How Did California Get Broken ?

How did California get broken? Binding referendums, large organized special interests, and painting itself into a corner during good times by raising spending instead of saving. Throw in hig tax rates that are sending business and individuals packing to other states as well.

How did California get broken? 2/3 requirement to raise taxes, and the conservative belief that you can get something for nothing.

Don't forget Enron and Ken Lay, who took advantage of a deregulated market to manipulate the price of electricity. The state was forced to request price controls.

CPUSA:

" WASHINGTON – On May 6, the Federal Energy Regulatory Commission (FERC) released internal documents revealing how Enron created phantom shortages in California’s unregulated electricity market to fleece ratepayers of an estimated $30 billion during the 2001 energy crisis."

The problem with raising taxes across the board is that even though inflation has gone up along with the cost of living wages have not and unless the trickle down begins to happen we will be paying taxes with what should have been grocery money. I agree that more people should pay taxes but I also would like to point out that is due to to many people making too little money and paying too much to support themselves in relation to that wage while a handful have done incredibly well but do not wish to pay more in taxes which is also understandable.

Another major problem for CA is that they give too much money to the FED who gives them relatively little in return so that they can build the roads and infrastructure of the south with CA's money.

It's a difficult state to run, but it has no visionary leaders. Everybody is looking for the short-term fix. For proof see: Budget crisis ("budgets" that aren't budgets), water policy (is there more water in the Colorado to take? The aquifer will last forever), growth policy (keep growing, what city planning?) transportation policy (keep building freeways). We specialize in the unsustainable. Further, we've clubbed ourselves in the knee with the initiative process: Thanks to us voters, we've tied the hands of the Legislature, so even if it did contain visionary leaders, they aren't allowed to spend most of the funds as they're tied up in specific percentages. We also took away one of the most stable sources of funds -- property taxes -- so now our state's performance is tied to the performance of the stock portfolios of Silicon Valley and Hollywood.

Also about the Legislature, I think the growing divide between right and left isn't helping, either. Compromise is punished, extremism is rewarded, everyone takes their checks from special interests and goes home.

How can we get back? Perhaps the initiative process is the biggest culprit, but that's a gut feeling based upon daily news reading.

Leonidas summarized it well: a broken budgetary process, egregiously coddled public labor unions, and overbearing environmental activism. Troy Senik's analysis is very good.

Texas is running a budget surplus and has $9 Billion in the state's "Rainy Day Fund". Texas Governor Perry says the solution is simple, yet not easy: don't spend all the money, then follow this formula:

1. Keep taxes low (Texas has no state income tax)
2. Have a regulatory climate which is fair and predictable.
3. Tort reform: prevent over-suing.
4. Accountable public school system: companies can move in and know they will have a skilled work force available.

Then get out of the way and let the private sector create jobs and wealth.

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Of course having the entire midwest trade their jobs to Mexico so that your state becomes a hub for all freight coming into the country that used to be manufactured here is a good thing to do to boost state revenues as well. Sorry the only "success" I see in the Texas formula is that no one seems to understand thats where all the US jobs were shipped they just pay half to a quarter of what they originally did. So yes after you make laws that benefit you get out of the way and let the money roll in, this is the same formula Enron used as well.

Your formulation is more magical and less mathical.

K so where did all of those warehouse and transportation jobs come from? Was it a gift from god that just handed them jobs out of nowhere or is it just possible that the job "growth" was actually just a job shift to a different part of the country? This is akin to saying we should run other states like Alaska while ignoring that in Alaska the state pays you to live there with funds gathered from natural resources, we could do that but I doubt it would be popular with the same people that campaign for it.

"2. Have a regulatory climate which is fair and predictable."
And deadly. But what's a few thousand dead people worth?More, I guess, when a building falls on them than when their own government allows a favorable "regulatory climate" to kill them.

http://www.nasa.gov/vision/earth/everydaylife/a...
"Houston has a serious air quality problem. Since 1999, the Texas city has exchanged titles with Los Angeles as having the most polluted air in the United States defined by the number of days each city violates federal smog standards."

I grew up in California and know the history well. The Dems and their related interests have run Sacramento for ages, and what's practiced there is what I've called "Massachusetts Lite" political and economic policy -- not as wacky leftist as meets Massachusetts's notoriety, or what would satisfy the many at the left edge in Santa Monica, Hollywood, San Francisco, or Marin County, but more than bad enough. It's also similar to what New York City did (managing to bankrupt itself by the mid-1970s by liberal politics and policy) but with a much greater-sized economy that is more diverse (it's not only the forefront of technological development but a first-tier, often-nation-leading agricultural producer, to give the two best-known examples).

