So what about California? A reader asks. Ummm, that's a tough one. No, wait, it's not: California is completely, totally, irreparably hosed. And not a little garden hose. More like this. Their outflow is bigger than their inflow. You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession. You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets. Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!
There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice. But actually, we do have a choice: we could let them go bankrupt. And we probably should.
I am not under the illusion that this will be fun. For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you're going to pay as a result. Your states and municipalities will pay higher interest on their bonds if California is allowed to default. Also, the default is going to result in a great deal of personal misery, more than a little of which is going to end up on the books of Federal unemployment insurance and other such programs.
Then there are the actual people involved. Whatever you think of, say, children who decided to be born poor, right now they are dependent on government programs, and will be put in danger if those programs are interrupted.
On the other hand, I don't really see another way out of it. If Uncle Sugar bails out California, California will not fix its problems. Perhaps you want Obama to make it fix the problems, using the same competence, power, and can-do spirit with which he has repaired all the holes in the banking and auto manufacturing sectors. But Obma is not in a good position to do this. California Democrats are a huge part of his governing coalition. All Obama can do is shovel money into the bottomless pit of California's political system.
Moreover, even if the administration could fix any of the core problems of California--and New York--and the banks--and the automakers--and the energy industry--they can't fix them all. Especially given how thinly staffed Treasury is. The president and his cabinet only have so much attention, more than all of which seems to be occupied by the problems already on their plate. They don't really have the time, knowledge, energy, or staff to take on running a whole 'nother government.
California will go bankrupt, muni and state debt will spike, the federal government will backstop humanitarian programs and very possibly all state and local debt, and eventually, California will figure out whether it wants higher taxes or lower spending. But we will not actually make the world a better place by enabling the lunatics in Sacramento to pretend they can have both.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
Good thing their governor is spending so much time making sure we all drive around in Honda Fits.
I'm pretty sure that California has a much higher retiree population than Mass. Between their healthcare, pensions, senior centers, nursing homes, and every other benefit under the sun, retirees are HUGE drain on state government budgets. In fact, they eat up a third of all local, state, and federal budgets.
I doubt this. CA has one of the youngest populations in the US, while MA has one of the oldest. Howwever, CA has lots of poor immigrants, while MA has few. That may be the difference.
"May be the difference"??? One of the major reasons CA is in the shape it's in is because of MassiveImmigration. Not only does that increase spending, but it also gives more power to far-left politicians, many of whom frequently act more like they work for the Mexican government.
The people ultimately responsible for getting CA into its current mess are RINOs like Arnie, the libertarian/profits-at-any-price crowd, the Democratic Party, and the far-left. What we can do now is look back at who specifically supported the current situation in order to discredit them and help reduce their impact on future policy.
If you want to avoid your state from becoming like California, go out and ask politicians questions on video about this issue.
24, you say the groups to blame are moderate capitalists, extreme capitalists, moderate socialists, and extreme socialists. Your point might have a bit more meaning if the groups you listed didn't encompass virtually every ideology going.
deport all illegal aliens and cut welfare
layoff 50% og gov't workers and things will improve
retirees oh yes
we should all work until we die for the glory of the democrat communist dream
Illegal immigrants were here during the boom and we (Californians) employed them by the thousands. Now there is a recession, an economic retraction in my view, and immigrants are leaving on their own with no change in the laws, their enforcement or their access to freebees. Now is the time to stop blaming immigrants for our poor financial decisions. Change the immigration laws to make them legit citizens who can work, pay taxes, buy foreclosed homes, and drive cars made in the U.S. of A.
Retirees can be good consumers spending their savings and retirement accounts on their senior residences, their golf and other hobbies, meals out, etc. Remember, the majority of seniors are independent and only 15% of seniors spend more than 2 years in a nursing home. The seniors create a HUGE demand for all kinds of businesses meeting their needs and employing a large amount of labor to provide those needs.. Senior are not a drain, they are job creators. I hazard that the HUGE drain you speak of is the cost of providing services to those who are here illegally.Think education, healthcare, unemployment insurance, free legal aid, food stamps, subsidized housing and every other benefit under the sun... My foreign born husband had to be sponsered into the US and take classes to beome a citizen. His sponsor personally guaranteed that the sponsoree would NOT get any pubic assistance of any kind but would be self supporting - or supported fully by the sponsor
Has any one credibly show that California will go bankrupt? California's short fall isn't any worse than the Feds. Of course it can't print like the Feds can but that can change. :-)
So here is the big question. I live in MA and I used to live in CA. The taxes are, as near as I can tell, much lower in MA. MA income tax being a flat 5% and 5% sales tax that excludes food and clothing vs. 7% and higher sales and income taxes in CA. That being said, the pubic services in MA seem far better than those available in CA.
So.... what the h*ll is CA spending all that money on?
All the inefficiencies that come along with suburban sprawl is a good place to start...
I'm calling bull$#@!--Texas and Florida are Sprawl Central, and they seem to run fine with even lower taxes than Mass. Show your work.
I assume it's spending some of that money on education, social services, law enforcement, and corrections for the children of illegal immigrants from the third world country to its south. When you import millions of poor people who consume more in state services than they spend in taxes, it tends not to be good for your state's budget.
Illegals don't use NEARLY as many state services as retirees do. If this country ever goes bankrupt, you can place the blame squarely on the grey haired crowd.
Why doesn't Florida have the same problem? If it's the *gray* haired crowd that's the problem, what does California do differently? Show your work.
"Why doesn't Florida have the same problem? If it's the *gray* haired crowd that's the problem, what does California do differently? Show your work."
That is easy. Florida's retirees are (relatively) richer immigrants that enjoy federal benefits (SS and medicare) and therefore are net revenue earners for the state but not for the nation as a whole.
Z, the grey haired crowd is the source of the incredile economic boom that you have benefitted from. The generation that followed the Baby Boomers is MUCH smaller in size and there is an inevitable economic fallout for a small group of consumers following an enormous group of consumers. don't forget, the 'GREY HAIRED" crowd are still consumng, creating employment, albeit in different markets than 30 year ago. Check out your statistics. You act as if 100% of seniors live out their lives in nursing homes, using state funds... In fact, it is a very small percent of seniors who live out their life in a nursing home on state subsidy. The vast majority have savings and/or pensions and supportive chldren to meet their expenses. Sad to say, it is illegal aliens who rceive a vast amount of state monies.
There's a couple answers to this.
1) California has a very low statutory property tax because of Prop 13.
2) California is a federal taxes donor state -- the state gets about $0.75 in federal spending for every $1 in federal taxes it pays. The other $0.25 go to subsidize other states with better population/senator ratios.
3) California's direct democracy system allows voters to put extremely well funded liabilities on the state budget that legislators can't touch.
Careful about how you use terms like "very low."
California's revenues, per capita, come to about 11.5% of income. That's higher than the national average of 11.0%. Perhaps they have gotten their property taxes down because of Prop 13, but the people who run the state have found ways to get around it.
California is most certainly not a very low tax state, in any real sense of the term. They are above average, regardless of their "population to senator ratio."
The issue here is having an appetite bigger than their wallet, period.
Reread 1) and 2).
1) is a problem because heavy reliance on income tax means California tax revenues are far more exposed to the business cycle. Property taxes are less cyclical.
2) is a problem because California taxpayers subsidize the economies of competing states and their appetites. I'm sick of hearing about how profligate Californians are from all those red states that receive our money.
We are a state with a slightly above average tax burden (highly skewed toward middle and lower income people) and an unusually screwed up governmental system. But the problem isn't that our overall taxing and spending are very different from the rest of the country.
Peter, your #3 is a myth. It is rare when "voters" can put an initiative on the ballot. Most ballot initiatives in California are put on the ballot by well-funded special interests -- unions, corporations, big-budget nonprofits -- who have turned the initiative process as a kind of shadow legislative process. The legislature itself puts measures on the ballot. "Going to the voters" nowadays is a tactic mostly deployed by the same special interests that push on the legislature. Most initiatives therefore fail, with the exception of bond measures, and increasingly they are failing too.
Yes, some of the measures that have passed are factors in the state's fiscal predicament, but mostly the initiative process is used as an alibi for lousy, cowardly decision-making.
Peter Peter Peter,
California is NOT a "donor" state - California has always gotten an inappropriate amount of Federal spending.I'm from Indiana we're the one's who get hosed, I've watched this statistic for years, and California generally gets about $1.50 back for every buck sent to DC.
California has several problems, one of which is liberal spending practices.. example: when Bush was only willing to fund stem cell research for existing cell lines, California wanted to make a statement, so the state ponyed up big $ to fund research, seen any return on that investment yet?
California's biggest problem is the size of the Government, the number of government employees has gone up 30% on Arnold's watch. These employees are paid about half again of what private companies pay, and they have powerful unions. Their pensions, which no private company could afford, are massive.
Hi Hoosier,
Here's data to back up Peter's claims:
http://www.nemw.org/fundsrank.htm
In 2005, Californians gave $1322 per capita to the feds more than they got back in spending. This amounts to 45 billion dollars in total, or almost double their current budget deficit. Texans, by contrast gave $144. Hoosiers got back $682 more than they gave. I doubt the figures have changed all that much since 2005, but something tells me they're about to...
I'd bet a whole lot of money that the feds will bail them out. Why not? They're good Democratic voters, much like the UAW. The fact that we don't have the money hasn't stopped any of the other bailouts, so why should this be different?
The fact that we don't have the money hasn't stopped any of the other bailouts, so why should this be different?
It would be particularly hard for the government to let California crash and burn when it could prevent that for substantially less than it has spent bailing out the auto industry. I agree that doing so would set a horrible precedent, but would it even make it onto the Top Ten list of horrible government precedents set during the last six months?
If Uncle Sugar bails out California, California will not fix its problems.
Is there any precedent for Washington forcing another unit of government into receivership? Even if there's no precedent, couldn't it happen if receivership (and federal restructuring of the relevant state laws) were made the price of federal cash? It seems to me Congress has the authority under the elastic clause to do what needs to be done. I mean, the country really will be f*%@ed if its biggest state is allowed to plunge into intensive care.
The taxes are, as near as I can tell, much lower in MA. MA income tax being a flat 5% and 5% sales tax that excludes food and clothing vs. 7% and higher sales and income taxes in CA.
Well, you'd have to consider property taxes, as well, but I think your overall point is valid: I looked this up not long ago, and I concluded Massachusetts (my current state) spends only slightly more than the national average on total state/local governments (as a percentage of gross state product). California's was higher (though not as high, IIRC, as New York). Anyway, California is a very rich place, but it's got some pretty crazy income extremes, and a lot of poverty. Poverty is expensive to deal with (not just from the perspective of welfare or education or healthcare, but it also tends to increase the size of the prison population). Also, California has the highest property prices in the country overall, and that raises the cost of doing business for everybody, including the public sector.
