Why Kalifornia is in Trouble (Hint: Spending)
Economics, Liberals — By Harrison on July 9, 2009 at 12:00 pm
Source: TaxFoundation.org
One of the blogs I read is Hope and Change, a well written site overall but I believe this post exemplifies how we, the taxpayers, got into this situation to begin with because the article says that if everybody chips in $650.00 the budget will be fixed. As much as I’d like to help, I do not believe, even if every man, woman, and child could afford to donate $650.00 of their post-tax dollars (more like $1,000.00 pre-tax dollars) to California that the madness would stop. Investor’s Business Daily makes some excellent points:
And other attempts to limit spending (California technically has a cap now) were gutted by ballot initiatives to guarantee spending growth where it was popular, especially on schools.
Another cause was the state’s failure to stand up to public-employee unions. The key year here was 1999, when Gray Davis and the Democrats had just won back the governor’s office from the more fiscally conservative Republicans.
As Schwarzenegger noted last week in a Los Angeles Times op-ed, Davis and the Legislature quickly hiked state employee pensions “to a point where some employees could retire after 30 years, at as young as 50 or 55, and continue to earn 90% of their highest salary plus cost-of-living increases for the rest of their lives.”
Just to give some idea of the magnitude of the obligation the state took on with this one move, Schwarzenegger says rolling back pensions to pre-1999 levels just for new hires would save the state nearly $95 billion by 2040.
All this suggests one answer to the tax counter-revolt: Government in California gets plenty of money. What it lacks is real leadership.
Instead of tax increases, it needs lawmakers and governors who can look their special-interest benefactors in the eye and say, “No, this time we’re putting the taxpayer first.”
I read on another Left-leaning blog that “big government” means “limited government.” I think we can see that this isn’t always the case. What happens in Kalifornia happens elsewhere later so let’s hope the taxpayer, of which I count myself, wins this battle with the Democrats. Let’s also not forget that Arnold Schwarzenegger, who claims to be a Republican, is just as guilty as the Democrats as he gave up the good fight after he was hammered at the polls and has been a rubber stamp for the legislature.
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22 Comments
Cali’s biggest cash crop: pot. Legalize it, tax it and get some relief?
Brian Anderson´s last blog ..Markell cuts state’s Finance Department
Let’s see… California already clamps down on not wearing a seatbelt, texting while driving… I’m sure legal pot sales are next. Not sure what it would do to productivity though!
Just print some more.. give California one of President Obama’s presses and all will be solved..Man.. do you make things difficult..What’s all this work and tax philosophy…Print and Spend is the way to go..
MegaMan the Madman´s last blog ..A Liberal Pschotic is on the Loose?
You may not be far off. Rampant inflation can be a great way to pay your debts off early as we saw in Weimar Germany.
while they legalize pot they might as well legalize prostitution and tax it as well. They could have a surplus in no time
dickster1961´s last blog ..Report: Dump Cap and Trade
I know the movie Kalifornia, not how you use it here.
See some of my comments disapeared, don’t understand?
Dickster: prostitution is bigger in most parts of the USA than in the Netherlands were it’s legalized, so women pay their tax, which give the government insight what’s going on in that ‘branche’ and the brance is decriminalized as well.
Kindest
hans
Hans´s last blog ..Why I cook and women have to stay out the kitchen
I didn’t touch any of your comments I don’t know why some would be missing. I will look in my admin page. Spelling California with a K means something about it is weird or goofy. You can spell any C word with a K and it’ll have this meaning.
I think this also has a little bit to do with ”The Governators” way of dealing with things and the united states problem with accepting that allot of the money that they need sadly goes into the black market of illegal drugs. What is your opinion on legalizing marijuana for profit?
Alexander Davis´s last blog ..Obama and The Pope meet to discuss Stem Cells ? Why ?
I am not in favor of it.
Chief Executive magazine has ranked California the very worst state to do business in for four years. Unfortunately, we may experience the adage- “as California goes, so goes the nation” before too long.
vulcanhammer´s last blog ..Walmart and The Noose Of National Health Care
Indeed check this out:
http://online.wsj.com/article/SB124718265362620253.html
Harrison, thanks so much for the endorsement. I’m very flattered. Let me clarify something, however. My point was not so much about how we got into this mess. My point was that the $24 billion budget deficit California is facing seems a bit less daunting if you think about it on a per capita basis. My other point is that whether we solve this budget gap by spending cuts or by tax increases or by some combination of the two, it is still going to cost us exactly the same amount. We will either pay by paying more for cigarettes or gasoline or car registration or user fees, or we will pay by receiving reduced services at parks, courthouses, hospitals, schools, etc. We are all going to suffer some pain no matter what we do, and it’s really just a matter of figuring out the most fair way to spread the pain around.