For those who are limited to much shorter-term retrospection and narrower scope, California spent itself into disaster during the bubble -- the Dims in Sacto seized a perfect "excuse" to be bubble-brained.

"Leonidas summarized it well: a broken budgetary process, egregiously coddled public labor unions, and overbearing environmental activism."

Yes, he did. Energy is a notorious additional example, not only environmental NIMBYism on steroids (how much more power from Palo Verde Nuclear Generating Station outside Phoenix will California be depending on in the next several years? How much will it rely on liquefied natural gas sources across the border in Mexico because they weren't able to be sited in California? Will they build the transmission capacity for electric power, gas, even water eventually, and continue to get other parties to provide it?). Not only is it enviro-NIMBYism on steroids (and parasitism of its neighbors and Uncle Fed) but that state government is also succumbing to the worst Lysenkoist environmentalist extremism with "global warming" or "climate change" or whatever it might be called next, complete with nonsensical "greenhouse gas" emission regulations. (ObamaCo and the Congre-Dems are so degenerate they're not working sensibly to counter this as sane federal energy policy, but are engaging in the same lunacy themselves.) The Grunpolizei there (and someday, in Washington, DC?) have wanted to ban certain small engines, and how easy is it to act right now to drive more efficient vehicles -- can people buy and drive Diesel vehicles there (or in the somewhat also-wackily-governed Northeast)?

Don't forget also that California has had a "global income tax" on businesses before (taxing all income, not only that income earned in California) and in the past has tried to tax retirees who moved out of state to escape its clutches.

And how do the worst of the worst respond to people voting with their feet to go where they are treated better (and jobs are valued much more)? One person wanted to levy a new tax on those departing the state. Yep -- a piece of resentment from angry little leftists at being told, finally, by somebody, "No."

He wanted to enact a wealth tax as well as an exit tax.


http://ag.ca.gov/cms_attachments/initiatives/pd...


Hopefully ObamaCo doesn't get any similar sick ideas.

As long as the California mob can change the state constitution and pass multi-billion dollar budget increases without any sort of tax increase, the state will be in trouble.

We want a train from LA to SF, but we don't want to pay for it. Only the federal government can work tha way.

Hold it, this almost sounds like classic trickle down spend and cut taxes Reaganisim, oh he was the Gov of CA you say...

Hmm so are we to expect this in another 8-5 years US wide or what? I guess it depends on whether or not we keep cutting taxes while increasing spending, I guess if we run out of money we will stop being the worlds police though I would guess our replacements will be visiting soon enough if that happened.

2) We are spending money on many more things than we used to, and thus there is less left for schools and roads

Not really many more things, just one big thing: retirees. Old people are living much longer. An estimated 1/3 of all local, state, and federal tax dollars go into the pockets of retirees. They are the welfare queens of this age.

Magical,

Your claim of cause and effect is mathematically incoherent.

Texas GDP is $1.08 Trillion per year. Warehousing and Trucking/Shipping is a valued yet tiny fraction of that GDP.

Before the financial problems of last fall, over 1300 people per day moved to Texas, and the numbers have increased since last fall. 500,000+ people/year. How many of them are moving to Texas for jobs in the warehousing or trucking industries?

Vey9-

I appreciate that you gave a specific example, instead of making a generalized accusation. It shows you have intellectual integrity. Some random observations, shaped by the way conservatives think about things:

- no one favors dirty air. Texas Legislators are not troglodytes. They are dealing with the problem in the most reasonable way they can see to deal with it.

- "number of days each city violates federal smog standards" does not account for the severity of the violation. I've seen California's orange sunsets which are created by smog. In my experience, Houston doesn't have the same severity of smog problem. It's pretty easy to violate federal smog standards. I live in Dallas-Fort Worth. We violate federal smog standards a lot. Usually, the violation days are indistinguishable from the nonviolation days. However, in full disclosure: we do have maybe a dozen smog days per year in which quality of life is noticeably affected. Those are yuck days.

- everything is a "Butterfly Effect" trade off. Enforcing stricter air quality standards does not happen in a vacuum. Stricter air quality standards will reduce wealth; reduced wealth will result in decreased quality of life, in increased human suffering, in decreased lifespan.