It seems to me Congress has the authority under the elastic clause to do what needs to be done.
Oh, really? Let's see...
The Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.
Pray tell me, for carrying into execution which of the "foregoing powers" would such an act be necessary and proper?
Just as there is no conceivable Constitutional justification for the bailouts of the financial and auto industries, there is none for bailing out a state either.
It may not fall under the elastic clause, but congress damn sure has the right to loan money to a state.
Even money it doesn't actually have. Or has to print. Or monopoly money. Or pixie dust.
Great plan...
I'm not sure you understand how this works. For Congress to have a power, it has to be explicitly granted by the Constitution. Anything that's not in there, they can't legally do.
Here's a handy link:
http://usconstitution.net/const.html
Please cite the article and section that grants Congress the power to lend or give money to the governments of states. Oh I'm sorry, you can't, because no such power exists.
It is a fact that the our government has operated outside of its Constitutional boundaries for a hundred years and more. That doesn't change the fact that the text is still there for all to see.
Noah,
You are right, de jure - but de facto we both know you are wrong. That's one of the reasons that libertarians and conservatives are apoplectic with Obama and his posse. They view the Constitution as toilet paper.
Where does he *possibly* get the right to use tax dollars to actually purchase GM?
Bush, hardly a strict constuctionist, was James Madison by comparison...
Just like the Constitution doesn't provide a way for the president to lie to Congress about why he needed to start a war? Or the way the president doesn't have to abide by US laws regarding torture and a writ of habeas corpus? The way the VP doesn't have to abide by laws requiring him to actually divest? Is there a law against nepotism, or is it just bad practice? Are there laws against influencing the awarding of no-bid contracts? I'm asking since you claim to be an expert on US law.
Is there any precedent for Washington forcing another unit of government into receivership?
If you remember your history, Gerald Ford tried that with NYC. Do you remember how that turned out? Left Ford with a lot of egg on his face. The world financial(and others) elite told Ford it would look bad if the Gov't let the home of Wall Street go belly up. I don't suppose you remember the famous New York Daily News headline "Ford to City: Drop Dead."? He was forced to eat those words in the end. I don't think Obama is that careless.
So.... what the h*ll is CA spending all that money on?
Mostly on people who vote for Democrats.
Mostly... but it's hard to classify Californians so easily. Remember, Ahnold is a Republican.
California is the rabbit whole, come to life. Alice would feel right at home there.
The one thread that is undeniable, however, is a tremendous appetite for various social engineering initiatives to achieve "justice."
You want Justice, California? Open wide, because here it comes. Bankruptcy is an equal opportunity endeavour. The whole state can play.
This "California is not a liberal state" argument will not do. Liberal states commonly vote for Republican governors in order to check the worst excesses of liberalism. But the voters and state policies remain solidly liberal. And don't blame "retirees" as though they are some animal spirit that could not be predicted. Republicans have been pointed out that transfering wealth from workers to a retirees is an unsustainable policy given low birth rates and aging population. If the liberals can do one thing, can they at least show some personal responsibility and accept the blame for the mess they created?
On what planet can you even conceive of Obama letting California go bankrupt? As you say, they are a huge part of his coalition. Heck, he's already brow-beaten CA's government into backing off on cuts to his public sector union votes.
You point out that Obama's attention is limited and giving money to CA will only allow them to continue their bad behavior. But where is the evidence that Obama feels himself overmatched by taking control of every aspect of the world that he can by throwing money at it? A president who has the time to interest himself in the who should be CEO of GM will certainly find the time to "help" his voters in CA. A president who has time to talk up the Ford Fusion certainly has time to tell his Treasury Secretary to float another trillion or so of bonds and give it to CA to do whatever they do with it.
And, yes, of course all of this will have horrible repercussions. But in a sterling example of the self-motivating genius of leftism, this will only mean that Obama must take more control, spend even more, and so forth. Because what he's already done has worked. But things are terrible, you say? They would be worse without the stimulus, worse without the massive new budget, worse without the bailout of CA, banking, automotive, maybe a few newspapers, whatever.
Maybe you were right and McCain would have been worse, though it's hard to see how. Maybe this is really just the end of western civilization and we're in the "careen towards the cliff" stage and it doesn't really matter who's driving, because hitting the brakes just means a few more moments on the road before the inevitable end.
DaveinCalif,
It seems to me like CA is the first place where the net tax-receivers have realized that they can vote themselves a "raise" at the expense of net tax-payers. But not forever.
You might want to apply that philosophy more broadly to states with better population to senator ratios that California. About 25% of federal taxes collected in California go to subsidize outsize spending in other states. Many of these states, flush with federal funds extracted from states like California, then pridefully boast about how they're balancing their state budget. Of course, when you're stealing from your neighbor it's a lot easier to fund your spending.
Peter said:
Isn't that how Progressive economic theory is supposed to work? California, rich in natural resources and wealthy people, ought to be sending money to States with fewer resources and a legacy of poverty. It would be unpatriotic to keep the money for CA, right?
Alternatively, the Federal government could shrink in size and influence, and then most of the dollars would stay in CA, to be spent the way the citizens of the State determined.
The federal gov shrinks and state govts expand as they see fit to pick up the slack? Sounds good to me. Nothing wrong with a little federalism every now and then.
The magic question is how many states can the Feds bail out? - NY, IL, MA, NJ, RI, MI are all on the edge and most likely going to fail. Funny how every one of them is virtually 100% democratically controlled. There is also the massive sucking sound as the wealthy flee these high tax states for low tax states, bringing businesses and job creation with them. Funny how when you target the rich they move. The second magic question is how long till they flee the USA?
That's right: listen to that "massive sucking sound" as all those jobs flee California. Oh wait -- the silicon valley tech sector is one of the first sectors that has started recovering. The state may have a unemployment rate higher than the national average, but there's no evidence of a mass exodus.
Let's not confuse Silicon Valley with CA. In good years, CA gets a huge percentage of its tax money from Silicon Valley, but the white middle class has been exiting for several years now, mainly from S California. If memory serves, CA may have lost population in the last year or two. Silicon Valley will continue to fund the state in good years for a while longer, with all the brain power up there and all the creation of start ups, but the trend for the state is downward regardless, precisely because middle class people sell their homes and buy the same amount of home in UT or CO or elsewhere for less money, and pay less taxes. They can fund their retirement by moving.
MA is faring better than in prevous recessions precisely because they reduced taxes a while back so that people wouldn't continue to flee "Taxachusetts" to live just over the border in New Hampshire while still working in MA.
I think it inevitable that the Feds will bail out CA, but the bigger issue is that we need to figure out how to be economically successful as a nation going forward, with the huge debts we will have at the federal level. We can rail about Obama's raising so much debt, but the root cause of the problem is the unbelieveable failure of our financial system, by which I mean private firms and public regulation. How did that happen? The failures aren't partisan, several of the critical reductions in safeguards took place under B Clinton with R Rubin's encouragement, on legislation sponsored by Sen. P Gramm (R, TX). PAC money has a lot to do with it. Will these influences now be benign going forward?
The root cause is the financial system? That may be the current issue that's gobbling up federal dollars, but it's not exactly like we've been fiscally responsible before it happened. We've had, what 3 surplus years in the last 40? Or something like that. (And even those three include heavy social security surpluses which are about to disappear.) The real problem is not the financial sector or the manufacturing sector, or any other sector. It's that Americans want more government than they are willing to pay for.
So far, I haven't seen single person attribute any of the fiscal crisis on trillions of dollars going to find an ill-advised, immoral war against a country that had no connection to the 9/11 terrorists. Think we could use that money now?
MA is not a high tax state. MA has 5 percent flat taxes for income and sales. A property taxes are very low in Boston.
Not that the facts matter, of course...
You're both right - Massachusetts has a significantly lower tax burden than NY or NJ, and is doing just fine while those two states are close behind California.
The tax reductions you both mention happened mostly under Romney. He got the states fiscal affairs in reasonable order. Not perfect, but reasonable.
But there is still hope for MA to become Taxachusetts again, now that they have a real left-wing governor back at the helm. Give it time... ;)
Well, I would say Massachusetts isn't doing just fine -- a budget was recently passed in the state's House that included almost $2 billion in cuts. There is a $4 billion deficit on a $28 billion budget. And that flat sales tax may soon become 6.25%.
Also, we're just starting to come to grips with the bill for the Big Dig, and Romneycare has only just begun what will almost certainly be many years of steady inflation-times-X growth. The real question is how long before our friends in Cow Hampshire fold up their Live Free Or Die tent and adopt an income tax. I've bet friends it will happen within 10 years, max.
is there really any question that the US will bail out the State of California?
Is Obama really going to stand by and watch a state that delivered 55 electoral college votes to him lay off thousands of state employed SEIU members? While Obama may talk about making the state fix its problems -- the fix would require many a Dem sacred cow to be slaughtered, and that isnt going to happen.
From what I read, California is #6 in per capita income but #10 in per capita taxes. We have high income and sales tax, but extremely low property taxes on a per capita basis due to prop 13. On a per capita basis our taxes aren't that high, but they are more visible than most states because it's income/sales tax and not property tax.
So.... what the h*ll is CA spending all that money on?
We have large numbers of illegal immigrants that consume a lot of education and health care resources. We also have a messed up proposition system where the public can vote for themselves any spending project they want, but no tax increases or spending decreases are associated with it to pay for the additional spending.
On what planet can you even conceive of Obama letting California go bankrupt?
Granted, it has lots of electoral votes, but then again, the other 49 states have more, and many of those states are also hurting (less spectacularly), so they may not be eager to send tax dollars "abroad," so to speak.
"We have high income and sales tax, but extremely low property taxes on a per capita basis due to prop 13. "
Ohhhh - that would explain it! I read that in Texas the property taxes on a 300,000 home in Dallas run about 6k a year. You have to come up with that 6k wether you have a job or not. So, obviosly Texas has a much more stable revenue stream.
In California, if you get laid off you stop making and spending money tax revenue falls to 0.
Megan,
Can you add the ability to edit posts like you can in WordPress?
As my previous post should have read:
"We have high income and sales tax, but extremely low property taxes on a per capita basis due to prop 13. "
Ohhhh - that would explain it! I read that in Texas the property taxes on a $300,000 home in Dallas run about 6k a year. You have to come up with that 6k whether you have a job or not. So, obviously Texas has a much more stable revenue stream.
