OP-ED: Stockton, California became the first major U.S. city to file Chapter 9 bankruptcy earlier in the week. It stands as an example of what ultimately happens to a city, state, or nation when the largest engine of an economy is government rather than free enterprise.
As in many other American cities, Stockton allowed its dominant industry to become government. According to the Census Bureau, the adult population (those 16 and over) of Stockton was 212,365. Less than half of those were earning private sector or self-employment wages. Nearly 20,000 worked for the government and 11,426 collected food stamps.
This means that a combined 30,204 are living off the tax money of those in the private sector. For every three Stockton men, women, and teenage children working for a private business, one citizen is collecting food stamps or an employee of the government. Added to the initial tax burden is the city’s single largest expenditure, pensions of government employees.
All government pensions (local and state) are managed by the state agency, the California Public Employee Retirement System (CalPERS). “Stockton’s biggest creditors insured $165 million in bonds the city issued in 2007 to keep up with CalPERS payments as property taxes plummeted during the recession,” the Associated Press reports. “Stockton now owes CalPERS about $900 million to cover pension promises, by far the city’s largest financial obligation.”
That means Stockton owes nearly a billion dollars to the state’s government worker pension system. With the ratio of government to private sector workers in the city that high, the only way the obligation to CalPERS can be met is by redistributing wealth from other parts of cash-strapped California.
Along with the disproportionate number of people in Stockton receiving their salary from the government is a large segment of its population who may never effectively enter the mainstream of the private workforce. 119,991 residents of Stockton do speak English at home. This equals about 41 percent of Stockton’s overall population of 289,926 people and about 45 percent of the 264,713 people in the city who were five years old or older.
The Census Bureau also estimated that there were 59,577 people over the age of five in Stockton who “speak English less than ‘very well.’” These 59,577 people in Stockton who had not mastered English equaled about 21 percent of the city’s total population and about 23 percent of its residents who were five years or older.
Just a few generations ago, Asian immigrants made it a point to learn the dominant language of commerce, English, and ensure their children received the best education possible so they could become self-sufficient. Immigrants, for example, like the woman I knew in Jackson, Mississippi, another city dominated by government. She came from Vietnam at the fall of Saigon with little but three young children and a determination to ensure they got the best she could offer. Years later she owned four restaurants and all of her children had graduated from private colleges without government assistance.
Stockton, California stands as a lasting monument to what happens to a people who come to expect government to fuel their economy. Without people like that woman in Jackson, there is soon no fuel left to stock the fires of a local economy. And no matter how much a state throws into that fire, it will soon run out of resources.
States, by law, cannot create money. That unfortunate task is left to the federal government. But more money printed does not equate to actual wealth. Instead, it equals more debt with no real plan to pay it off in the future.