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California is bankrupt, Schwazenegger promises vengeance upon those who oppose him
tbloxham
Registered User regular
Registered User regular
The BBC has this to say....
In summary the State of California, one of the worlds largest economies and one of the most successful ,despite the current economic crisis, will soon be bankrupt. Despite a diversified economy, across many industries including both basic needs (food, fuels, clothing), hi tech (silicon valley, solar panels, biotech, google), tourism (multiple major airports, numerous extremely popular tourist destinations, skiing etc), finance(multiple major business centres with the headquarters of large banks and finance houses) and leisure (movies, media) somehow the state has still managed to be on the verge of going broke unless urgent action is taken.
How has it come to this and what is to be done? While tax revenues have been falling shouldn't Californias massively diverse economy have sheltered it from the worst of the problems? Perhaps the cost of wildfires and natural disasters are to blame? Is public spending too high, or are taxes too low? Could our crazy constitution be to blame, or do we have too many fatcat public sector employees. Will the Obama middle class tax cut help us, California does have one of the highest costs of living in the US, and so a large fraction of this tax cut will go onto compulsory spending on food and necessities here compared to in other states.
The Democrats control the California senate, but require cooperation from the republicans to reach a 2/3 majority required to pass fiscal measures. The Democrats want to raise taxes and cut spending, the republicans say any tax rise is unacceptable.
Surely if California can't fix it's problems, then the rest of the world is going to hell in a handbasket (other than China I guess, go indentured servitude!) Personally I think that the Obama cut will help us, but only if it also stimulates the rest of the US economy. However we also need to take direct action ourselves.
I think that an increased state tax on gas might be an appropriate measure to help meet costs. With gas prices falling people might accept a 30c gas tax now (which given California consumes 16 billion gallons of oil a year would raise 5 billion dollars a year and still leave gas prices $1.80 below where they were at their peak), and have forgotten about it by the time prices go back up again. Gas purchases are also relatively price inelastic, and so a tax rise should not cost california many jobs, and the gas tax hike might actually cause further falls in wholesale oil prices due to fears of decreased consumption. This tax hike might also be popular with environmentalists, as it would be a direct tax on a major pollution source, who are a major lobby in California and might help persuade wary republicans to get on board in order to help secure the green vote in the next election.
However even this 30c tax wont meet our shortfall. Where will the rest of the money be found?
edit : I should have spell checked Schwarzenegger in the title, now my idiocy is plain for all to see. Forgive me my transgressions please PA forum
In summary the State of California, one of the worlds largest economies and one of the most successful ,despite the current economic crisis, will soon be bankrupt. Despite a diversified economy, across many industries including both basic needs (food, fuels, clothing), hi tech (silicon valley, solar panels, biotech, google), tourism (multiple major airports, numerous extremely popular tourist destinations, skiing etc), finance(multiple major business centres with the headquarters of large banks and finance houses) and leisure (movies, media) somehow the state has still managed to be on the verge of going broke unless urgent action is taken.
How has it come to this and what is to be done? While tax revenues have been falling shouldn't Californias massively diverse economy have sheltered it from the worst of the problems? Perhaps the cost of wildfires and natural disasters are to blame? Is public spending too high, or are taxes too low? Could our crazy constitution be to blame, or do we have too many fatcat public sector employees. Will the Obama middle class tax cut help us, California does have one of the highest costs of living in the US, and so a large fraction of this tax cut will go onto compulsory spending on food and necessities here compared to in other states.
The Democrats control the California senate, but require cooperation from the republicans to reach a 2/3 majority required to pass fiscal measures. The Democrats want to raise taxes and cut spending, the republicans say any tax rise is unacceptable.
Surely if California can't fix it's problems, then the rest of the world is going to hell in a handbasket (other than China I guess, go indentured servitude!) Personally I think that the Obama cut will help us, but only if it also stimulates the rest of the US economy. However we also need to take direct action ourselves.