- Houston residents are not helpless. If air quality makes Houston an unfavorable locale, a Houston resident can relocate. Houston is a nice town, but much of what is nice in Houston can be found in, for instance: San Antonio, Fort Worth, San Marcus, Corpus Christi, Amarillo, Plano, Oklahoma City, Kansas City, or in many, many towns and cities across America.

The trucking jobs are not there, the truck stops and infrastructure to support high volume transfers through Texas from and to the rest of the US are which is why so many "service" sector jobs have exploded there. Do you think they would have done so well if we were not having to ship parts from Mexico to Indianapolis to finish a bumper for Ford? Being an ex-truck driver myself I have my doubts. Either way they have warehouse growth but most of the freight is being handled at drop yards where a US driver just picks them up in TX to transport elsewhere, The trucking jobs are where they originally were but the infrastructure needs to support them have moved from the midwest to Texas and the border states.

I am not sure if I was not explicit enough or if you are unaware when it comes to freight and the transportation industry which is kinda of obscure I will admit. If I had not spent so many years in the industry I would know pretty little about how it works as well. When I transported my first bumper from TN to Canada and then back to Detroit and then back to Indianapolis before it could be "finished" it was a huge wake up call that wages were not the only problem in our auto industry.

"We want a train from LA to SF, but we don't want to pay for it. Only the federal government can work tha way."

If you are in California, you have come to see by now that the state government indeed can work that way (it just can't print its own money -- IOU jokes notwithstanding -- and has less debt it can assume before encountering the "debt trap"). The "bonus" in the state's case is that many liberals there can assume and expect the federal government to bail them out. How much "stimulus" money, incidentally, is being misused there as it may be in other states such as Michigan (where I currently am), to pay for current expenses rather than for all-new, one-time, temporary expenses for which it ought to be spent, instead? (And instead of reducing spending rather than arrogantly as well as stupidly assuming and expecting taxes to be robotically increased, as happens so often in Blue Nation states?)

Good luck with the high-speed rail project if you undertake it. (That assumes it remains a real, truly modern high-speed rail project rather than using the pathetic ballooned definition of the term to include conventional equipment and speeds as low as 110 mph rather than the state-of-the-art 186-200+ mph.) In addition to paying for it, I just hope you can get the project done right, if you do it, for California's two major metro zones are one of the few places in this country where modern high-speed rail might work. Don't compromise on speed, and worse, on route as was done with Acela in the Northeast Corridor. (As many curves should have been removed completely from the old rail route, but they were not! Idiots.)

Also CA has benefited at the cost of NY as shipments from and to Europe are more and more rare and shipments from China are becoming the norm which usually come through CA. The difference is that was due to the market and the other was due to NAFTA and other regulations which I would hardly call a market force. It was a political choice that benefited TX and the border states at the cost of the midwest. Admittedly I am a little bitter since I am from IN but not too bitter I now live in OR and love it here. EIther way their "fix" is not one that can work for everyone.

"Old people are living much longer. An estimated 1/3 of all local, state, and federal tax dollars go into the pockets of retirees."

The problem now is nothing like it's going to become.

That was probably not the reason why ObamaCo removed the remark about the consequences of this, which was on the Trustees' reports for years until this year, "curiously" (a remark about how much larger the federal government would grow in order to meet future retiree welfare program costs). (They likely removed this because of general, not program-specific, reasons; they favor mammoth overgrowth of the federal government, and of their egos, in general, not only with existing entitlement programs; it's merely a coincidence that they're trying to expand entitlements to the non-elderly rather than reform elderly programs as they said needs to be done, and they insisted they must and will do. Who believes them?)

If you look at any recent year's Budget of the United States, complete with projections ahead for only a few years, you'll see the huge proportion already that Social Security and Medicare constitute.

It only will get worse later (and affect us so much earlier than naive or dishonest liberals insist), as the Trustees keep reminding us. (Even this year -- there's only so much manipulation ObamaCo would do.)


http://www.ssa.gov/OACT/TRSUM/index.html

http://www.ssa.gov/history/reports/trust/trustr...


Then add to that, the problem of federal, state, and municipal or county (local) government retirees, and all the future liabilities, many of which are unfunded currently. How are we going to be expected to pay for this?

* How are we going to be expected to pay for all this? Sooner or later, we won't be able to pay it all.

* Many people's retirements will be bleak? Why would we tolerate a two-tier society where government retirees live well, on the support of everyone else, including many facing hardship and worse in retirement? Sooner or later, we won't tolerate such a thing.

Government retiree "promises" [sic] will be broken or changed to accomdate reality someday, eventually.

