Weekend Wars: California vs. The Union

I think there is very little hope for the state. Exactly like Greece, it has gotten addicted to the enormous spending that has been its hallmark. Even with fiscal restraint becoming more prevalent in most areas of the country, the coastal blue states have clung even more stubbornly to the liberal welfare state ideal that they have created. The system has failed, but they are blind to it. The only question is which state will default first.

1. Over the last few decades California has been a massive net giver of funds (through federal government transfers) to your beloved "fiscally-sound" red states

2. California will likely rebound like a champ, and hopefully get some impetus for reform to boost

3. Governments suck at managing money. Pretty much every single one that's ever been created. It's a property of government, and Cali is no worse than most of the Union

Come on man, you need to relax and stop being so East Coast about this ish. What is money anyways but an illusion used to grease the wheels of govt? You should love our free spending direct democracy ways you libertarian bastard...

How is California going to rebound? It is resoundingly anti business. High taxes and high home prices keep most sane people away. Plus it has massive social issues with illegal immigration.

Government is supposed to do basic things. Not be a mom and dad. People who look to the government to solve their problems are simply incompetent human beings. California has gone far past providing the basics and establishing law and order.

@ ANT: How did California become the 4th (actually thought it was sixth...) biggest econ in the first place, huh?

Good points Alex, but I don't think housing or energy are necessarily long term killers. Sure it will take a while to work through nearly a decade of misallocated investments, but demographics (immigration), reform (in govt budgets), and wholesale restructuring (debt markets) can certainly help to correct a lot of this very quickly.

I think you'd much rather be California than any of the states whose budget situations appear milder on the surface, but who have much less hope of growing out of it.

Also, don't forget Cali's biggest asset: human capital

Yeah, because economies can't shrink or get surpassed.

Are you mad they didn't legalize gay marriage in california for you?

http://en.wikipedia.org/wiki/File:Gross_Domestic_Product_of_California_…

Government is 12% of Cali economy. In 2008 17% was Real Estate.

I don't see how that pie is going to be expanding anytime soon, especially with the tax and regulatory situation in California.

The US would be a lot better off if it told California to go to hell. And if I were Texas, Wyoming, North Dakota, Vermont, Tennessee, Oklahoma, Alabama, etc. I would be looking to secede from the Union ASAP. It's a very similar situation to what is currently going on in Europe. I think Europe is lucky in that they are less federalist and can go their separate ways more easily. Most Texans are probably too stupid to realize they are being royally screwed over. Texas could secede from the US, be energy independent (they already have their own grid not attached to the rest of the US), run a surplus, and suck up a ton of new business from companies escaping the tax hell in states that have spent more than they earned. I've never lived in Texas and don't care for Texas whatsoever (running an energy fund, if I wanted to live in Texas, I definitely could). Just pointing out that Texas is to the US what Germany is to the EU.

@ Midas (the quotation thing always freezes up for me):

1. My point was that its hardly fair to characterize a state that has been an economic driver for the rest of the country as the worst example of anti-business govt mismanagement. It's history of success suggests otherwise

2. Inherent advantages (huge amount of natural and human resources as well as accumulated capital) have not gone away, merely been mismanaged for a while. Better bet than Wisconsin or Texas that's for sure

3. Wouldn't buy Cali bonds, but would bet on the underlying economy nonetheless

Was just joking about East Coast stuff. Actually have no affiliation to California w/e. It is democracy though, what was that quote about if you let the masses run the government then they'll vote themselves everything and ignore the costs...

http://www.calitics.com/diary/11753/texas-budget-deficit-shatters-myths…

So wait, let me get this straight. Texas is a bad model because they have zero taxes and a deficit as large as California. Yet California is one of the highest taxed states in the union and still runs a massive deficit.

Texas is in a temporary deficit. As the economy comes around, as businesses and spending increase, the Texas deficit will decrease. Texas can also increase taxes by a nominal amount, entirely temporary and be fine.

California on the other hand has to both cut services and increase taxes.

I also love how that chop shop article spins the lie that we should simply tax the rich more. The rich pay taxes, they pay all kinds of taxes. You simply cannot keep robbing the same people simply because they have more. That argument is tired.

Yes, the rich have more. Yes, the rich can afford to give more. But they shouldn't HAVE to give more.

I don't necessarily agree with the opinions in that article, it was just the first thing on google pointing out that the Texas myth is complete bullshit.

The point here is that governments suck at managing money whether they have a lot or a little. Other fact is that California's economy has crushed Texas's historically. It is far larger, more diversified, and more dynamic (though the Lone Star state has been improving recently), so all this talk about California being screwed while the low-tax models are proven wrong is bs.

I'll take the bait on that last paragraph, and say no one should HAVE to give anything. But we (choose to?) have governments, and they need revenue, and we (in the US) have never come close to "overtaxing" anybody (by which I mean taxing to the point where it disincentivizes work).