In California, if you get laid off you stop making and spending money tax revenue falls to 0... hence their current predicament.
Texas doesn't have that revenue stream--the counties, cities, school districts, water districts, etc. collect and use *all* property taxes. The state-level services are primarily funded through sales & use taxes, and franchise taxes. So, no, it's not that stable.
Yes, property taxes are often high, and they can vary a bit locale to locale, depending upon who provides your services (cities, MUDs, etc.). Mill rates generally run between 2.3 to 3.1%
Meta-Comment:
Good job (mostly) avoiding the REPLY feature on this post. Keep up the good work, folks! Together, we can end the scourge of REPLY that stains our orderly discussions!
Will do.:~)
Hope and Change, buddy. Learn to like it.
The problem is multifaceted, but I think that the ultimate root is that it takes a simple majority vote by the populace to mandate spending, allocate bonds, or cut taxes, but a 2/3rds vote to raise anything but a general, unrestricted tax. That formula just can't work over the long term. After decades where the populace voted "yes" on virtually all new spending, and "no" on all new revenue, this crisis was all but inevitable.
In addition, voters have also approved virtually every ballot measure designed to take away power away from the legislature. The power of the legislature to actually do anything budget-related is actually quite restricted.
And the final part is an unwillingness on the part of the state "leadership" to tell the people of California that California's budget mess is basically our fault for voting the way we have. Most of the voters here are against cutting any spending that would actually make a difference, raising any taxes, or giving the legislature any flexibility, but are also convinced that this crisis is 100% the fault of "the politicians".
So I voted "no" on all the budget measures on the ballot today. They were all gimmicks, or things that have been tried before and failed. Hopefully, this will cause a crisis that can lead to the major changes in the political culture that we need in this state.
You've got it.
Support majority rule on all budgeting. End ballot-box budgeting on anything but capital improvements.
"Granted, it has lots of electoral votes, but then again, the other 49 states have more, and many of those states are also hurting (less spectacularly), so they may not be eager to send tax dollars "abroad," so to speak."
Obama's political calculus will be the following:
If I let California fail, a large state full of supportive constituencies WILL be mad at me and likely wont forget by 2010 or 2012. If I bail California out, 49 other states of varying degrees of support MIGHT be mad at me, and will likely forget by 2010 and 2012.
At its triangulating, Clintonian worst: its really about making sure a reliable, large Democratic state stays that way. If this were a question about Arizona being bailed out, we all know the answer to that one.
I *think* this will be a reply to MarketKarma - something is messed up in the reply javascript (that wasn't messed up earlier today).
Obama can do what he wants to California. He won here by 24% of the vote. He'd have to alienate almost two million people to lose the state in 2012. And he can deflect that by throwing Arnie under the bus and blaming the pain on California's Republican governor and the failures of the Bush administration, and to say that it would have been worse had McCain been president. California's voters are dumb enough to buy that.
I would think there is literally zero chance Obama doesn't step forward with 20 to 30 billion dollars to tide California over for 6 months. Of course, he will have to repeat this procedure for every other state in deep financial stress. So, basically, we add another 150 billion dollars to this year and next year's deficit. Hell, it probably become a standard budget item in years ahead.
Can we bail them out on the condition that California wipes the slate clean with a new constitution?
Look at Nebraska's Unicameral legislature for an example.
Or maybe even, dare I suggest... something modeled on the Westminster system?
California is already talking about authoring a new constitution, but that takes considerable time. First, they'll have to put a measure on the state ballot calling for a constitutional convention. Then, they have to actually hold the convention and write the constitution. Finally, they have to wait another election cycle to put the constitution on the ballot for vote.
California is too big to govern as a single state. It should be split up into smaller, more manageable states. Actually doing that would be very hard--you'd have to cut a deal on water rights and US senate seats--but that's the solution.
I live in California. I also voted against all of the props, basically for the same reasons as 'DaveInCalif'. Our illustrious leaders just aren't serious people. Part of the problem is that the State is gerrymandered up the wazoo. We've tried to fix this several times: cross-over primaries, etc. Every time we pass a fix, some judge nullifies it for aromatic reasons. We really aren't a Democracy any more, just a socialist state with show elections a la the late great Soviet Union. So maybe a bankruptcy is in the cards. Good!
As a life-long Californian I can completely understand the electorate's exasperation with Sacramento and what is laughingly called "the budget process" there.
Yes, certainly, but you need to realize that the State traditionally takes from the local governments -- County and City in order to solve problems like this. Arnold has already stated that he would do so if the Propositions did not pass. What does that mean? It means that direct general public services like police, fire, public works, streets, libraries, etc. will be cut and cut dramatically.
This effects everyone. Sacramento's inability to get beyond their irresponsible funding of their pet projects (liberal or conservative)in boom times will directly result in the loss of public services to the general population, including safety services. It's not just about teaching them a lesson -- it's your safety and your community that will be effected.
For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you're going to pay as a result.
This will happen in any case, given the disposition of our government. So I might as well enjoy my Schadenfreude while I can, yes?
Pass the popcorn. This would be a once in a lifetime event if so many other states weren't in line to follow...
I too voted no on the props today. Our problems stem from the fact that we not only screwed up the property tax base with Prop. 13, but we've also voted in idiotic spending mandates like Prop. 98. It's a recipe for disaster. Plus, we're gerrymandered out the wazoo, as wGraves said, and while there's a fix coming for that it hasn't taken effect yet. The only real fix for all of it is to rewrite the state constitution, since all of those lovely tax cuts and spending mandates were voted in as constitutional amendments. I'm hoping the failure of the props will spur exactly that.
I wonder if one of the conditions of a California bailout would be the resignation of Governor Schwarzenegger in favor of a successor of Obama’s choosing.
In all seriousness, I think Megan’s pretty much right on the money. As bad as a bankruptcy is whether we’re talking about a company like GM or a State like California, when you have an organization this dysfunctional, it’s probably better to bite the bullet and get the pain over with NOW rather than try to postpone it with a “bailout.”
As far as schaedenfreude goes, I take no pleasure from either situation. I feel no pity for them either anymore than most of the commenters felt for the author who wrote the book Megan recently reviewed in an earlier thread.
I think a lot of people are going to feel pain either way and many are people who are wholly innocent, i.e. the taxpayers in the other 49 States who didn’t vote for the current government. That all being said, I don’t think the choice is really between a bankruptcy now but rather between a bankruptcy now or a bailout now plus a bankruptcy later.
Given the choice, I think it’s preferable to get the pain over with now and not give the guilty parties any incentive to continue or repeat the behavior which created the problem in the first place.
The source of California's electoral difficulties is not gerrymandering but the 2/3 supermajority required to pass a budget. This means that an unserious Republican minority can thwart pretty much any budget - and lumber the electorate with tied bribes like the passage of 1B being dependent on the passage of 1A. If a budget required only a simple majority the Republican minority would be under much greater pressure to put forward policies that would make it electable statewide. As things stand there is absolutely no pressure on the California Republicans to actually win elections because they are able to thwart the wishes of the broader electorate while preserving their loyalty to batshit ideas.
The above is,of course, compounded by the crazy ballot system which as people allows any reasonably funded idea to get on the ballot.
while preserving their loyalty to batshit ideas.
Such as trying to fight tax increases?
ndm: So what about the unserious Democratic majority? Do they get to exit your story as pure as a freshly ironed shirt in the driven snow, or is there an exciting Part 2 coming up?
Can a state even go into receivership? Wouldn't it more likely just repudiate its debt?
Of course then California may find it difficult to borrow, but as Megan mentioned in a recent post relating to other sovereign borrowers, memories can be short.
Megan, I love you. But your habit of talking about what bloggers are saying and doing without linking to any of the ones who are saying or doing that drives me mad. I'd love to click through and see what people are saying... but I can't. At best, I can search for bloggers who are discussing the issue and try to figure out if they're who you were talking about. Seriously, what's up with that?
Check this article out if you haven't already: http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=13649050
The Constitution prohibits the several states from interfering in contracts. (Article I, section 10, paragraph 1). It also reserves bankruptcy as an original power of the feds.
I think the idea of ballot initiatives has gotten out of control in California and elsewhere - in Mass they tried to eliminate the income tax last year without any alternate revenue source. The folks in Mass were smart enough to not but suckered into an extra 5% percent in their paychecks.
I say get rid of the ballot initiative process and actually hold the legislators accountable for what they are elected to do. The ballot initiative process devolves the issue of accountability infinitesimally onto each voter. They vote their own pocket book/wallet be it Prop. 13 property tax limits or Prop. 1A high-speed rail bonds. They vote to have it their own way and its hard to look in the mirror sometimes.
If it were a legislator entirely responsible for the spending and borrowing then the voters could stick it to them. But the legislators' hands are tied by the super majority requirements to raise revenues and to pass the budget. Further the legislators are fixed to the spending whims of the voters and the tax qualms of the voters.
I would let the state fall off into the ocean if I had my way. Or they could go the route of constitutional convention like some groups are going for. But that is a multi-year process. In the meantime I think they need to feel the pain that they have all inflicted on themselves. They have that wonderful direct democracy to thank.
I say get rid of the ballot initiative process and actually hold the legislators accountable for what they are elected to do.
I agree in principle, but I don't think we need to throw the baby out with the bath water--after all, there are times when direct democracy can be of constructive use. But we definitely need to ratchet up the threshold for qualifying an initiative for the ballot, and probably for passing one too. In other words, keep initiatives around, but make it awfully hard to pass one.
I say get rid of the ballot initiative process and actually hold the legislators accountable for what they are elected to do.
Oh, but you are missing the point. The ballot initiative process is one of the best ways of holding the legislators accountable. I live in So.Cal. As and example, the legislature would never have gotten around to fixing the problems that existed with property taxes (pre-prop 13). It is chaotic, and to outsiders seems a bit weird, but I shudder to think of what the legislature would be like without it.
I live in So.Cal. As and example, the legislature would never have gotten around to fixing the problems that existed with property taxes (pre-prop 13).
Isn't California's financial crisis primarily caused by its reliance on income and sales tax revenue to fund the provison of public services?
Isn't California's financial crisis primarily caused by its reliance on income and sales tax revenue to fund the provison of public services?
Thats one way of looking at it. Another is simply that they spend too much.
I live in So.Cal.
I fully expect these tax increases to fail and welcome it. I think this may be a day of reckoning that has for too long been postponed. There are several factors which will make this interesting:
A liberal legislature that gets elected by promising lots of stuff paid for with tax dollars (my personal favorite budget item: $500,000 for tattoo removal).
A ballot initiative process that means that unpopular tax increases can be overturned.
The state has 55 electoral votes.