Your points are well taken. Still, with or w/o NAFTA, Texas economy would be stronger than most state economies (or national economies in the entire world). Part of the reason would be good state government which: is friendly to free enterprise, believes in freedoms ("don't tread on me") for citizens (not outspending State funds, no state income taxes, reasonable regulation, accountable public schools).

But of course we have no way of knowing how they would have fared so we are just making stuff up much like with Alaska. Do not get me wrong all of the Dem happy fairy tale lands have huge issues as well, including OR but to say other states should follow their methods I see as problematic since that is what IN did and though they have a pretty balanced budget they have no jobs and all of the educated citizens are leaving. On top of that IN has no good jobs in its future either since the educated continue to leave and in my opinion where I make stuff up I would guess without oil TX would look much like IN. This is because TX benefits greatly because of its location and its natural resources but it does not have a great deal of other advantages.

Also for every penny that Texas loses to Federal taxes CA loses 15 which adds up.

Since the blogger asked us to give our opinions, we are merely participating in good faith.

Re natural resources: California is beautiful, has beautiful weather, has bountiful natural resources, and is in the toilet. Isn't the difference between California and Texas also the difference between expansive government and limited government? I will agree that Indiana does not have the natural resources of Texas. Yet, Texas does not have the natural resources/natural attractions of California. I think the comparison between California and Texas is apt.

If, in 1950, there had been a way to permanently install Texas style limited government in California, then California would not be in the toilet today, and California would be even a greater world economic force than she currently is, and such human suffering as currently exists in California would have been lessened by the even greater wealth generated by California's economy.

Conversely, had we installed California type of expansive government in Texas, then - NAFTA or no NAFTA - Texas today would suck eggs, and few people would live here, and Texas would not be a desirable destination.

In my opinion.

That was probably not the reason why ObamaCo removed the remark about the consequences of this,...

Whatever DLS. Both Republicans and Democrats are in the senior's pockets. At least the Democrats are trying to cut medicare costs, efforts that Republicans are blocking. It may be a pretty weak effort, but it is something. I am willing to trade some expanded healthcare access if it means medicare cost cutting.

"Whatever DLS."

??? Immaturity or irrationality duly noted.

"It may be a pretty weak effort, but it is something. I am willing to trade some expanded healthcare access if it means medicare cost cutting."

The removal of the statement of the Trustees about the growth of the federal government has nothing to do with crude robbing of Medicare in part to "pay for" universal coverage, but is more general, as I have clearly explained before.

Robbing Medicare to "pay for" universality does not solve either the universality problem, nor does it constitute the real Medicare reform that is long overdue, as I and others have noted time after time. ...

Sorry for being difficult gcotharn I am actually trying to think of a more apt comparison but I am not well read enough on our conservative states, which has become abundantly clear while I was brainstorming this. One issue is that without the culture that was created in CA it would lack the allure that draws people to it. On the other side giving homeless people welfare I find incredibly odd and did not even learn that was the case until I moved out of CA, either way though programs like this are a large part of the issue. I think the largest issue though is tied to the fed since they hand out too much in tax revenues and receive to little in return and have up until now been barred from doing things that would fix large shortfalls and would work there unlike other places like decriminalizing and taxing pot(which will hurt the border states due to falling illegal import money). Actually a host of reasons on this thread of the cause I agree with but I disagree that turning it into TX will make things all better considering TX has a large amount of issues of their own and are currently just coming out of a very beneficial twenty years due to our laws and regulation choices. Another thing to think about in the TX/CA comparison is that the cost of living in CA is sky high and really low in TX but the wages in TX are very low compared to the same jobs in other places in the country(this is now shifting though) but the jobs in CA are pretty close to the average pay rate for the nation. That is a long way of saying either peoples home prices will need to fall through the floor or large swaths of people will need to learn to be working homeless for such a shift to take place.

I always called TX "the land of minimum wage" because almost everyone I knew that was from there never made much above minimum wage. The good thing is that you can live on that in TX, but in CA you will be homeless and have little more than food and transportation and that is only if you use public transport.

From my point of view I saw it tried in IN by Mitch Daniels and it became a race to the bottom. More industries left the state so they cut and privatized more and more and laid off more and more workers and now they have little to attract industry since they look exactly like OH, MI and the rest of the midwest and since no industry is moving in those state jobs will remain gone or privatized and those profits do not end up in IN to invest elsewhere but instead on Wall Street. In my opinion this is how IN was looted and though I think CA has many problems I do not think looting it will turn it back into an economic powerhouse, in fact Enron(whose profits were largely spent in TX and Wall Street) may have contributed greatly to this problem.

