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Fantasyland

Well, Californians basically rejected all of yesterday's budget initiatives, and since they were mostly gimmicks I don't really blame them.  So what's next?

Beats me.  There are legal, judicial, federal, and contractual limits to how much spending can be cut, and there are political limits (i.e., the Republican rump in the legislature) to how much taxes can be raised.  The sums just don't add up.

Californians are living in a dream world.  Prop 13 slashed property taxes and nobody wants to amend it, even for commercial property.  Arnold Schwarzenegger got elected in the middle of a budget crisis by promising to cut taxes.  When that proved to be an unsurprising disaster, the voters approved billions in borrowing, making the budget situation even worse.  It's easy to blame Sacramento for this mess (and I do!), but the public has been complicit every step of the way.

Historically, California has been a high tax/high service state.  That's fine.  Some states prefer a low tax/low service model.  That's fine too.  (It's a lousy idea, I think, but fiscally it's fine.)  But over the past few decades we Californians have somehow concluded that we can be a medium tax/high service state.  It's a fantasy.  Unfortunately, I'm not sure just what it's going to take to jolt everyone out of their delusions.  Stay tuned.

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Comments
felinecannonball

This is sort of like the

This is sort of like the second coming for anti-tax libertarians. Time to start drawing water for the bathtub.

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mismatched thresholds

I think that the fundamental problem as I heard pointed out by a commenter at mcmegan's blog, is that due to the 2/3 tax hike requirement, we have a situation where programs and spending only require a majority threshold, but tax hikes and revenues require 2/3 majority, so the incentives are further misaligned than normal. that, more than the property tax consequences of prop. 13 really seems like the fundamental kicker.

it's not fundamentally that dems want to spend too much or repubs don't like taxes, it's that the mechanisms to control each part of the equation are mismatched.

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an earthquake and food riots will increase home values

The exodus from California will boost property values everywhere else. A huge earthquake and food riots in LA will do more to resolve the mortgage crisis than anything the government can do.

Kevin Drum

Yes, the two-thirds

Yes, the two-thirds requirement for budgets and tax increases is crazy. And spending went nuts in the late 90s during the dotcom boom. We've never really recovered from that.

It's possible that the only answer is a constitutional convention. That sounds like pie in the sky, and it probably is, but there's beginning to be some serious interest in it.

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Recession politics

The usual step at this point in a recession is to threaten to cut services that people actually like, then the government gets the authorization that they want. That type of negotiation probably won't work with the California GOP.

So, the fees for anything they can change are going to go up, way up. There will be more layoffs. Deferred salaries, forced reduction in salaries. Fewer students. Probably sword rattling at unions, especially the prison guards. Probably much talk about ejecting illegal immigrants.

The usual bullshit.

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Umm...we're more like a

Umm...we're more like a high-tax, low-service state.

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Medium tax state? Yes.

Agi's comment reflects the kind of fact-free nonsense that makes the politics harder to address.

As the Public Policy Institute of California has noted: "CALIFORNIA’S REVENUE BURDEN IS CLOSER TO AVERAGE AFTER ACCOUNTING FOR ITS HIGHER INCOME. As a high‐income state, California has a larger base of economic activity and resources to tax. When state and local revenues are considered as a share of personal income, California’s U.S. ranking drops to 18th. In 2006, state and local general revenues represented 17.6% of personal income in California, compared to 16.9% in the nation as a whole, 21% in New York, 16.2% in Florida, 15.4% in Illinois and 15% in Texas." http://www.ppic.org/content/pubs/jtf/JTF_TaxBurdenJTF.pdf

So, it's exactly as Kevin says, a "medium tax" state. And the quality of services has eroded given the never-ending cuts, but the extent of services is definitely at the high end--just look at what passes for state services in many poorer states in the country.

There's a big political fight ahead over how to resolve the California budget mess, but, please, let's try to have a reality-based conversation.

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I think what Californians

I think what Californians are hoping for, deep down, is that some of that lovely bailout money slushing around in Washington will be earmarked for California because if you can bail out the banks, and GE, and General Motors, and nearly every other company, then *surely* you ought to bail out California. Don't think it will happen, though. So my guess is that California will default.

Joshua Norton

You can whimsically amend the California Constitution

any old way you want with only a %50 + 1 vote. However you need a 2/3 super majority vote to raise the money that pays for those same fits of whimsy. Anyone who doesn't see this as completely ass-backwards just isn't paying attention.

JN - SF

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Kevin, I sure wish you'd

Kevin, I sure wish you'd write a bit about what 'services' California provides at the medium level and where the money goes for each of those services. A new road to help out a developer is a service but so is food and shelter for a homeless person after a brush fire destroyed everything.

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California should cut

California should cut wild fire fighting crews in Santa Barbara, Carmel, La Joya, Beverly Hills, etc. out of its state budget.

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California's endless initiatives

Maybe this is better addressed by Kevin in a separate post, since it's not about the California budget crisis, but could I have a short remedial education in California politics? That is, why is so much there decided by ballot initiative (invariably, it seems, in crazy ways)? I assume that it's because the state constitution makes it easier to put things up to the voters. There's clearly a reason other states have legislating done by the legislature. Thank you!