I think that an increased state tax on gas might be an appropriate measure to help meet costs. With gas prices falling people might accept a 30c gas tax now (which given California consumes 16 billion gallons of oil a year would raise 5 billion dollars a year and still leave gas prices $1.80 below where they were at their peak), and have forgotten about it by the time prices go back up again. Gas purchases are also relatively price inelastic, and so a tax rise should not cost california many jobs, and the gas tax hike might actually cause further falls in wholesale oil prices due to fears of decreased consumption. This tax hike might also be popular with environmentalists, as it would be a direct tax on a major pollution source, who are a major lobby in California and might help persuade wary republicans to get on board in order to help secure the green vote in the next election.
However even this 30c tax wont meet our shortfall. Where will the rest of the money be found?
edit : I should have spell checked Schwarzenegger in the title, now my idiocy is plain for all to see. Forgive me my transgressions please PA forum
"That is cool" - Abraham Lincoln
tbloxham on
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Interesting times.
If only there was some other means of raising tax revenue.
Well, miniature in comparison to the whole US, but California is still a major world economy, and a hugely diversified one with an educated workforce who are typically willing to move to work in a new industry (California has a large population of people who have already done so)
If anyone should be capable of meeting this crisis, it should be California, and if California can't then I don't believe any major world economy can. Even China can't survive if it has noone for its sweatshops to sell goods to, and if there are no jobs to be outsourced, India won't be too hot either.
I think the gas tax might work, the representative from San Francisco could introduce it (since whomever does introduce it will become the scapegoat to be hung out to dry by the anti tax people). It might also be combined with current gas taxes, and made inversely proportional to price as a percentage, making gas taxes revenue neutral with changes in gas prices. ie...
gas is $1/gallon, tax is 50%
gas is $2/gallon, tax is 25%
gas is $4/gallon, tax is 12.5%
Which might soften the fear of even higher gas prices if they go up again if it was a normal 5% increase in sales tax or something.
Let's see - Prop 13 requires that any tax-related bill in the State Legislature has to be approved by a 2/3 supermajority, which makes it near impossible to get any passed. Not to mention that it completely gutted the commercial property tax base (as commercial properties rarely change hands, meaning that the trigger for reassessment rarely happens.)
Yeah, I think there isn't enough scorn to be dropped on it, as well as the initiative system.
I figure it's a nice pairing with our penchant for sneaking in ridiculous spending under the guise of bond measures.
Nearly everything in the budget is constitutionally mandated, thanks to initiatives.
2) California hasn't seen anything yet. Between 2010 and 2012, there is going to be a firestorm of regulations coming into effect, which, while very good ideas, took for-fucking-ever to be developed thanks to various delays (seriously, we knew about this stuff at least since Captain Planet), and so are happening way too goddamn fast. The agencies involved are trying to reign the regulations back a bit, now that the recession has temporarily reduced pollution production, but unless the EPA says "Uh uh, no, fuck you!" we're going to be dealing with a lot more problems involving just about any company who uses a lot of diesel equipment, and any largish project site with storm water runoff. There will eventually be savings from lower health care costs and such, but the up front costs are going to be massive, and the projections were based on the illusion of pre-2008 prosperity.
The money doesn't "not exist"; it's been maldistributed or tied up in the production of unneeded excess inventory (in this case, lots and lots of shitty McMansions). The problem is bigger than California and the solution has to be bigger as well; in this case, the federal government, because only it has the power to make up for the shortfall in aggregate demand and thus kickstart the economy back into gear.
However, I do know that there are immediate steps California could take to help. Aren't a lot of the state's property taxes frozen, or grandfathered in? So some dude in a mansion could conceivably pay less in property tax than a family in a bungalow. Rectifying that would probably be a good first step.
Step 1: Legalize marijuana production, sale, and use
Step 2: Tax the now legal marijuana and have harsh penalties for bootlegging it
Step 3: Profit!
Lather, rince, and repeat throughout the other 49 states. We'll smoke our way out of this recession, by God!
I would agree if this was a low tax state, but it is not. If other states with lower tax rats can balance their budget I don't see why Cali with it's higher taxes should be unable to balance it's budget.
As previously mentioned doing away with the prop system mandating spending would be a good start.
