Wikinvest Wire

California descends into the abyss

Wednesday, May 20, 2009

If only the state of California had a printing press, it could solve its current budget problems as easily as the Federal Government does...

Maybe that's the real solution to the fiscal imbalances here in the Golden State, imbalances that just rose from about $15 billion to about $21 billion (down from $42 billion earlier in the year) after voters nixed five of six budget measures yesterday.

The only initiative that passed - by a whopping 74 percent to 26 percent margin - was aimed at penalizing lawmakers during years when the state runs a deficit by prohibiting pay raises for said lawmakers.

There's a good deal of irony in the fact that this measure was on the ballot at all - as if elected officials felt they had to show some level of responsibility for having created such a mess, along with, perhaps, a little humility.

There's even more irony in the election results that, despite a ten-to-one advantage in campaign spending, saw all measures that would either raise taxes or use sleight of hand to make ends meet fail so miserably by comparison - it wasn't even close.
IMAGE You can almost imagine the discussion when adding Proposition 1F to the list - about lawmakers being held accountable for their actions and being more responsible.

Little was it known at the time what an easy platform was being provided for voters to voice their displeasure with the crew in Sacramento.

Granted, the system as currently constructed is unworkable and it needs to be fixed - requiring a two-thirds vote for the passage of a budget when combined with the ballot initiative process sets anyone up for failure.

But, the state just spends too damn much money.

The only way the current level of spending can be made to function within the current system is if you have massive asset bubbles that generate massive tax revenue bubbles that dupe elected officials into thinking a "new normal" has been achieved.

With no hope of either a technology bubble or a housing bubble reinflating anytime soon, we're clearly headed back to the "old normal".

So, elected officials now huddle in the state capitol, pondering thousands of layoffs for the state's 235,000 workers which, clearly, is way too many to begin with. The education and healthcare budgets look ready to be slashed by billions of dollars, local government coffers may be raided, and tens of thousands of inmates may be booted from state prisons.

This should be interesting to watch - I'm glad we we'll be able to watch it from a distance.


josh.gelb said...

Your schadenfreude is sadly misplaced. For one you probably aren't running away to a place that will end up being better.

Two you lived your entire adult life in and benefited from that dysfunctional system.

Three everyone shares the blame. A large state, an apathetic voting populace, ballot initiative politics and a huge disconnect between where the money comes from and how it gets spent, vis a vis inflationary monetary policies.

Tim said...

Wrong, wrong, and wrong - your facts are sadly misplaced.

I'm Not POTUS said...

I say swim in it, I as heck sure am.

I even said no to 1F. That raise penalty is determine by a "committee" of 5 people who decide what constitutes a deficit. I guess using a minus in front of the budget numbers is not a big enough clue.

If we are never going to build another freeway WTF do we need an army of engineers for at CalTrans.

Dan said...

If we are never going to build another freeway WTF do we need an army of engineers for at CalTrans.

Why... for the great engineering war, of course...

Anonymous said...

For lightrail perhaps? If so I can't complain.

I don't for a second doubt that the state wastes a ton of money, but seriously does California really spend any more than many other states PER CAPITA? I don't think so. And if not then the problem is probably on the revenue end rather than purely on the spending end in addition to all the state spending being completely unflexible as its all been allocated based on brain dead propositions.

Someone will complain that taxes are already high in CA. From the perspective on an income earner yes. But then is an $1000 a year property tax bill on a 1/2 million dollar house really high? That's less than 1/2 percent. And yes that's a real tax bill. Think about that the next time you say CA taxes are high.

Johan said...

Should launch their own currency.

Could be called "The Arnie".

Arnie's face on one side, a hypodermic needle on the other (for injecting fiscal steriods into the economy).


Anonymous said...

True property taxes are possibly artificially low. That may be the result of voter backlash years ago when prop 13 was passed. Sort of a 'starve the beast' I say to the lawmakers - get with the program and start tightening your belts like the rest of us. Yes what a novel idea, fiscal responsibility.

I do wonder how california's per capita spending stacks up against other states, but ultimately that doesn't matter. What matters is the fact that an indordinate amount of my income goes to the state in taxes and when lawmakers fart around and allow this budget mess to occur I start to wonder wtf I'm paying for.

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