters in the state. With high schools and universities dominated by union teachers and left-wing professors, there is a serious vacuum of clear messages about what the party stands for in the youth world. There is a near-total absence of youth and energy in the party’s outreach plans.

Last week service employees at UC Davis defied a court order and went on strike demanding wage increases, service workers are demanding guaranteed overtime pay, a guaranteed step system for salaries, and uniform statewide wages. Basically more money for the work they are doing and promises of more raises in the future on a fixed timetable (the “guaranteed step system”).

There were no allegations of dangerous workplace conditions, no argument about decreased workplace safety, just a demand for higher salaries. To quote Gail Price, the Union Treasurer, in the article, "They won't give them across-the-board raises like they will the patient care unit. We're not letting them get away with it anymore."

California and its local governments are facing tough choices this fiscal year—basically cut services to balance the budget or raise taxes dramatically to pay for it. But why?

It turns out that revenue declines are only a small part of the problem. The real answer lies in the fact that the cost of government rises each year without any change in services—it comes in the form of salary increases and benefit increases.

These amounts are largely negotiated in secret and buried in public employee agreements that rarely if ever see the light of day. Does this mean that public employees do not deserve raises? Absolutely not—they should and do receive annual increases.

Most public employees automatically receive a three to five percent “step” increase each year. The raises we hear discussed in the limited public releases about these negotiations are increases on top of these basic increases -- the so–called COLA or cost of living adjustment.

For example, in Vallejo, a city which recently filed for bankruptcy protection, some unions were scheduled for 21 percent COLA increases over three years—on top of their regular step increases of 3-5 percent.

Democrats' efforts to impose significantly higher taxes on the state’s businesses and wealthiest individuals is but the most recent incarnation of the tyranny of the majority prophesied by leading thinkers in our nation’s founding. The concept that a majority can abusively (or tyrannically) take the property of others for the interests of the many has long been the focus of constitutional scholars and philosophers in our society.

And yet the desire to dramatically fine narrow segments of our society to fund the general government, at the exclusion of others and, in many instances to subsidize others is one of the common mantras of state and local finance. Today the legislature pursues businesses and the successful to fund a government whose spending is accountable to no one.

It happens at all levels of government. Local governments tax hotel residents to fund local programs like parks and senior centers. Senator Obama proposes a new shift to a more progressive federal tax system that would eliminate the tax liability of some ten million Americans. The state legislature targets a narrow group of people who already account for a disproportionate share of the state budget.

This morning I received an email that exposes one of the roots of one of the foundations of the funding crisis in California higher education. It was an electronic newsletter from Cary Nelson, the President of the American Association of University Professors calling for national unity in support of the efforts by the University of California, the California State University and the California Community Colleges to fight state efforts to reduce their budgets.

The column discusses the potential reduction in the number of students who will possibly be able to attend the state’s public universities and calls for all faculty members across the nation to rise up, sign a petition and enlist their friends to fight the cuts to higher education in this year’s budget. Its primary focus—making sure that the public subsidy in higher education is maintained at its current or even higher levels.