Almost all the congressional seats in the state are safe ones due to gerrymandering.
No. more. money.
This isn't schadenfreude on my part. I have lived in lots of places in the US and this is the most dynamic, interesting, creative place I have been so far. There are aspects of living and working here that I really like. I think there are a lot of hard truths that need to be faced, though.
Here's an example of the problem right here. California has had Republican governors for 20 of the past 25 years. Thanks to the 2/3rds rule, there has been no budget in the last 25 years that could be passed without at least some Republican support in the legislature. And we won't even talk about all the spending forced into existence by the voters directly (everything from school spending to high speed rail to California's draconian, and expensive, version of three strikes). And yet we are to believe it is exclusively the fault of "liberal" politicians.
No, Ian, it is not the fault of liberal politicians. It is the fault of both Republicans and Democrats. And moreover, it is the fault of the California voter, because we put these people into office, restricted their power, gave them unreasonable expectations, and mandated spending that's now bankrupting us.
Which means, Ian, that it's your fault. And mine. And the fault of every other California voter.
This problem will end when people like you, Ian, stop whining about how this everybody else's fault and take a little responsibility for their actions. You want cuts? Stop complaining about a mere $500,000 for gang abatement (which is what the tattoo removal is for), your share of which equals exactly one shiny penny. If you want cuts, describe how you'd cut $10 billion from the state budget. And don't give me vague crap about "illegal immigrants" or "waste, fraud, and abuse". Give me real, specific, examples of what you would cut, on the order of $10,000,000,000 (that's 20,000 times $500,000, in case you were wondering).
DaveinCalif: Let's start by addressing the state pensions and future obligations. Take the existing pension funds and divide it proportionally between all participants. Give each person cash for their share. It won't cover the obligations. Tough. Close down the state pension funds and let each worker fund his/her own retirement.
Which problem should we fix next?
As a lifelong Californian, I'll tell you it's simple. Everyone knows the solultion, but no one wants to be bothered to make it happen.
You cut the Legislature staffs by 75%. Limit the number of days the Legislature is allowed to meet to 90 days per year, limited to one session in the dead of summer. Make it illegal for state goverment workers to join unions. Cut the state employee rolls of regulatory bureaucracies by at least 50%. Eliminate the obscene and unfunded public union retirement giveaways that are bankrupting private citizens and businesses in order to pay the leeches who've worked in the State government.
Eliminate the entire state-level education bureaucracy. Institute a citizenship or legal resident requirement to enter public schools. enact and enforce real term limits. Eliminate gerrymandered districts that ensure one party control in Sacto.
In sum, the problem with California is NOT the voters or taxpayers of California, it's the fact that the politicians in California have set up a political spoils system designed to reward the politicians and their non-jobs-creating cronies. The voters in California have consistently voted to reduce taxes (prop 13), reduce spending (prop 189), reduce the influence of corrupt politicians (term limits) and on and on...all in the hope that someone in Sacto would get a clue that Californians want their state government to leave them alone to enjoy the beauty of the state, without having to bother with what is essentially a necessary, but simple nuisance - state government. But at every turn the politicians have quietly passed laws to overturn those reforms.
This problem will end when people like you, Ian, stop whining about how this everybody else's fault and take a little responsibility for their actions.
So why don't you enlighten me. How exactly are *you* taking responsibility? Please, I want to know.
And don't give me vague crap about "illegal immigrants" or "waste, fraud, and abuse". Give me real, specific, examples of what you would cut, on the order of $10,000,000,000 (that's 20,000 times $500,000, in case you were wondering).
Are you suggesting there are no cuts that can be made and that we simply have to raise taxes? Hey! Problem solved!
Really there's only one thing you need to know about the California budget to understand what's going on: If California had held spending to what it spent five years ago (adjusted for inflation and population growth), the state would have a fifteen billion dollar surplus instead of a twenty billion dollar deficit. This has nothing to do with the economy, or the housing market, or illegal aliens.
The problem is the voters want to have their cake and eat it too, and any politician that doesn't go along is voted out of office. So the legislature has (of course) been spanning the gap by issuing bonds to keep the lights on. The difference between what the state's cash flow could support in the absence of borrowing and what the state spends has been growing so quickly the situation had to come to a head. The only thing that could have prevented it is massive, unending economic growth. Actually, I'm not even sure that would have saved us.
I live in CA, and I really, really hope the feds don't bail the state out. It will accomplish nothing but allow the voters to behave, at everyone else's expense, like children for a few more years.
I live in CA, and I really, really hope the feds don't bail the state out. It will accomplish nothing but allow the voters to behave, at everyone else's expense, like children for a few more years.
You said it better than I could. This is a day of reckoning that is long overdue.
Bring it on!
Nope. There is still a lot of money coming in to state coffers. The problem is the money couldn't possibly come in fast enough to cover the checks they're writing in Sacramento.
I'm a lifelong Californian, and the ballot initiative process does nothing to hold legislators accountable. Quite the opposite--it allows them to do nothing and pass the buck to the people of California. I, for one, am tired of having to do the job I elected *them* to do.
I read that in Texas the property taxes on a 300,000 home in Dallas run about 6k a year
On a house in California that would be 3K a year to start, and go up by 1% every year until the house is sold. There are multi-million dollar beach front mansions that have a lower property tax basis than starter homes in middle class neighborhoods. You want to know why California businesses have troubles recruiting? It's not just the property values, but that the taxes are set-up to be the highest on people just starting out, and those who move here.
Yes, but the flip side is this:
Some of my neighbors are retirees on fixed incomes who paid less than $100k for their houses in the 70's, which, at the peak, were worth over $800k. If the prop tax were simply a fixed percentage of the current assessed value, they would be forced to sell and move elsewhere.
Do you think this would be better?
Assuming 1975 as the baseline year, $100k in 1975, adjusted for inflation, would have been just shy of $400k last year. So if those homes are worth about $800k now, the real value has roughly doubled.
Would their property taxes correctly reflect that, and if so, what's the problem if the equity is there?
As I recall, the popular thing to do in that situation is to sell the home, flee north, spend $180k in 2009 dollars to buy a similar-sized house in the Albany area or Portland's western suburbs, and then live very comfortably on the difference.
Perversely, the property tax exemption probably has helped drive the market values higher in CA, because people don't move to avoid a higher tax rate on a new home. This leads to a bigger boom and bust compared to most other states.
In many states, senior citizens may have a modest homestead exemption, but still pay the going property-tax rate. If home values move up quickly, and they can't keep up with property taxes, then they will have to downsize. But what's wrong with that? They get equity out of the house, and probably lower maintenance costs at the new place. That's life. And that is just what the missus and I are planning to do when we retire in a few years.
> On a [300k] house in California that would be 3K a year to start, and go up by 1% every year until the house is sold.
Both numbers are wrong.
1% is the max base rate, but many/most jurisdictions have additional assessments and the like that significantly boost the actual rate. For example, the rate in much of Santa Clara county (Silicon Valley) is over 1.7%.
Prop 13 also limits the increase in the taxable basis to 2% per year. However, it doesn't limit the decrease if the property value shrinks. So, folks who bought recently are seeing huge decreases in their taxes while folks who bought a while ago are seeing modest increases. To take Santa Clara county as an example, its revenues are dropping by only 2% even though property values took a 10-15% hit.
Prop 13 exists because we know that property tax rates aren't decreased when values explode - the cities and counties just gobble up the extra revenues. We also know that they'll increase the rates to keep their revenues stable when property values drop.
Yes, folks who bought recently pay more. They also knew what they were paying and know the maximum that they'll be paying going forward.
After a few years of increasing prices, they switch from not liking the system to being big fans.
During price collapses, like right now, prop 13 helps new owners quite a bit. Instead of having their rates increased in proportion to their property value decrease, they're actually seeing significantly lower taxes.
"in Mass they tried to eliminate the income tax last year without any alternate revenue source. The folks in Mass were smart enough to not but suckered into an extra 5% percent in their paychecks.'
I'm a Mass citizen, and I voted against this referendum - but if our legislature raises taxes to pay for the current downturn WITHOUT a sunset clause, and another such referendum comes up again - I'm voting for it. Just to force the crisis that CA is now seeing.
BTW, I've noticed another Mike S floating around, so I should show up as msully here on out.
Funny-- I changed to Michael S. just yesterday for the same reason. :-)
BTW-
Looking at the results so far, all the props except for 1f (legislative pay cap) are going down in flames.
What do you think Obama won't bail them out?
Sure it's insane for the rest of us to do so, but sanity has little impact on Obama's policies.
To quote the Taxinator:
"Hasta La Vista, Baby..."
When California asks for a federal bailout: should the rest of the country be bailing out a state that pays 3600 prison guards over 100K a year?
http://nalert.blogspot.com/2006/07/3600-california-prison-guards-make.html
Of course not, but that won't stop President Chauncey.
Don't forget, those are state employees. Income is just the tip of the iceberg when it comes to compensation...
You hit at one of the big problems. The state government has been completely captured by the public unions. They power the Democratic machine. Breaking that hold will require a third-party, like a bankruptcy judge.
"Perhaps you want Obama to make it fix the problems, using the same competence, power, and can-do spirit with which he has repaired all the holes in the banking and auto manufacturing sectors."
That was intended as irony, right?
I have a better idea. Do a managed bailout on fairly strict terms, viz, if California wants to ever be able to get another bond issue or another federal capital grant, they have to get rid of supermajority voting requirements, they have to curtail the initiative so that it can't earmark funds, and they have to commit to a repayment plan. California would not be in this situation if you did not have the toxic combination of two-thirds supermajority voting on the budget, which diminishes the individual and collective responsibility of the legislature and enables a lot of grandstanding; and the ability of voters to effectively place firewalls around large parts of the state budget, further diminishing legislative responsibility.
If you have a polity in which the legislature is infantilized, you're going to get politicians behaving like infants.
Some of my neighbors are retirees on fixed incomes who paid less than $100k for their houses in the 70's, which, at the peak, were worth over $800k. If the prop tax were simply a fixed percentage of the current assessed value, they would be forced to sell and move elsewhere.
$100,000 in 1972 is equal to $509,000 now. If they could afford to buy the equivalent of a half-million dollar house in 1972 they could afford to put enough money away to pay the property taxes. If they can't pay - then either do a reverse mortgage or sell the home they can no-longer afford.
On the issue of retirees, Prop 13 is a giant market screwer-upper. It's really no different than rent control in NYC... and see how well that's worked. Sure Bubbie Esther isn't forced out of her East Village apartment and that's quaint, but it also means anyone moving into the city has to fight over the scraps of the 30% of property that's left which runs the rents up for everybody, and eventually all other costs go with.