Actually, I work in the California legislature (Chief Clerk’s office), and without getting into too much detail (CCO is non-political, and I don’t want to bias myself), Leonidas and Don Quijote pretty much got it. The referendum system used in California binds the legislature’s hands. Right now, mandatory spending minimums and earmarks take a huge chunk (I think it was somewhere between 65% and 70%) of state revenue, most of which stem from referendum. Couple that with the 2/3 requirement to raise taxes and 2/3 requirement to pass a budget, you end up with the mess we have now. There are many states that have one or the other—supermajority for taxes or budget—but California is the only state to combine these two with devastating results.

Ergo, what you have is a majority of state revenue is already appropriated via referendum cutting the legislatures choices and discretionary funds. They cannot raise taxes due to the constitutional 2/3 required and conservative objections. The only thing left is to cut spending and no one can agree on what to cut making the 2/3 consensus almost impossible.

That’s the California debacle in a nutshell, and there is plenty of blame to go around—Republicans, Democrats, voters, it’s all of our faults.

And your solution for Indiana is ...

You totally have me there gcotharn, I have no idea which is a personal horror to me. As it stands they will need to re-build from scratch slowly raising the standard of living as more industry comes there but the only new industry that comes there is in telemarketing or the military or prison industrial complexes which I do not see a great deal of growth in. When things began to fall apart around 2000 my idea was to lower corporate tax rates and keep as many state jobs going as possible to keep the revenue flowing but instead they cut the state to the bone and still raised taxes which just made things worse and then they began privatizing many of their state programs which has led to worse service and rising costs.

The best idea I have is a long ball kind of game, attract business anyway possible and then much like in OR buy local needs to become the ethos of the citizens. I know this sounds weird but the reason I moved here is because they had so many major tech firms with huge wallets and a thriving local industry in just about everything, this is actually one of the greatest things about Texas as well though I do not know if they are so local focused but small businesses are the norm and everywhere. Google and Yahoo and Nike's money comes here but a good portion of it stays here in the pockets of local clothing designers and local artisans in trades to be honest I thought people didnt do anymore(glassblowing), they buy local food from local farmers and yadda yadda yadda. It was my main reason in moving here, I like many others foresaw a financial crises of some type(nothing specific but it all looked like a giant leaning stack of plates to me) and I wanted to wait it out the safest place possible, though it is incredibly hard to get a job here but once you do your golden. In a global free market system if you like your community you need to ensure that it survives and the best way to do that is to invest locally, every time you get a chance. That way if the economy falls apart, as it has, that money is still there to sustain the local market until they can sell to a larger market when the economy rebounds. The problem in most of IN is that everything is corporate or franchised which means that what little local economy exists is usually around the edges and when industry or state or federal jobs and funds go away nothing is left behind. Without the industry to help build the local economy it is hard to get it up and rolling and will take many many years but the advantage is that sometimes one of your local businesses goes national and takes others with it which again helps build the local economy and infrastructure. So I guess I have a few ideas I learned in Portland, OR but otherwise I am stumped.

They really have little going for them but great people with a hard and hardy work ethic(I think I am putting that mildly) and some great soil. TX & CA have many advantages that IN and the midwest in general just do not economically though.

Actually, after re-reading your initial comment, I would mix my plan with your plan because I think that is their only way out. I think CA needs to find a way to make a few successful hail mary passes first but IN is pretty perfect for your plan I just think they need to grow their local industry this time to mitigate their losses next down turn.

Wow, spend the day at work and see what you all produce while I'm gone.

Impressive debate.

Of course not everyone agrees but at least some good discussion.

For myself, as I have said before, I think we need to look at both revenue increases and spending reductions to make the grade. The obvious problem is that we have the nasty lose/lose potential that increasing taxes will reduce the tax base. Similarly we have the problem of not being able to cut a lot of spending because of the law.

Perhaps looking to how it worked in the 50's could be a guide ??

Magical,
You make interesting points. Best luck to you.

Ultimately, the only long-term solution is constitutional reform. Because, individually legislators are powerless, super-majoritarian consensus virtually impossible, and a majority of spending out of the legislators hands, the political system here is in reality set up to fail.

There is a biblical parable about a foolish man who builds his house upon sand. Eventually, it will collapse. The strongest nation or state can be undone by building their institutions on an unstable foundation. No one can say this wasn’t inevitable.