Now, if you're talking about "fairness" that's different, because I have no idea how to decide on a "fair" level of taxes. Really, I think basically all levels are fair as long as the money is spent productively and efficiently, which is of course back to the issue at hand...

IMO California is just too big to manage. That wasn't the case in the 1800s when the state lines were being drawn up, but there's too many competing political forces that the end result is that nobody gets what they want or need.

I think a lot could be fixed by dividing the Northern and Southern parts of California. Of course, that isn't going to happen, but state representatives in San Diego have little interests in common with those in the Bay Area, who have little in common with those in rural Northern California. The scale of government has gotten beyond that which is manageable.

As far as California being the xth largest economy in the world...really, so what? Mexico has a bigger GDP than Switzerland, but where would you rather live? Point being, you need to look at where a place is going and not just where they've been.

It all has to do with the philosophy of how to spend money. Is it just me or are the states that got hit the hardest the blue ones?

Michigan? Blue. Nevada? Blue. California? Blue. Florida? Blue. Ohio? Blue. Rhode Island? Blue. Arizona and Utah are the only red ones on this list, and also #s 7 and 8: http://www.collegedegrees.com/blog/2011/02/25/8-states-hit-hardest-by-t…

Not necessarily, it really comes down to which issues worry the voter more. I for one identify as a Republican, but I'm an unhappy Republican everywhere because of my social views. I have a feeling that most Republicans are conservative because of fiscal, not social, policy. That said, I think a state that leans even slightly blue is at a distinct disadvantage.

California obviously has had shitty governance for as far back as I can remember but it still has far better assets to drive economic growth than most other states if they were properly managed (keyword if). 1) One of the most productive agricultural regions in the world. 2) Some of the best universities in terms of quality and quantity 3) Probably the most diverse economy in the U.S. 4) Largest amount of skilled immigrants choose places like SF, LA, and the valley to set up shop 5) Not as important, but the weather and girls are hard to compete with.

Having said that, the disproportionate amount of union power, traffic/transportation problem, and shit political system needs to be addressed before any of these inherent advantages can be utilized.

@ D M

Your "blue red" categorization appears to be based on (recent) Presidential elections, which aren't really as important to the matter at hand (state finances) as who controls the state legislature and governorship.

In any case, I don't think its party designation that drives most of these things. Just looking at the national scene it seems pretty clear that both parties have plenty of geniuses and idiots to go around...

Oh, I believe they're all idiots, I just think/hope the Republicans won't do as much harm.

Few observations from my 3 years there:

They have a school administrator office in sacrament that employs 50,000 people! These aren't teachers!

Businesses have been fleeing for years. One example - Google has more employees in Texas than California.

Environmentalists will do anything to promote their agenda, to include destroying the entire central valley's water supply for a year to protect the smelt, a fish that isn't indigenous to California. That knocks out the biggest food producing region in the US.

The state prisons pay their employees with IOUs for months at a time. The cops will give out a ticket for anything to extract money from the populous, but the courts won't send criminals to jail because it's too expensive.

They have a referendum system on the ballots. The public will vote something into law after a year of deliberation and ad campaigns, and the state supreme court will rule the public's choice unconstitutional.

The local papers, radio, and TV are always discussing various plans where the state splits into 3 or more states based on economy and ideals - just like during the 1850s leading up to the civil war!

So many more, but if I had the least bit of sense about me and a choice to leave, I would take it. I for see a reverse grapes of wrath event where people load up the family on a truck and head east for unemployment.

As a former resident of Northern Virginia, one could see the major issue in the region was emigration from the northeast "blue" states. As Virginia's economy boomed, even in comparison to its neighboring Maryland (and, of course, D.C), largely on the policies of Richmond, VA, people fled states like New Jersey for economic opportunity in Virginia. The problem is, they brought their political belief systems with them. Despite fleeing Democrat public policy, they brought that Democrat philosophy with them, which has begun to turn the politics in Virginia, ever so slowly.

My fear is that the same thing is going to happen with California. People are already fleeing California for Texas. What happens when California finally implodes entirely? One can just imagine a tidal wave of white liberal Democrats fleeing to places like Kansas City, Oklahoma City, Houston, Austin, Salt Lake City, etc. seeking out economic opportunity. However, they are likely to bring the same welfare state cancer with them that they used to destroy what was once the greatest state in the Union, California.

^^^Exactly UFO! Get rid of any crime that doesn't cause harm to another person or their property. Smoke pot? Cool. Deal pot? Cool. There goes a few hundred thousand prisoners

I was born and raised in Southern California. My father started his career in law enforcement (e.g. prison officer and patrolman), and now is much higher up in the food chain.

California is in deep trouble economically due to its mismanaged and horribly bureaucratic government programs.