As a former California resident, I think Prop 13 made a lot of sense. The market value of your property only makes a difference when you go to sell the property. If you buy a property being taxed on the original market price is the equitable tax. However if you chose to refinance to pull equity out I don't have a problem with resetting the tax based on the new value.
Michigan has the equivalent of Prop 13, and there's an advantage for smoothing out the revenue bumps. When taxable assessments don't go up as fast as property values, the money flowing into the state capitol does not rise as quickly. Which is good because, of course, the state government would spend it all. And then in a downturn, with property values falling, the taxable assessments on those limited properties keep rising. Which means that revenues don't fall as fast as they would. So it acts as a revenue stabilizer on both the upside and downside.
We've been in our house for about 15 years and now are paying less in property taxes than we would if we'd just bought it. But our taxes are still rising at ~3% a year rate even though property values here have taken a 30-40% haircut.
What the heck do local property taxes have to do with the STATE'S finances? Do any CA property taxes go to the state? They don't in virtually any other state.
If the state CHOOSES to send money to locales to support profligate spending, that only allows local pols to escape responsibility for their excessive spending.
The state basically took all the non-dedicated property tax revenue to "redistribute equitably" in some previous budget crisis. So, yes, property taxes are part of the state finances.
Which is one of the things which makes it harder to balance the budget - salaries are set by localities, but paid for by the state.
As someone who prefers lower taxes and lower spending, I actually think a big across-the-board tax hike is the solution here. And not just on the "rich" but everyone--make every American fully aware of the cost of all this spending that we've been conditioned to over the years. Only then will we see the tide of opinion change as they realize that there's really no such thing as free health care, retirement bonuses (social security) and the like.
Obama will almost certainly bail out CA if the other option is receivership--it's a no-lose proposition politically. Though I imagine he'd attach some conditions to the bailout (like beefing up environmental standards, supporting state public sector unions with some giveaways, maybe construction of a mass-transit system). That seems to be the pattern--use future taxpayers' money to give to some entity in need (banks, automakers, states now) and use the money as a lever to make them fulfill some political goal. This may seem loathsome, but it is brilliant politics.
Will Obama let California fail... Well there is 55 electoral votes there and 30 million that vote Democrat most all the time. Therefore there is no chance that California will not be bailed out. Over and over again. Just like the UAW owns the Democrats. It is all about politics and power, not about what is right.
They'll just print up more of that Monopoly money and send it there.
One thing I would like someone to explain- how is it that initiatives mandating spending can become law without funding sources? Would one reform of the iniative process be that the two must be part of the same initiative?
This is only the first shot in the tax rebellion. Few states/localites are making real efforts at cutting spending to match the declines in revenue. In almost every case we are seeing the line held in spending, with slight declines in the rate of increase being trumpeted as hard-choice budget cuts. Taxes are going up everywhere, and these increases will live on long after the recession ends.
This is the root of the problem. Unlike other economic entities, governments don't think they should cut spending ever, even if their income is falling, and they surely don't think they should cut spending when their income is rising, but, rather, raise the rates of increase. This is economic and fiscal madness masquerading as prudent policy. The citizens will put an end to it by simply not paying, and California has started the ball rolling.
Other than Prop 98, most initiative spending measures have included funding sources. Prop 98 also includes a funding source: general revenue. (Prop 98 mandates the percentage of the total state budget which must go to education. It also includes an escalator clause so we can't just cut everything 25% across the board.)
Why doesn't California just delay sending it's tax revenues to the Feds until they fix their budget? I'm no constitutional expert, but it seems that the Feds would have quite a fight on their hands to get it, due to that whole inconvenient "federalism" thing that is the heart and soul of the Constitution.
Not that politicians in California would ever have the guts to try this, but we can dream.
Gee i wasn't aware that California taxpayers sent their fed tax money to the state and the state then sent the money to DC. I guess CA is different from every other state in the union where your fed tax money goes directly to the feds.
mndasher:
"Will Obama let California fail... 55 electoral votes there and 30 million that vote Democrat most all the time. Therefore there is no chance that California will not be bailed out. Over and over again. Just like the UAW owns the Democrats..."
Spot on. If a Republican were in the WH he might (slim chance) do what Ford did to NY City and tell CA to get stuffed. No chance. The Messiah will do that. Does anyone seriously believe the guy has a single neuron firing on the idea that overweening federal control is not the answer to everything?
My (Canadian) wife asked me this morning what legal justification the federal gov't would have to intervene and bail out CA. After cleaning up the remnants of the half-masticated banana I had spewed all over the tablecloth I asked her what legal mandate it is had to nullify contracts in the banking and auto sectors.
We live in a corporatist nation in which the sovereignty of individual contracts, let alone the the states as enumerated in the Constitution, are trivial obstacles for the statists in power to sweep out of their way.
If Obama wants to bail out CA, how does he get the House and Senate to go along? After all, they have to vote any money.
How could the Representatives and Senators in bankrupt states like NY, NJ, and MI justify votes sending money to CA? How could the Representatives and Senators from better run states justify such a vote?
I can just see some senator from Oklahoma or Iowa trying to explain why he voted to send billions to CA so a bunch of CA union slug employees could retire at 90 percent salary at age 51 with full medical coverage for their entire family.
The bank and auto bailouts were not popular, but every state has banks, many have auto parts makers and lots of GM and Chrylser dealers. That provided some reason for the bailout votes. The Representatives and Senators from the other 49 states would have NO justification for voting a CA bailout.
ed,
As far as I know, there has been just one vote taken- for TARP. All the bailouts flow from that and the Federal Reserve, combined with, shall we say, creative interpretations by the executive branch.
There was the so called "climate" bill from last September that provided the auto makers with $25 billion in loans.
Yep, forgot about that one.
Its clear what is going to happen- the Federal government is going to print money to bail out California, which will encourage the other 49 states not to settle their budgets, which will cause the federal government to print money to bail them out.
Oh- and Obama will threaten to cut the federal funds to any state that attempts to cut spending on public unions, just as he did in California.
In other words, we are in for a hyperinflation nightmare.
There is 1 very simple difference between conservatives and liberals in this country when it comes to government. Conservatives (and most independents i'd bet) have no doubt they could take a red pen and balance the budget without grinding society to a halt. Liberals believe this to be impossible (witness Obama's ridiculous 100 million dollar spending cuts). Who is right? Well Republicans really ought to be out there waiving red pens and budgets of their own if they believe they can do it, prove their point. Sadly the current republicans are too in bed with their own contributors and special interests to actually do so. But that has nothing to do with how much spending REALLY needs to exist on the state or federal level.
California- give me a pen and an afternoon, and i will balance your budget. Yeah, people will lose jobs, but the essential services will still work and in the long run more jobs will be saved than the current road you are on.
Mark,
There is 1 very simple difference between conservatives and liberals in this country when it comes to government.
Then can you please explain conservative repubicans support of the Medicare Drug Benifit?
"Sadly the current republicans are too in bed with their own contributors and special interests to actually do so."
"Then can you please explain conservative repubicans support of the Medicare Drug Benifit?"
Sure, politics. The current republican political class is corrupt to the core. I doubt you could find a dozen 'practicing' conservatives in DC.
Right. And, although you implied it, you should come right out and say: any "conservative" who voted for the Medicare Drug Benefit, No Child Left Behind, etc.... they aren't conservative. Period.
The fact that Bush's spending looks cute and amateurish compared to Chauncey's doesn't change the fact that true conservatives turned on Bush in droves because of this. The term "drunken sailor" was used everywhere.
You can't take anything away from Obama's flogging of McCain, but you also can't deny that conservatives turned their back on "Maverick" and simply didn't vote. This is the exact reason: we're tired of people mis-using the term Conservative.
California is also a cautionary tale for the entire country when it comes to tax policy--
Over the last 20 years, like the Federal system, the tax base of the state has been made more and more narrow. Lower incomes have been effectively exempted from income tax with the rates increased on upper incomes.
A highly progressive, narrow tax base is also one that is very sensitive to economic activity, and will produce highly volatile revenue streams.
Two bubbles in the last ten years -- one a technology/internet stock market bubble and the other a housing bubble-- caused very large, temporary spikes in incomes and tax revenues.
California legislators (and a complicit governor) tended to assume that those spikes would not only re-occur every year, but grow as well. Long term spending committments were made based on those revenue projections.
It was only a matter of time before a serious deficit issue was created.
"Conservatives (and most independents i'd bet) have no doubt they could take a red pen and balance the budget without grinding society to a halt. Liberals believe this to be impossible (witness Obama's ridiculous 100 million dollar spending cuts)."
Which is why Clinton balanced the budget and Bush and Cheney said deficits don't matter and spent like they won the lottery.
Oh, I forgot. The man whose every action was praised by conservatives for eight years was labeled "not a real conservative" on January 20.
Of course, those 37 Republican Senators who voted for the Republican stimulus plan of $900 billion in tax cuts for corporations and capital gains that would have increased the deficit by more than what actually ended up passing...those aren't conservatives either I guess.
Hell, it's apparently just Ron Paul and every blog commenter ever that actually wants to balance the budget. I can't think of any other elected Republican that actually meets your definition of conservative, since they all consistently vote for the deficit-increasing measures their party supports.
So I certainly hope you don't vote for them, do you?
Adam,
Clinton did it, but he certainly didn't do it by himself. However, once he left office, the Congressional Republicans lost their aversion to more spending.
I've always said, Bill Clinton is the type of guy who would pick up a girl on another guy's whistle.
Bill Clinton balanced the budget? Newt Gingrich balanced the budget, remember the "Contract on America" that the liberals made so much fun of? Now tell us about how Mr. Clinton fixed welfare.
Why do Liberals have so much trouble understanding that oppressive taxation hurts the economy and decreases revenue to the Government? JFK was the first guy that proved this.
Look at it this way, lets say we make the tax rate 1%, gee the Government won't get much money so make it 2%. The IRS will collect more $, but not quite twice as much, now make it 3% and so on.
Run the same experiment in reverse, make the tax rate 99%. The economy will crease to function and the government will get nothing, so make it 98% etc., actually you will have to drop it quite a bit before the economy cracks up, but at some point the government will start getting more and more revenue by dropping the rate. Somewhere between the extremes is a sweet spot, where the government is extracting the maximum amount of revenue from the economy that is possible, without leaving money on the table or choking the economy. Unfortunately, we are being taxed at a rate that is higher than that sweet spot.
In NYS, counties pay a significant amount of their revenues (sales taxes and property taxes) on state programs. For example, our county pays for 25% of the state's medicaid costs in the county, and the school district only gets 26% of their revenues from the state--most ofthe remainder has to be made up in property taxes.
