Jacksonian Economics

Today, a memorial will be held in Los Angeles at the Staples Center in honor of the recently deceased Michael Jackson. It will be a spectacle.

I don't question the need for a memorial. His passing touched millions of his fans and they would like the opportunity to have a public gathering to celebrate his life.

The problem isn't the memorial per se, but the cost.

Jackson's estate can't exactly afford this, and neither can Los Angeles. Overtime costs for policing the event is expected to run into the millions. AEG, the music promoter is running the memorial (they had planned on running the 50-date concert tour later this summer).

In that respect, Jackson's economic woes mirror that of the state of California. Jackson's fame brought massive fortune his way. He was able to buy anything and everything to his heart's content, and even then it wasn't enough. He bought the Neverland Ranch and stocked it with a menagerie of animals to allow him the childhood he never had since he was in show business from such an early age.

No one ever told him no.

No one ever told him that spending to such excess might come back to haunt him as he might suffer economic setbacks.

Well, there were setbacks, and the sex scandals and albums that didn't match earlier expectations meant that Jackson had to leverage assets to maintain his lifestyle.

It was unsustainable. The move to hold a 50 concert run in London was hoped to raise capital to help unsaddle Jackson's business ventures of their massive debt. That didn't happen as Jackson died on the eve of starting the concert run.

His estate will have to defend such claims, including the handling of the Beatles collection, which is co-owned by Sony.

If all of that sounds familiar, consider that this too is the problem with profligate spending by California and all too many other states around the nation.

States spent lavishly when times were flush, made bad business decisions, and hoped that taxpayers would bail them out via tax rate hikes that would increase revenues.

That didn't come to pass as the recession sapped consumer spending and tax revenues dropped precipitously. California faces a huge budget deficit and no solution in sight.

California doesn't have Jackson's rabid fan base that is willing to turn out for his memorial. California's fiscal demise will occur with a whimper.

California can't get banks to sign off on its IOUs, and its fiscal situation continues sliding into insolvency.