State prisons are so far in the red, I have no clue what they can do about it. I don't know too much about it, but its definitely an issue.

Welfare is a joke there. Many people collecting checks and relying on them and welfare fraud is rampant. The program is, simply put, poorly designed. While there might be a sound rationale for helping those down on their luck, it is not implemented that way. It is implemented to give checks to those who qualify for them on paper. It creates a dependency on the welfare for many underprivledged people that should otherwise go out and seek jobs. You will hear some argue against this, saying that welfare is just dandy, but many of these professors and politicians are so far removed from the implementation its quite funny that they run their mouths so much. On the ground level, the whole system is screwed up and needs to be cut or fixed.

Illegal immigration is also a huge problem. I don't care how many "statistics" you hear from a professor at University of Blahblahblah, you're not going to get any semblance of accuracy about it, as they are illegal immigrants who are inherently reluctant to identify themselves/are unknown to be illegals by others. (there are also a lot of statistics that show the billions of dollars that illegals are costing Californians, but we will call these inaccurate also). The evidence you need is when principles in San Diego County and throughout Southern California come out and say that their schools are 90% hispanic, and that way more kids show up every day than are enrolled in the schools. Parents drive their kids across the border and drop them off at California schools. Not only is this costly, but the permanent illegals who have families here costs the system a huge amount. They have kids in the school system and claim benefits and social services from the state. And i'll eat my hat if they (in general) are paying any taxes. Now the morality of illegal immigration is a different discussion, but economically I am arguing that it is way more harmful than it is helpful. Many from the agricultural regions of CA tend to defend illegal immigration due to the fact that it is cheap labor, but I believe that the effect of their "cheapness" does not necessarily go to the state at all (instead, farming tycoons) and does not necessarily offset the economic weight they put on the system.

These are just a couple reasons weighing on CA. That being said, I think California has a ton of resources and economic assets. Its all about managing those government programs well.

Having been to Cali several times I can attest to it's beauty. The problem is it being overly liberal and run as such. Until that changes, it will continue to decline.

nm

The problem with California's government isn't an issue of liberal or conservative ideology. The problem is the system of direct democracy makes it impossible to govern.

Then what's been the excuse of Illinois, Michigan, New Jersey, etc.? Truth is, one of the primary problems in California is the public employee unions at the municipal level. This extensive June 21 NY Times expose does a great job summing up one of the main issues with California.

http://www.nytimes.com/2011/06/22/business/22union.html?_r=2

This shows us that Utah is the best off state in terms of public pensions, but even it is in dire straights over the next 30 years under realistic scenarios.

http://www.nytimes.com/interactive/2011/06/21/business/union-graphic.ht…

Basically, public employee unions have put all 50 states and the District of Columbia on a path toward fiscal ruin.

"I think there is very little hope for the state. Exactly like Greece"..what do you mean about this....does the state is not good in globalization and work offered....The real issue is "public employee unions at the municipal level. " AGREED

but we should think about it and do something what we can

Bullshit, at least when applied to the federal level. Presidential elections are won and lost based on the trajectory of the economy. Everything else is white noise.

1. Texas budgets in 2-year blocks. So when that stupid article (by "CAlitics conveniently) says that the deficits are both 18 billion, Texas' is really 9 billion for 2 years. Half of CA's. And Texas spends FAR less than CA as a % of GDP, meaning that cuts and/or tax increases will much more easily fill that gap. As mentioned above, most people consider this a temporary deficit that is not a long-term issue at all. Also, CAs overall debt has been building up for years while other states like Texas have maintained reasonable levels, so one bad year for TX is not a big deal while another whopper for CA might push them over the edge. Even ignoring that TX is in a 2-year deficit, your argument is basically like saying that Germany and Greece would be equal if they both have 10% deficits next year. Not true at all.

2. The budget is only half the proof of why CAs system blows. The other is simple economic performance. Texas has been practically untouched by the recession compared to CA and most other states, and continues to lead the US in economic recovery. Businesses are moving from CA to TX like they are escaping the plague. Even the Silicon Valley tech golden gooses are shifting out of CA, as more and more open up there new offices in Austin, NC, etc (I know Google is one of them). And there are different ways to slice the numbers, but in the last 2 years, at least 35%, and up to 48%, of ALL new jobs in the US were created...in Texas.

There's is no doubt that CA has plenty of things in its favor (weather, coast, energy, SV, etc..), but as long as it's run like it is, they will continue losing out to less "talented" states.

If you are going to be a high tax state, you need to offer something that a low tax state can't match. NYC can rape you because it offers something few cities in the US can match. California as a whole is not only highly taxed, but incredibly unfriendly to business.Anything that doesn't require being in Cali will simply move away. As the tax base drains you have a massive pension, tons of social programs and a populace addicted to mom and dad government solving their problems.

Entitlements are easy to give, nearly impossible to take away. Have fun Cali. Good riddance.