A Small Question of Reality

Q. What is the full impact of the financial crisis?

A. Not known at this time.

--From an Associated Press question-answer overview of the Orange County financial crisis.

From high in a tower of glittering stone and glass, the attorney could gaze down upon that part of Orange County where the living is especially easy. This is that part of the county where a BMW is considered a sensible second car, where the jetliners cut back the engines on takeoff so as not to offend the swells living in houses by the sea--where the principal industry seems to be investing money to make more money to invest again and make still more money.

The wind was up, sweeping the skies clean. In the distance, the sun played off the Pacific waters. The day before, Orange County had filed for bankruptcy, and the newspapers stacked on the attorney’s conference table screamed of apocalypse and meltdown and bombshells.

“Sure doesn’t look bombed out to me,” the attorney mused at the window. “Maybe a neutron bomb hit us--the buildings are left standing, but the people are gone. I don’t know. It still looks pretty good down there, doesn’t it?”

In this way, he addressed a question that has hung over the Orange County financial crisis from the start, that hangs over it still. The question is this: Is the collapse of the Orange County investment pool a real thing, or is it a government thing?

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I suspect everybody grasps the difference. A real thing hits you in the wallet or heart or over the head. It changes your life. A government thing is contained within the workings of government, its impact wildly overstated.

A robber sticks a pistol in your ear, that’s a real thing. Congress passes a crime bill, that’s a government thing. Only the most lightheaded romantics will swallow the political rhetoric that a crime bill will deter the robber from sticking a pistol in your ear.

The balance sheet spit out by your ATM, that’s a real thing. The federal deficit is a government thing--at least until the bill comes due for our children, or their children, or so on down the line.

Two summers ago Sacramento failed to pass a budget on time. The state issued IOUs instead of cash, and everyone started screaming that California, the golden giant, had gone bust. Everyone was wrong. The government of California was in the ditch, not California itself. Did the IOUs touch your life in a real way? I didn’t think so.

Similarly, every year local bureaucrats everywhere seek to protect their fiefdoms from budget-cutters by unleashing a stream of doomsday scenarios. They sound quite real. If the funds aren’t restored, hospitals will be closed, murderers set free, corpses left to rot on freeways and so on. The funds are not restored, and yet, lo, there is still money enough for the hospitals, the jails and even to scrape up the daily road kill. And the citizens, having survived another doomsday, exhale as one and sigh: Ah, it was just one of those government things after all.

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With that background, what to make of the mess in Orange County? Real thing or government thing? The question has been asked, in varying forms, since the treasurer’s investment tower first began to topple. So far, the official answer is nobody knows. The ship has blundered into uncharted waters.

Certainly, as government crises go, this one is a whopper. Heads will roll. The recall posse is saddling up, and so forth. It’s been projected that some public schools won’t be built on schedule. And maybe Michael Eisner won’t be given a taxpayer-financed off-ramp for his expanded Magic Kingdom. A new highway is on hold, along with a fancy radio system the cops all want. And it’s probably not a good time to apply for a county job. Still, none of these setbacks brings to mind the Oklahoma Dust Bowl or the Great Depression.

It is important to remember that Orange County is not broke. The government of Orange County is broke, for now. Unlike Humpty Dumpty, however, governments possess a magical glue to put themselves back together. The glue is called “tax base,” and here in Orange County it remains spectacular.

The other day, after leaving the attorney’s office, I drove over to South Coast Plaza, a sort of Holy Land for conspicuous consumers. It was packed with holiday shoppers. Were they buying fewer presents because some county treasurer had lost his shirt playing poker with the big boys from Wall Street? Get real.