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downward spiral

There is no good news here. Anti-tax fiends (who say they are pro-business) will be thrilled that thousands of state employees will be laid off or have their wages cut. But then they won't (or can't) spend and businesses will be laying off even more people (who won't/can't spend) and they'll be asking for relief from the taxes they do pay.

Lots of people who are laid off will be trying to get into community colleges and state universities to get their degrees or retrain, but there won't be space (indeed there isn't now) -- and so laid off workers will be part of a permanently under or unemployed subclass. They won't move out, partly because most Californians have some stupid notion that this state is paradise, but mostly because if they do own a home they'll not be able to unload it (and it's not like there are lots of places in the US that are awash in jobs to go back to).

When you look at the Dems who are running for governor (Brown -- again, and slimey LA and SF mayors Villaraigosa and Newsome) you know none of them would elicit any cooperation in Sacto if they won. ---- and the Repubs are either too moderate to command their own party (Campbell) or too crazy (the insurance commish, Poizner?) or too inexperienced (Whitman -- we don't need another republican political novice and self-styled expert: repeat after me : governing is way different than being a CEO).

We're doomed. Yeah, the 2/3rds is a problem, but it's compounded by the tyranny of term limits, the safe nature of legislative seats , and the fact that both parties are controlled by their extremists (into which I include my own union). Plus, you practically have to be an f'ing millionaire even to run for state assembly!

There's not much about CA that I like anymore.

Art Eclectic

Toast

I agree with those who say California is toast. The state is done. All that is left is to decide if you like living here enough to accept the enormous taxes you will pay to live in what is rapidly becoming a 3rd world country. Everyone has their hand in the taxpayer till here, pensions pay out 80%, 1 out of every 5 residents of Los Angeles county is receiving public support, 1 in every 11 employees of my city makes over $100k a year, it takes a minimum of 8 hours to be seen in an emergency room in LA County.....

Half the people I know here are seriously looking at moving out of state. I hear tell that it isn't so bad in the Northern parts of the state - but there is no escape from the taxes there, either. Middle class people with kids are fleeing the schools unless they can afford private schools, or else they leave the state altogether.

So, what services are we demanding that call for yet still higher taxes?

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We are crack addicts

California and the US in general by receiving all these government "services," has become hooked much akin to crack cocaine addiction. Providing "services" even to a fractional level of what is today termed "entitlements" was never envisioned by our constitutional authors. Government has effectively supplanted nearly all forms of charity leaving little for valid and efficient charities to actually perform their roles.

And make no mistake. Many liberal politicians either with lengthy careers behind them, or aspirations thereof, would like nothing more than a population dependent on government "services" to masses of “needy” citizens standing in line to have their asses wiped by Uncle Sam!

It will no doubt be tough for many at least initially, but a LONG-TERM solution is to overcoming this addition 1) reduce the inefficiency of those services and replace them with free market competitive services. 2) Get government back to its originally intended role, or some reasonable semblance thereof. 3) Hold individuals and corporations accountable for there actions weeding out those that can best serve what role and where. 4) Let family, communities, churches and charitable organizations do what they do best; care for those in need.

That’s obviously a top-level simplistic view, but isn’t it time to just say “no,” and kick the habit?

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It's more than a simplistic view, it's incorrect

When people talk about the "disfunction" of California, they're not talking about the number of poor people (other states have greater income inequality and more poor); mostly what they're complaining about is things like failed schools, unresponsive bureaucracy, overflowing prisons, poor fire management--in other words, poor quality public services. This is, in fact, one of the key traits of so-called "third world" countries--inefficient/corrupt/nonexistent public services. Cutting public services in California is unlikely to make the state more functional.

I'm not saying that some funding priorities shouldn't be reorganized, but cutting funding for state and local services is the best way to make California even more unliveable.

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vigilantes

free market competitive services

Like the no bid contracts Republicans issued in Iraq or like HMO's that deny service?

Hold individuals and corporations accountable for there actions

Are vigilantes supposed to do this? Or is it government's originally intended role?

charitable organizations do what they do best

Fund raising is what churches and charitable orgs do best.

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Can't agree with "high service" description

I'm a little surprised by Kevin's characterization considering he lives here, and which might lead the casual reader to believe we have gold-plated public services.

Not really.

For example: the largest Calif. budget expenditure is for education, where California ranks below the US average per pupil and perhaps more to the point, spends barely half of what New York and New Jersey spend. The infrastructure is likewise nothing to brag about.

For anybody motivated to suggest a fix, here's your starting point:

http://www.ebudget.ca.gov/pdf/BudgetSummary/SummaryCharts.pdf

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Fantasyland

A question: Does Prop 13 still work the way it did when it went to the U.S. Supreme Court many years ago? I.e., folks (or their descendants) who owned homes at passage are grandfathered in and pay way less taxes than neighbors who purchased more recently. Believe the case that went to the Court involved a recent purchaser who was paying ten times more than other folks on her street.