BTW, property taxes on a $300K house run about $7K in upstate New York, and this is in addition to a 8.0-8.5% sales tax and, of course, our income tax.
Over half the state's expenditures go to Medicaid, even with the counties picking up 1/4th of the total cost. We also have the second highest state worker per capita ration in the country. The pension funds used to be in fairly good shape until the market tanked, so now we have unfunded pension liabilities to worry about.
Maybe when I retire I'll move to Eastern Tennessee.
You could do worse. Eastern Tennessee for me, too. Parents and a sister live there.
If California is too big a problem for Obama to handle, maybe he should refer them to the recently beefed-up IMF? The IMF need practice in setting tough conditions for bailouts of major developed economies; and California sure qualifies as developed, major and in need of tough conditions.
More to the point, Obama needs to build bridges to Republicans, and Shwartzenegger to Democrats. An Obama:Shwatzenegger compact to save California will have lots of political sizzle.
"Which is why Clinton balanced the budget and Bush and Cheney said deficits don't matter and spent like they won the lottery."
I don't think Clinton was particularly liberal (at least when forced to work with a republican congress) and Bush certainly wasn't a conservative. You won't find many rank and file conservative republicans praising Bush's budgets.
"Oh, I forgot. The man whose every action was praised by conservatives for eight years was labeled "not a real conservative" on January 20."
Straw man. If you didn't hear 8 years of fiscal conservatives attacking Bush budgets you weren't listening. You can support a president's foreign policy and tax policy without supporting his spending. In other words, there were bigger fish to fry. Was Kerry going to spend less? Hah.
"Of course, those 37 Republican Senators who voted for the Republican stimulus plan of $900 billion in tax cuts for corporations and capital gains that would have increased the deficit by more than what actually ended up passing...those aren't conservatives either I guess."
Err, pretty much by definition.
"I can't think of any other elected Republican that actually meets your definition of conservative, since they all consistently vote for the deficit-increasing measures their party supports."
I think I have already said that.
"So I certainly hope you don't vote for them, do you?"
I have taken to voting against all incumbents and I urge everyone to do the same regardless of ideology. We have a ruling political class in this country that has worked together on precisely 1 issue, incumbent protection. There is no conservative republican party on the national stage, and most conservatives absolutely agree with that. So the next best thing is to get as many of the old, corrupt, bought-off politicians out of Washington as possible. New faces are a good thing. Term limits are better.
Is it not likely the way forward is for California to start auctioning off state assets? The highways could be sold to private investors, who then convert them into toll roads. The BART and the bridges of the Bay Area also sold off to investors, who then charge market rates for using them. State parks could be sold off or maybe to the fed (oops, I forgot, they have an insolvency problem as well). Finally, the UC and CalState university systems could be privatized as well. In the long run, this is the only option for California.
Is it not likely the way forward is for California to start auctioning off state assets?
Problem is that's a one time influx, kinda like selling the family silver to pay your minimum credit card payment. Chicago sold off our parking meters recently to plug a budget hole. What happens next year when your expenses are just as big?
It all comes back to spending WAY too much. Governments employ too many people, in too many agencies, for too much money, and way too big of benefits (particularly pensions) compared to comparable jobs in the private sector.
Yes, but much of the state spending is on these assets and the state employee unions that work for them. Privatization will considerably reduce CA state spending.
Unless you can produce quotes of yourself from, say, '02 or '03 wherein you claim that Bush is no conservative, I have no reason to believe you. Funny how we have all of these people crawling out of the woodwork now, when they seemed conspicuously absent then.
On the subject of California, it seems that the problem is that California has too little democracy, not too much. A simple majority for anything involving spending increases, but a 2/3 majority for funding increases? That's not democracy, that's the tyranny of the minority. Note also the flip side, the constitutional amendments. There it looks like too much democracy, not too little. It shouldn't be the case that an indefinite number of bites at the apple are allowed, but that once bitten, the proposition is set in stone.
as much as I want to blame the republicans (and often do!), i think that Daveincalifornia's point is still the most persuasive: increasing spending requires majority votes in legislature (or on ballots) but increasing revenue/taxes requires 2/3. that is an untenable structure. it needs to be changed somehow.
How about making both spending *and* taxing require 2/3?
"Unless you can produce quotes of yourself from, say, '02 or '03 wherein you claim that Bush is no conservative, I have no reason to believe you."
My heart is broken. But since I can't resist an excuse to google myself:
I strongly oppose Bush on his reckless domestic program, particularly expanded subsidies and tariffs. I can barely stomach the massively increased budget as a Keynsian economic stimulus.
posted by: Mark Buehner on 10.14.03
Link
Not than anyone cares what I (or you) think, but for anyone that was paying attention, there was plenty of howling at the Bush domestic budget, and I agree a lot of those voices have been sitting out elections since 04.
Look, what CA needs is a constitutional convention. There really is no other way out of the current mess.
Prop. 13, insofar as it applies to residential properties, really can't be the problem. The sensible idea behind it was that you shouldn't be forced out of the house you bought thirty years ago because suddenly the thing is worth a gazillion dollars and the property tax has been adjusted accordingly. What you paid for a house ought to give some rough idea of what you can afford in property taxes, so Prop. 13 (roughly speaking) pegged the one to the other.
(OK, now we know that "how much house you thought you could afford" is only weakly correlated with your actual disposable income, but at the time it was a good assumption that if you could afford such-and-such a monthly mortgage payment, you could also afford the property taxes that went with it.)
When the house is sold, the property tax is pegged to the last sale price. I should think that the large majority of houses in CA have changed hands (some many times) since Prop. 13 passed.
Of course Prop. 13 did the same for commercial property, which is much less defensible, since such property changes hands much less often.
wGraves, I'm afraid that CA is rather less gerrymandered than are most other states. Yeah, there are a lot of "safe" districts -- in fact, there's practically nothing but safe districts -- but that's because Californians live in clumps that tend strongly liberal or strongly conservative. Making competitive districts out of CA would require the sort of skill people apply to gerrymandering in other states. I'd just as soon leave the whole thing alone. I'm what passes in Marin County for a "conservative," though in a wide swath of America I'd be a flaming liberal, and I know perfectly well that my neighbors are gonna outvote me on practically everything. I can deal with that.
"Was Kerry going to spend less? Hah."
With a Republican Congress it was virtually assured. So, I assume you voted for Kerry?
"With a Republican Congress it was virtually assured. So, I assume you voted for Kerry?"
No. First, because I have no faith that Kerry was a political windsock like Clinton and hence would settle for limited spending. Second because I seem to recall us being neck deep in 2 wars at the time and I would never vote for someone who voted against the 1st gulf war as commander in chief. And thank god for that or we'd be looking in at Iraq burning to the ground today instead of looking forward to withdrawing our troops on our (and Iraq's) terms today.
Mark, you're not alone regarding your concerns and criticisms. I live in Cook County, IL (suburb, not Chicago) and our situation is very similar to California - except that we are a step or two behind - but quickly catching up.
The conservative grassroots have been screaming from the mountain tops for most of Bush's tenure regarding his and the Republican Congress spending. Both his "legacy" and the dire minority status of the present R's reflect this.
BTW, the Republican party KNEW that they had serious problems with their conservative base regarding the spending. I can't tell you how many times they'd call my house looking for money and when I just didn't hang up, we'd talk about the spending issue and 100% of the time they'd be in agreement and say that they were hearing A LOT of this.
But the great Rovian plan was to legislate like D's and thus have a permanent R majority. Which is how we got the Medicare expansion and so much else - all for pure political gain.
We know how all of that worked out for them, don't we?
Expecting jmo3 or whomever to understand our sense of propriety and responsibility is pointless (I should know, I live in a suburb which gave 85% of their vote to Obama) - but your posts ARE appreciated by people such as myself. Thank you.
We're a great country and we'll eventually emerge from this situation - but it won't be without more idiocy, etc. But I have to be optimistic - my son is 17 and my daughter is 15.
Amen to that, Megan! Brilliant article. Time to cut California loose before its fiscal insanity pulls the rest of us down with it.
I can't comprehend how Californians didn't get the memo that we remain in a deepening recession and they long ago ran out of money to spend.
Also, how do Californians not understand the earthquake risks of their two most heavily populated areas? California has a 70-80% probability of a major earthquake in the next 30 years that's guaranteed to destroy them financially.
63% chance of a major earthquake in the Bay Area with estimated costs over $1.5 trillion:
http://en.wikipedia.org/wiki/Hayward_Fault
http://earthquake.usgs.gov/regional/nca/ucerf/
10-30% chance of a major earthquake in the LA area with estimated costs over $200 billion:
http://shakeout.org/scenario/
More info on a possible deadly and financially devastating Southern California earthquake scenario ... Suddenly seems a lot more believable now that downtown LA has just had two magnitude 4-5 quakes within a week:
http://www.youtube.com/watch?v=opXZY1zZ8xk
Those who live directly under the dam are always the least likely to believe the dam can break.
Since Mark's link to his comments technically didn't explicitly claim bush wasn't a conservative, I've opted to find a better link. Scent of Violets, let me google that for you. I've been hearing it pointed out consistently pretty much since he took office that 'compassionate conservatism' wasn't conservative. Leftists tended to blow it off as extremist sniping at the time, so my hypothesis is that you forgot about the incidents you did see because they didn't seem important.
How about an X-Prize to balance the budget of California? I'm only half kidding. Maybe less than half.
I was born in Sacramento, lived in the bay area until I was 5 and then moved to Los Angeles twice, once in the '90s and once in 2003. Every time I go back there it saddens me.
In 2004, the L.A. Daily News did an expose that pointed out that 1,200 LA County retiress made over $100,000 per year from their pensions INCLUDING 2 or 3 janitors!!! How do janitors get pensions greater than $100,000 you may ask? By working a TON of overtime in their last three years to bump up their salaries and since the pensions are based on a percentage of their three highest earning years that cost goes on for decades.
My wife got paid $38.33 per hour as a L.A. Unified school teacher when she had about 9 - 10 years experience and that was back in 1997. That's a ton of money for someone with a bachelors degree and 9 - 10 years experience.
It's this type of fiscal irresponsibility that has lead the state to where it is at. Screw them! The state needs to go bankrupt.
Please give the earthquake stuff a rest. A lot of the Southern US lives in Hurricane Alley, we don't tell people in Texas that they need to take down Houston. Or people in NC that they need to move Raleigh.
Californians do understand this. And maybe California should stop subsidizing the rest of the U.S. and figure out a way to either get a fair rate of return on its federal tax payments or keep some for an earthquake fund.