Right now we are paying by seeing California’s bond rating drop like a stone, by seeing businesses lay off workers because they cannot live on IOUs issued by the state of California, and by seeing the reputation of the state suffer because it is perceived as ungovernable. So the sooner we all get together and try to solve the problem in a way that spreads the pain around in a manageable and fair way, the better.
Joe Markowitz´s last blog ..A Position to Aspire To
Thanks for the comment. I do enjoy reading your blog but I disagree with you on this point. Had the Democrats not sent so much spending to the governor, and had he not caved on his promises to run a more fiscally sound government than Gray Davis, we would not be in this mess to begin with. There are numerous spending programs that never should have been created to begin with though now they are being called “cuts” as if this is a negative thing.
The higher interest rates California now pays costs us all but, again, it is the result of out-of-control spending and taxpayers should never have been put in this position to begin with by the legislature and the governor.
It is like I make $200,000.00 one year so I spend as if I will make this every year. When, in the future, I make only $150,000.00 do I still try and find ways to keep all of the luxuries I have enjoyed in the past or do I live within my means or do I ask everyone I pay my bills to to help me out and charge me less? A small, fiscally conservative government will rarely run into the problems a large, bloated Liberal one will because the philosophies of the two are so different. One is realistic and responsible, the other is not.
I think the chart above illustrates this point clearly.
The difference is that the government does have the ability to raise taxes to make up for declining revenues due to an economic downturn. I recognize that there are some limits on the government’s ability to do that, but I don’t believe we are at the breaking point where the government is unable to wring another nickel out of us.
But my point is really not to argue about the causes of the fiscal crisis, but instead to suggest that unless our way out of the crisis takes into account all political interests in the state, it is not going to be perceived as fair. And the reason we are in paralysis right now is that all sides are still playing the blame game, and there is not enough willingness to compromise.
My basis of comparison is the fiscal crisis in New York City in the 1970’s, which I lived through when I was a college student there. New York City was basically bankrupt. And there was plenty of blame to go around. You could blame greedy unions, reckless government spending, and excessive borrowing. But you could also blame a declining manufacturing base, and declining property values, which caused revenues to drop. It was a gigantic mess. But the recovery process was a model that California and perhaps the nation could do well to emulate. You really ought to read some of Felix Rohatyn’s pieces on it. It required sacrifices by all parties, including both tax cuts, pay decreases, spending cuts, and every other possible solution. And it worked.
Joe Markowitz´s last blog ..A Position to Aspire To
I meant tax hikes.
Joe Markowitz´s last blog ..A Position to Aspire To
Tax hikes usually mean spending is too high. Again, why not cut spending or, better yet, don’t raise it so much year after year. The graph shows when “income” was reduced so was spending… so why should spending automatically increase when “income” is higher? Shouldn’t the government try and take as little of my income as possible in taxes?
Not as little as possible but only enough to pay for the things that we the people through our elected representatives decide that we want. You really should respect the democratic process more.
Joe Markowitz´s last blog ..A Position to Aspire To
I do respect the Democrats process although I do not always agree with the representative democracy we have here.
The counter argument to that is the majority of Americans were in favor of slavery so therefore if we always followed the “democratic process” (we do not have direct democracy here) then slavery might still be legal.
And when people are given the choice of having benefits given to them they rarely take the time to investigate the cost of them. That is where the representative part comes in. Lest we pile onto those poor elected officials of ours too much the people are also negligent about re-electing these turkeys.
I thought of a pretty good analogy to the problem of resolving the budget impasse. Maybe this will help you get my point. Let’s suppose the Legislature appointed you and me to devise a plan to close the budget gap, and locked us in a room with instructions that we were not allowed out until we presented a balanced budget. How would we do it? (First let’s stipulate that there would be a rule that if one of us resorted to force, the plan of the other one would have to be accepted in toto, so neither of us would be able to kill or maim the other.) So what would we do? I think first we would argue about every possible budget cut and every possible tax increase, and you would thereby find out the budget cuts I minded the least, and I would find out the tax increases you minded the least. Then we would get into horse trading and compromise, and we would come up with a plan that neither of us liked very much but that both of us could live with. This kind of process is what the California legislature really should use to solve the problem, because that is how you respect the democratic process and the will of the people of California.
Joe Markowitz´s last blog ..The Future of Journalism
I think that’s what will happen BUT I think what you say should ALWAYS happen before any spending increase or tax increase is passed. Because Democrats have held a majority in Sacramento for a very, very long time this sort of dialogue does not need to happen so it doesn’t. To be fair, whenever any party holds a majority there is this need to shut the other side out.
But while it is an excellent idea, I think the fact that this hasn’t been happened for many years is why what you propose will have to happen now.
AWESOME POST! Keep up the great work!
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