Bankrupt California

It is depressing to think about California, my adopted home state.  Having spent my high school years there I fell in love with the state and the people I met there.  When I left to attend college in Tennessee I planned on returning, having experienced the hospitality and slower paced life of the south.

Then the economic crash of 2008 hit.  What few outside of California know is that California was headed down a recessionary path already.  High regulation, higher taxes, and some hair-brained elected officials believed they were on the right path (and they probably were in their own minds), but the recession accelerated the decline of the largest state in the Union.

Faced with this economic reality (unemployment numbers for my adopted home town’s county) and a girl I wanted to marry, I remained in Tennessee.  I think often of California and while I desire to return to the one of the world’s largest economic engines, I cannot return.  California is bankrupt.  Tax revenues are down, high income earners are fleeing, entrepreneurs, who can now start and grow profitable businesses anywhere, are fleeing or avoiding the state that boasts the likes of Apple, Google, Facebook, Twitter, and more.  California is pursuing ideas like a high speed rail that will surely lose as much money as the Amtrak line it mirrors, while destroying acres of profitable farmland in the process, revealing a bankrupt leadership unwilling to acknowledge simple realities, challenge the status quo, and lead.

Victor Davis Hanson reminded me of these thoughts today.  And I thought I would share them, and his work, with you today.


Articles of the Day

I have not had any epiphanies recently but I did notice some articles I think are worth spreading.  Check them out.

Back in California

I have been back in California for a couple of days.  It is definitely a treat to soak up the sun and I love the cool nights.  7:30am runs when it is 65 degrees out are fantastic.  Being back is a reminder the recession and its fallout are far from over.  California and her run away budget and more recently, run away deficit, are causing ulsers in Sacramento.  A $26.3 billion hole in the state budget cannot be ignored.

How to close that hole is the problem politicians have been tackling for the last weeks.  The deal apparently struck in the last 24 hours involves cutting CalWorks, hiking vehicle fees, taxing oil extraction, cutting school spending and releasing up to 27,000 inmates from the prison system.  (If you want to try and fix the budget hole yourself, try right here)

This is not fun to watch.  California in 2006 had the 8th largest economy in the world and now is struggling mightily to pay her debts.  I am far from a respected economist or politician but I can safely suggest to every other state (and individual) that if they want to take anything away from the California experience it is this:  fiscally responsible budgeting is a must.  I have a couple of common sense suggestions to make.  First, California would do great if she would save a set portion of her budget permanently for use in times like this.  Only a small percentage is required.

Second, locking yourself into deals with any organization, be it a union contract or a road deal, that could imperil you in tight fiscal times is bad for any organization.  California is only exasperating her problems now because she is forced to pay her workers less, taking more taxes out of the system.  Solving those debts will be the most difficult and it is very likely contracts will be broken or bent severely.  For example, there is talk of taking money from the school system but guaranteeing it would be returned in a few years.  Bad idea!  It will be years before the economy turns around.  Recessions end within a year or so but typically take more than 4 or 5 to return to previous productivity levels.

My only hope is we get out of this mess and we learn our lessons.  I do not have an answer to this problem nor is there a magic pill.  Just as many businesses are doing California needs to bite the bullet and make some serious cuts, whether they are specific programs or across the board reductions.  I would recommend it be a combination of both.

California Tax Reform – The Shocker!

A shock!  Yup, I found one.  California is “contemplating” the ultimate in social reform:  ending welfare.  Yea!  Crazy!  The state lawmakers are working to deal with a $24.3 billion budget deficit and it appears that all options are on the table. 

California is proud of being a very progressive state.  Why not give this a shot too?  It might go nicely with a flat tax.

Flat Tax in California? No Way!

Arnold has asked for a proposal….  Background:  There is a commission looking at ways to overhaul the California tax system.  It, like many tax systems, is in need of some fixing and a flat tax is one idea.

A flat tax is a tax on income that is, well, flat.  For example, Bill Gates would be taxed at 15% and so would the guy working at McDonalds.  Obviously this is not a popular move for proponents of the progressive tax system which is our current system.  Here is a decent explanation of it.

There are benefits to a flat tax system one of which would mean less cheating on your taxes to stay in a lower bracket.  Another is that it is morally fair though not necessarily economically fair.  I believe it is economically fair but there are others out there, typically leaning towards the left, who believe a progressive system is most fair because it comes the closest to levelling everyone economically.  e.g., taxing Warren Buffet so that he has as much disposible income as the waiter at Outback you had last week.

I would like to see the Flat Tax tried.

California Special Election – Jared

California has a proud tradition of direct democracy.  Special elections can be fun for some, stressful for others.

For exmaple California had a special election to deal with the state’s budget deficit yesterday.  It had lots of options to “reform” spending, change the way government pays for things, and to prevent lawmakers from getting raises during years with a budget deficit.  Only the last one passed.

I am glad to see the people of the state standing up.  Now let us see if our politicians can handle the pressure and carve some fat out of the budget.

Global Warming!!! – Jared

I talked about this once before, but it seems global warming is suffering the consequences of winter!  I’m in Tennessee where the weather has been pleasant to say the least recently, but snow is coming!  Just to the north.  How I wish I lived in Chicago again.  I have some fond memories of snow forts and snow ball fights  back before we moved in California.

Chicago, particularly O’Hare International Airport has been socked in with snow, over 8 inches with more forecasted.  Some of the coldest weather is coming.  Now, freak winter?  Sure… Freak summers of warmth?  Sure.