Or maybe we can just agree that we're all Americans and we'll agree to help out New Orleans after a hurricane and we'll help out LA or SF if there's another quake.
Megan makes a good point. I'm all for taking away initiative and referendum altogether and starting from scratch with a new State Constitution which doesn't fix so many spending priorities in stone.
The only way California will stop subsidizing the US is if either (1) Californians get poorer, (2) we adopt a flatter tax structure or (3) we start dismantling the welfare state at the national level. Which one do you want?
> [jcsnotes]
> Please give the earthquake stuff a rest. A lot of the Southern US
> lives in Hurricane Alley, we don't tell people in Texas that they
> need to take down Houston. Or people in NC that they need to move
> Raleigh.
No, I'm not going to give it a rest, jcsnotes, and you're off by several orders of magnitude.
Raleigh and Houston will suffer minor losses in even the worst hurricane we can estimate, and they'll have time to evacuate before any major hurricane.
LA and the Bay Area, on the other hand, can be massively damaged and partially destroyed with ZERO warning.
It's not America's job to subsidize overconstruction of insufficiently quake resistant housing in dangerous parts of the country. If you want to live in an area like that, you should pay a premium for it.
We put our heads in the sand when scientists warned us about the Katrina scenario, and then Katrina happened. Why do we continue to put our heads in the sand with the LA and Bay Area earthquake scenarios?
http://www.youtube.com/watch?v=opXZY1zZ8xk
Chet,
If the republicans had said - "If you find yourself 70 years old and you never bothered to save enough to pay for your medication you're on your own." I would have been thrilled.
If they had said, "We don't want to increase the rates of home ownership because poor people are poor because they make poor financial decisions and have no business owning a home." I would have been thrilled.
But instead they morphed into some horrible socially conservative fiscally liberal hybrid mess. So, give a choice between social concervative and fisically liberal republicans and socially liberal and fiscially liberal democrats, I'll go with democrats 80% of time.
What I would really like, is a nice socially liberal fiscally liberal Republican party to get behind.
jmo3,
Thanks for your thoughts.
I think that most "conservatives" are supportive of certain increased gov't, but we always come back to: how are WE going to pay for it?
Every day I have to make choices regarding what I can and can't have. My children are 15 and 17 and they'd love to have "more," but, fortunately, they understand the basics of personal finance and so realize that what they want and what they can get are two different things.
This restriction, however, is clearly not understood by a lot of our elected officials and, obviously, voters in CA who approve high-speed rail, etc - with no regard to "how are WE going to pay for it?"
You want both a fiscally AND socially liberal Republican party? Is that a typo? This description is otherwise called "Democrats."
And while my heart is receptive to much of what is requested/demanded by the left, my head asks questions and I know far too well that the devil is in the details and where one gives an inch or two - the next request if for a mile.
My question about writing a new Constitution for California:
How do you stop the existing fiscally irresponsible amendments from simply becoming part of the core of the new Constitution?
'A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.' - Alexander Tyler, 1787
Does anyone see a parallel with what is going on in CA and the US in general?
The only way California will stop subsidizing the US is if either (1) Californians get poorer, (2) we adopt a flatter tax structure or (3) we start dismantling the welfare state at the national level. Which one do you want?
I vote for options (2) and (3).
I am intimitely familiar with California's approach to government, due to long having advocated on behalf of industry (which is typically a losing battle, of course).
In order, based on my observation, here are the main reasons California is where it is:
Government worker unions -- see Fairfield. Government workers are plentiful, are extremely well paid, and have extracted incredbile retirement plans. California is not alone in this (see New Jersey), but probably the most egregious.
Extremely poor business climate. The worst in the country by far. Fee after fee and onerous regulations far exceeding those of the federal government. The only reason that any business stays in this market is due to its size. California has used this as a club, knowing that few manufacturers can ignore it. However, to the extent they can move operations elsewhere, they do. Hence, less industry and lower tax receipts.
Low-skilled illegal and legal immigrants. Clearly, they use more services than they pay for, and California has the most by far. Many came for the construction boom and haven't left, even though the jobs have.
There are other reasons, but these are the ones that drive all the rest.
"You want both a fiscally AND socially liberal Republican party? Is that a typo? This description is otherwise called "Democrats.""
Woops - yup... typo.
That should have read socially liberal and fiscally conservative Republican party. This socially conservative fiscally liberal thing has been a disaster.
I've read through all the comments and I've now come to conclusion that liberalism is a non-falsifiable hypothesis. Here are the common liberal arguments.
It's Ronald Reagan's Fault. Yes, California's fiscal mess in 2009 is the fault of a Republican who was governer thirty years ago.
It's Ronald Reagan's Fault. Yes, the minority party is to blame for California's budget mess.
It's the Red States' fault because we subsidize them. Yes, the Red States are to blame for progressive income taxes and the welfare state income redistribution.
It's the systems fault. Ok no more sarcasm, there is a kernel of truth here. California's initiative system is a little dysfunctional. But back when California voted Republican it created the nation's most enviable economy. Now that Democrats have been in power for decades the system is to blame? Not buying it.
Hagios,
CA's initiative system is a good deal more than "a little dysfunctional". When wealthy interests can place initiatives on the ballot with little review that obligate the state (and it's funding) for decades (and generations) to come, there's a serious structural and financial cost.
Back when CA voted Republican, however, not only did they say they were fiscal conservatives, they actually meant it. The "Republicans" today have no compunction (just like Democrats) in saying one thing and doing another. Late '60s [actual] conservatives have very little in common with the professional GOP politicians of today.
I agree, that it's not the Republicans that are holding the state hostage, but the mindset of the Democratic establishment - still spending like it's the height of the housing boom, and they still haven't realized that the boom went bust.
Back then, the most important thing Gov. Pete Wilson said when taking office was, "California is open for business!"
California is closed for business now.
9.25% sales tax. Regulations at every turn. Air Resources Board counting pollution in parts per trillion so as to run roughshod over manufacturing.
Revenues don't come automatically with the dirt. They have to be allowed to prosper. Business is viewed as a necessary evil to be milked.
Rep. Ron Dellums wanted aerospace to leave California because it was (paraphrasing) "icky" and baby-killing bomb makers shouldn't be in his state.
From there, it's a short trip to getting rid of evil SUV dealers (with attendant domestic green-terrorist firebomb attacks on dealers), shutting down anything with a smokestack and taxing the rest until they quit.
We Californians have enough oil off our coast to pay for anything we want. But that's evil too.
When business is demonized, it goes elsewhere...with its money.
California is the victim of the philosophy, everyone for themselves. It is never more true than when examining public office holders, whose only reason for existing is to garner ever higher or any public office. It doesn't matter which political party, the only interest is self-interest. Sure they delude themselves into thinking that leadership requires their participation and that only they can adequately represent the vulnerable when in reality all they seek is the public limelight. Most, like the Governor, confuse being elected with being effective.
The only direct path out of the mess, is to declare bankruptcy, no different than that being offered to GM. The State must split the property roles, assess the resource industries their fair share of impact fees and weed out the upper and middle management of state and local bureaucracies that were grown solely to justify pay scales and budget expansions. The pension formulas must be re-cast and health care benefits to Cal-STRS and Cal-PERS recipients must be terminated at 65. Union contracts must be renegotiated and termination of simultaneous Civil Service and Union contract protections must occur.
SolutionOriented,
I don't think you can abrogate the health care coverage of previous plan retirees. In every state it has been tried the courts overturned the effort, saying that as written the plan provisions provide for the same health care coverage that active employees receive.
You can create a new plan for future hires that provides for health care termination at Medicare eligibility, but you can't take the benefit from those who already have earned it.
In any case, what retirees receive after their 65th birthdays is essentially a pretty generous and free "Medigap" policy. Medicare is still the primary carrier; the state just fills in the various doughnut holes in the Federal coverage.
I'm not sure what you mean by "split the property roles". Can you expand on that thought?
I do agree that most government bureaucracies have far too many levels of middle management. Corporations have proven over the past twenty years that most line workers are pretty competent, willing to follow corporate directions, and able to work without an MBWA (management by walking around) supervisor.
How would union contracts and pensions benifits be handled in a Chapter 9 municipal bankruptcy?
"Only a "municipality" may file for relief under chapter 9. 11 U.S.C. § 109(c). The term "municipality" is defined in the Bankruptcy Code as a "political subdivision or public agency or instrumentality of a State." 11 U.S.C. § 101(40). The definition is broad enough to include cities, counties, townships, school districts, and public improvement districts." Source U.S. Courts
It may be that any Chapter 9 claims would have to arise from those political subdivisions dependent upon State funding.
That's funny, because your quote doesn't say what you think it does. although, amusingly enough, it does claim that in times of recession one should spend money. And someone else says this:
Funny, but your name doesn't appear there either ;-) And of course, you are aware that over the last thirty years at least, it is Republicans, not Democrats, who are the big spenders:
Indeed, I find the claims that someone wants to 'cut spending' while at the same time they want to wage war to be contradictory. To say the least.
Or is this yet another case where a 'conservative' isn't opposed to increased spending per se, but only on the spending for certain projects that he himself opposes?
[rimshot]
The bottom line is, if you were really against big spending, you would have been much more likely to have gotten what you wanted with Kerry. Not Bush with his trillion dollar plus war.
One point I notice most people ignore: California is in the "goose that laid the golden egg" category. As of 2004, California pumped a _net_ of $50+ billion per year into Federal coffers. That's "outgo exceeding income" net.
So stop and think that through: If California were to reclaim that $50bn in federal revenues, and spend it in-state, the state budget deficit would disappear overnight. In it's place would be a $30bn _per year_ budget surplus, that could be spent on education, capital improvements, smart grid, world-class telecommunications, the whole nine yards. And we could afford to cut taxes while doing that.
So for all of you who are willing to let California go belly-up, just remember what California's _net_ contribution to the national coffer is. And that if California goes belly up, that net contribution will go away.
The Federal government is in debt by trillions of dollars.
Whatever California's "donation" to other states is, it's only a drop in the Federal debt bucket.
I think it's hilarious that we condemn Gov. Arnold as incompetent for California's $42-billion debt (because it bankruptcy-type debt!) while heaping praise on the all-wise Obama for his $2,000-billion debt.
California may be broke, but our USA is broker.
50 billion per year net contribution to federal coffers? I don't believe it. I live here and I don't believe it. You're gonna have to back that up with some kind of research. Preferably research done somewhere other than California. But let's say you're right. As with all accounting we should make sure everything is in the column it belongs.
Does it take into account all those retirees who leave the state to avoid its onerous taxes? It shouldn't. Surrounding states are full of retirees from California.