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super majority requirement

Many states adopted a super majority requirement before legislatures can raise taxes. They are having the same problems as CA. The people will have to vote in 2/3 majorities to tax the rich.

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Vigilant responses

Responses to yours:

1) Like the no bid contracts Republicans issued in Iraq or like HMO's that deny service?

In general No! Most of the republicans of late are NOT acting like free market capitalists. However, given Iraq occurred and given the US was going to rebuild it, I’d argue that the number of viable bidders would have been extremely limited. Think about what Haliburton was tasked to do.

As for HMOs, I seem to recall that HMOs were created under the “HMO act of 1973” under a democratic congress. That is irrelevant however given government should have merely stayed out of health care in general. The cost increases in health care are in part driven by the forced memberships into HMOs which effectively limited competition by forcing providers and patients into larger groups thereby limiting individual and provider choices for care. ‘

2) Are vigilantes supposed to do this? Or is it government's originally intended role?

Reasonable legislation (which we surpassed long ago across countless fronts), one enacted is um…duh, enforced by government. But, since government CAN’T seem to do this right, I’d prefer to carry myself and do my own protecting of self and family, thank you very much.

3) Fund raising is what churches and charitable orgs do best.

Yes, of course that’s what you’d say…because they don’t redistribute their income to “causes” you see fit.

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wbinmd - Where does that work?

wbinmd,

please name one society where your prescription has been applied and has produced a top tier society in economic status, low crime, education level, population health, and median standard of living.

If you can do that, you can start to convince me that your ideas are sound.

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It did work...until government stepped in

The prescription was applied to the United States starting in 1787. Our society had all those tenets of a "top tier" society throughout our history. Our free markets evolved to emerging demands. However, in the 20th century, our government started responding with knee-jerk reactionary "solutions" that have exacerbated existing problems and created countless others.

For example, the depression of the 1920’s was far worse than the “Great Depression.” The government’s solution was to but out, thereby allowing the free markets to respond more rapidly. Unfortunately, during the “Great Depression,” government butted IN tripling taxes, increasing government oversight, etc. Read this: http://www.lewrockwell.com/orig4/powell-jim4.html

This is but ONE example of where our government has meddled and cause long standing and likely irreversible consequences; more and more and more government. Thanks for that wonderful “New Deal” FDR!

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a nation of day laborers

The New Deal was responsible for creating America's huge middle class. Without it, America would have remained a nation of day laborers working for local patriarchs, which is what the Potters wanted.

In 1787 slavery was the greatest economic engine of the US. There were few free markets. Those slaves' ancestors have yet to be compensated for the labor that created the wealth that allowed the US to fight for its independence.

do my own protecting

Then I can protect myself from you and your family?

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The new deal

Was a response to a depression, which would have corrected itself just like the depression of the 20's. You tout all the "good" the new deal created, but you can't you admit that the New Deal has been the cause of so much government bureaucracy that will NEVER end. Workers organized, during the labor movement, not government. The individual joined together as a collective to "right" the labor wrongs. But alas the bad has come with that good as well. Now we have union floor sweepers making far beyond a living wage. Union workers who refuse to do any task if it is not documented in their job description. But I suppose you believe all labor, physical and intellectual should be rewarded equally.

Admittedly, slavery was one of our darkest eras. As for compensation for those ancestors and their compensation. Granted it would be great to get an accounting of all those who were enslaved, and determine what their wages due would be and to allocate those wages to their offspring. Perhaps we could also deduct all wages earned by one of those offspring if they were given a job based solely on their color.

Based on your continued comments here on MoJo, you are the one that needs to be protected from. Keep on voting for more and more intrusive government my friend. Keep on voting away your individual liberty. Soon, we'll all be like robots following government's every wish.

If the time comes however, I seriously doubt you can protect yourself from me.

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OT

Sorry, the is completely off topic but where did you get the California jpeg you include with this post? I've been looking for a Florida in the same style.

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institutionalize wealth transfers

The wealth transfers that the New Deal institutionalized are responsible for America's huge middle class. Without them there is no huge middle class, but a huge population of paupers, which is why the overturning of New Deal policies, the wealth transfers and finance regulations, is causing the decline of the middle class. Wealth transfers and finance regulations may be intrusive, from a small economic imposition point of view, but not only did they create the highest living standard ever achieved, government involvement into everyday life did not devolve into a raw, police state expression until the beginning of the Reagan era, when the dismantling of the New Deal began in earnest. Progressive taxation and providing minimum social benefits do not lead to a police state, but unbridled greed and imperialism do.

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I seriously doubt you can

I seriously doubt you can protect yourself from me

Me too. Does that make you feel like a free person or is it required for you to achieve sexual arousal?

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Paul Krugman's column this

Paul Krugman's column this morning answers the question I asked earlier:

http://www.nytimes.com/2009/05/25/opinion/25krugman.html?_r=1

A tax system that asses different taxes on homeowners depending upon when they purchased the house is ridiculous and fundamentally unfair. Can't believe that California hasn't had the political fortitude to reform it.

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Oops, I meant to type

Oops, I meant to type "assesses"

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