A well-established economic principle called the “wealth effect” holds that consumers’ spending is influenced more by their sense of well being than by their incomes.

If consumers believe that their wealth is growing — from home equity or retirement savings, for instance — they’re more inclined to run up credit cards, tap home equity and otherwise incur debt to buy things.

California has seen the upside of the syndrome. The decline of the housing market is an especially egregious example of the downside.

Californians’ penchant for debt has a political counterpart in the absolute tidal wave of borrowing that the state’s officeholders and voters have undertaken, some above-board bonds, some clandestine off-the-books loans, some for legitimate public purposes, and some to cover deficit spending.

The irony is that until a couple of decades ago, California had an almost pathological aversion to public debt and relied on pay-as-you-go approaches, even for public works projects. The state’s once-matchless highway system was financed from fuel taxes, for instance, while its world-class system of colleges and universities was largely built with royalties from oil on state-owned tidelands.

Our massive water system, including Oroville Dam and the California Aqueduct, was built with “revenue bonds” repaid from water sales, not general taxes. Local facilities were financed either from fees, such as those for water and sewer service, or property taxes.

Proposition 13, the 1978 property tax limit measure, didn’t preclude tax increases for local debt, but the atmosphere turned sour. The state began issuing bonds to finance school buildings, courthouses, jails and other local public works.

As budget deficits hit the state in the 1990s and in this decade, governors and legislators turned to debt to finance them, undercutting the facade of balanced budgets. Some of the debt was formal, such as the $15 billion bond issue Gov. Arnold Schwarzenegger pushed through in 2004 to refinance short-term operating debt. Some of it was clandestine, such as robbing the state teachers retirement system, knowing that the money grab would be declared illegal and have to be repaid later.

Servicing existing formal and informal loans now costs the state general fund more than $5 billion a year — and the beat goes on.

Voters approved $42 billion in bonds two years ago, but the November ballot already has several new ones, including one to finance a high-speed rail system of dubious justification. Schwarzenegger wants another $9.3 billion bond for water and to borrow against future state lottery profits to create a budget reserve. Republican legislators want the state to borrow billions of dollars from local governments and/or transportation accounts to cover the current budget deficit rather than raise taxes.

California is building a debt mountain. Someday it will collapse. The only question is when.

(Walters writes for the Sacramento Bee.)