California is dependent on the water it gets from the Colorado river. How much is that worth? Since the state can't function without it I'd say it's worth a whole hell of a lot to California. Is California paying market price for that water?
How much benefit does Nevada get from roads choked with traffic that's just passing through on the way to California? I would say even though those roads are built in Nevada, California is the primary beneficiary. Wouldn't you agree?
Wells Fargo received $25 Billion in TARP money.
Doesn't anyone see something strange here at some level that the amount of money that we gave to a single bank in order to protect the bondholders is more (>$21B) than the amount that would devastate a state?
In the california case, we see $21B as a real quantity. An incredible amount of money that equals firefighters, teachers, 40000 prisoners, police, health services for a state of tens of millions. over $1000 per household.
This is less than what we gave as taxpayers to the shareholders and bondholders of a single bank.
We gave $16B to general motors. One company. Literally burned it in two quarters.
We gave $675B more to other banks. $22B assigned to insurance companies.
Spare me the talk of moral hazard. We decided long ago in this crisis that moral hazard wasn't important. $21B for California would be the first Bailout for the broad welfare of 30 million people instead of money shoveled out the back door as billions in bonuses for hundreds or at most thousands of already wealthy people. Argue with this, please.
I don't care to argue about the money to the car companies, but the other TARP "bailouts" aren't actually money given away, they are loans or in most cases investments. Originally TARP was to buy the troubled assets so the investment banks could clean up their balance sheets, but that didn't happen, instead treasury started pumping money into banks by buying "preferred shares" (no voting rights, but first dibb's on profits). Now the administration wants to convert the shares to regular shares so that they can get voting rights and control the companies.
At the end of the day, the government is hiding the fact that they were going to end up eating a great loss anyway - most of the toxic assets were repackaged mortgages that came through Fannie Mae or Freddy Mac and had some form of government backing.
The problem is that California can't issue stock and sell itself to raise operating capital - it already belongs to it's citizens.
My predictions for California 2010:
1. Budget cuts will be made. Enough to persuade more voters to agree to tax increases
and,
2. A limited constitutional convention will reduce the number of required yes votes to a simple majority
and,
3. The federal government will backstop short-term loans or loan money outright.
Thoughts?
But that money wasn't given to WF to protect bondholders. It was given to WF because Paulson convinced Bush and Congress that the financial world was going to come crashing down and take the rest of the economy with it if we didn't inject it with a whole bunch of "liquidity".
If California goes bankrupt the impact outside the state will be much less severe. It might be more expensive, as Megan says, for other states to borrow money. There will be a bit more federal money paid out for unemployment and such. Realistically, the average person in the rest of the country isn't going to notice.
I don't care. I predict nothing will change. California government sufffers from a fundamental agency problem. The shills in Sacramento get massive benefit (both to ego and pocketbook) by acting as the soul of charity...with Other People's Money. Where I am from - Los Angeles - the environment benefits from a periodic burn off of the chaparral (high desert brush). Let financial ruin sweep in for a while. Let the spoilt and vapid feel despair. Then they can leave, commit suicide, or learn humility - it is all about choices.
I say Cry Havoc (in a financial sense).
The people ALWAYS get what they want – always.
The folks in California want it all and don’t want to pay for it – they got exactly that.
It’s no different than when a poor person is allowed to buy a house that they can’t afford – they fail eventually. In the meantime the do-gooders try to make us feel guilty and we are supposed to somehow prop up a person who should never been allowed to buy that house stay in the house.
Nope, Californians are living in a state that they can’t afford and the do-gooders will be running around trying to make us feel guilty while the situation just gets worse.
Let California fail – they got exactly what they wanted; I'm happy for them.
P.S.
Why blame the Govenator or the politicians? They are simply carrying out the marching orders from the folks who elected them. If you don’t like the situation just leave California.
It’s no different than the folks living in a slum – they are happy with the situation or they would just leave. The people of California are happy with the situation – if not they would simply leave. Californians want the rest of us to pay for their lifestyle – now here’s the rub. I am perfectly happy where I live and I don’t want to spend a penny helping Californians live beyond their means.
No one ever said that citizens are bright folks – they simply have the right to vote in folks who are a mirror image of themselves. If they look in the mirror and see a moron they will then vote for morons who will simply carry on the moron tradition.
It’s all very logical…
I lived in California and finally left in disgust at 10% income taxes and a property tax system where I had to pay 10x more than my neighbors who happened to buy their property a few years before me.
California created all its problems. I'm going to be really mad if the Feds take my tax money and use it to subsidize California's structural budget deficit after I've gone to all this trouble to escape it.
This ongoing budget crisis (arguably it's been going on since the dotcom bust) is the first fiscal reality check that California has had in a generation. California will keep floating along as long as someone is willing to lend them money. They will only be forced to solve the problem when the lenders cut them off.
Everyone who wants to understand this issue would be doing themselves a huge favor by reading this study, Rich States Poor States. There is a ton of info about California specifically.
http://www.alec.org/AM/Template.cfm?Section=Rich_States_Poor_States
And if you think the public is pissed about the auto and financial bailouts, wait tell Obama begins to wade into this water. This could certainly sink any re-election effort in 2012. It is sad how many smart people out there don't realize that all these bailouts are not designed to fix problems, but prop up people who both voted for the current administration and allowed him to raise the most money in presidential election history by a huge margin in order to buy any remaining support needed. Government gluttany and special interest is threatening this country's very existence and half of you don't even realize it.
California the Golden state, is fast becoming the poster child for an bankrupt third world State!
An unholy alliance of Socialist Democrat politicians, Unions, and Illegal Aliens supporters are feasting at the trough of tax payers paid benefits while taxing & regulating business and the tax paying public into poverty.
The pandering of Left Wing Democrat Politicians to their constituency of Illegal Aliens, open border supporters, and unions are driving business and citizens to other states & countries, while leaving the parasites & welfare leeches in an increasing bankrupt, dysfunctional state!
For years California has ignored economics 101 and imported poverty, Criminals and uneducated Peons from Mexico, while exporting business and educated working tax payers.
Like all Socialist & Marxist States the results have been an lowing of living standards & bankruptcy.
Failure to abide by our Constitution against invasion & enforce our Immigration laws and constraints on wages and benefits for public employees will result in turning the Golden State into MexiCalif and the end of the California dream!
The policies of Obama and Wash. DC Democrats are intent on following Calif. policies and are resulting in the same creeping socialist process across American.
Amnesty & Citizenship as a reward for their invasion of the USA, will result in the rest of the USA turned into a Spanish speaking third world cesspool, modeled on Mexico and follow California into a polluted, over populated, Spanish speaking third world Nation of Crime, Corruption, Poverty, & Misery!
This will result in a population depending on Welfare and the Democrat party, thus assuring the lock on power for the Socialist Democrat party of the United States of Mexico!
Californians need an authoritarian Governor who can make decisions and act independently WITHOUT consensus in Sacramento and pandering to special interests. We need a change in the House and Senate too. They are all accountable for the mess we're in.
Intentions = results. Barbara Boxer talks like she's above the fray - her behavior is far beyond audacity. Worst of all, we don't have any solid leaders vying for Governor in 2010.
Anandakos, you are quite right with regard to retirees whose benefits have fully vested but my reference was to alteration in benefits offered prospectively. The coming layoffs/furloughs provide a wonderful opportunity to eliminate positions and any future positions created would be subject to new terms and conditions.
Concerning split rolls, the reference is to the tax rolls currently governed by provisions of Prop 13. Existing laws provide a limitation upon both commercial and residential properties. By splitting the tax roll commercial properties would be subject to a different formula, providing an opportunity for enhanced revenues to local and state government.
If the feds bail out CA, CA should be our bitch, just like the auto companies and TARP banks. Let Obama flex his management muscle there. He seems to think he has a lot of good ideas about how to run things.
Then let's pwn them.
It would be great if some state leaders who didn't care about re-election went apeshit and zero-budgeted everone. Then gave the assignment: you apply for your continued existence. Submit your program, staff, and budget. Must include salary freezes, conference travel freezes, and an accounting of how you spent your budget last FY. No new programs. Bare bones. Prove yourself.
PD, FD, related survival/security type things that the state must do are approved.
Beyond that, all else is optional. Prove yourself!
And then stay within budget, forecasted conservatively.
Great way to cut the fluff. Isn't there a state office for the promotion of self esteem, or some stupid crap like that?
Sorry CA, you can't afford your typical stupid crap nowadays.
California's major problems are:
1) The overwhelming of its social services and health care systems by illegal immigration.
2) The never ending stream of new programs designed to spend our tax dollars.
3) The never ending demand for more money to cover the cost of regulating every aspect of Californian's lives.
California's major problem is that it is too big. Los Angeles County alone is bigger in population than 60% of the nations of the world. Huge size means huge budgets for election campaigns, which means that most politicians heal to special interests of one stripe or another.
When people can sit down and discuss problems face to face they are more likely to create real solutions.
Here, however, we have to fly to Sacramento to deal with the legislature, and that is just too expensive unless the bill is paid by a local government, big business or big labor.
We need a constitutional convention, and a serious problem-solving approach from outside the box.
California says they do not have a spending problem. They have a revenue problem. California sent IOUs to taxpayers with refunds.
My state, Alabama, delayed refunds claiming they did not have the money. Alabama gov claimed sales taxes were down and so were income taxes. I am a CPA. No one that came through my office made as much money in 2008 as they did in 2007. Now with the curent layoffs I see
2009 to be much worse. Does any of our fearless government leaders federal or state see that there might be a small correlation between
number of working taxpayers and the amount of tax they get. Am I the only person that knows this.
Just skimming throught these comments it saddens me. I have lived in both California and NY in my life time. It upsets me when people generalize "Californias" just as they do "New Yorkers". Not everyone in California lives the life of a movie star or lives above their means. Many of us, in Sacramento,are state workers that work hard and do the jobs of more than one person at times. There is the misconception that if you work for the state you have a cush job! People are so willing to throw state workers under the bus, but we have taken the furlough days each month and no raises as well. Now there is talk of a third furlough day. It's a person's choice to apply for the state and if they don't choose to then don't just assume that we have cush jobs with huge checks every month. Many of us are supporting family and extended family during this unbelievable time. Laying off thousands of state workers will create a huge trickle down affect especially in Sacramento. The country is a mess, but it didn't happen over night and instead of pointing fingers at everyone or hoping that California falls in the ocean--realize there's alot of good in this state as well.
Summer resort.
You live
in the youth
of a summer
resort, your
delicate voice
appears in
my mind like
a winged creature,
and even a
pleasure describes
in a moment
a bright sensibility.
Francesco Sinibaldi