Oh I agree wholeheartedly about cutting the prop system, I think after this year we can all see that. Nevertheless, there needs to be some more revenue found. The residents and businesses here relies heavily on the government to run and we can't just cut everything.
Fixed
We tried that with tobacco. People just quit, and now the programs that were being funded by cigarette taxes are facing revenue shortfalls.
Legalization would theorretically help lower law enforcement and prison costs, but good luck cutting police and prison expenses. Ahnold doesn't have anywhere near the political capital it would take to face down police or prison guard unions - no one in the state does.
Reinstating the $150 hike in vehicle registration would close half of the budget gap. Of course, first putting it there got the last guy fired.
Realistically, this is all rearranging deck chairs short of a constitutional convention. Letting 50%+1 voters add on billions of new spending for any pet cause every election with no regard to revenue flow is a suboptimal way to budget a state.
in addition to the other objections, step 2 could turn out to be nearly impossible because marijuana is really, really easy to grow, especially compared to tobacco, and it's pretty difficult to monitor and tax the equivalent of trading tomatoes from your garden.
Tax rates are frozen based on the last sale price of your house. Which means if a seventy year old man on fixed income in a modest house suddenly sees property values around him skyrocket, he won't suddenly have to find an extra $3k/year to cover the extra taxes.
Is tobacco that much harder to cultivate? If marijuana were legal, I don't think people would be nearly as interested in spending their time growing their own.
Most people don't buy their tomatoes from gardens, and penalties would be applicable for tax evasion and unlicensed distribution.
Not so. Property values are allowed to appreciate for tax purposes by 1% annually.
The best (by best I mean most retarded) part of this is that corporate property is not exempted. Since, typically, corporations themselves are bought and sold, rather than buying or selling the property itself, a great deal of expensive, corporate-owned property is massively undervalued for tax purposes. Disney, for example, is paying pennies on the dollar for Disneyland because they owned that property when Prop 13 passed, and its value has since (surprise, surprise) increased by much, much more than 1% annually.
In short, Prop 13 is an example of everything that's wrong with California's state government. It's a proposition, passed with only a bare majority, which amended the state's constitution and unrealistically curtailed the ability of the state to raise revenue, while doing nothing to alleviate the state's costs.
Seriously though, California saw the largest price appreciation from the bubble in housing and probably benefited the most from the increase in leverage and borrowing this nation experienced over the past decade. The implosion of the housing market and deleveraging of America is obviously going to lay waste to the economy of the state. I don't know why people are so surprised that Cali is in such a hole. North Dakota on the other hand has a $1 billion surplus. I think expanding the narrative to say the whole country is doomed because California is fucked is a bit melodramatic. Our country is fucked for a whole bunch of reasons, with the implosion of California being a contributing factor, not the only one.
EDIT: I missed that you actually said the rest of the "world" was doomed given that California was in the shitter. Again, I think this is a bit much but you are certainly entitled to your opinion
I know Cali has done a lot of money raising through bond measures, how do bond liabilities factor into this mess Cali is in now?
I just did a project a while ago about Prop 71 (the Stem cells) and how it is all bond financed but that the entire projected income to pay it back is supposed to come from lowered health costs and increased tax revenue (since those stem cell researchers will be coming in droves and then get taxed).
Does this mean Cali could default on state bonds and be back in the black?
If a hugely advanced, highly diversified economy which produces numerous goods in high demand around the world cannot survive intact then no modern economy can. North Dakota certainly won't see it's surplus last if California can't keep on buying its corn (or whatever other monoculture North Dakota has) If California stops buying, then North Dakota will be billions in the hole within the year. California is the worlds 4th largest economy by itself or something like that. It's problems do not solely stem from the housing crisis, but from poor money management, and a system which made it hugely easy to add spending items to the budget but nearly impossible to add taxes to pay for them. Again, another microcosm of the US and European problems.
Noone thinks the gas tax is a good idea though? I suppose the problem would be agriculture and haulage, although even they can't complain right now while gas prices are low.
edit - I'm also not stating that California will be destroyed or something just because it's in debt, but if it can't figure out a way to keep operating, then we will be looking at a 1930s like recession, and governments around the world being unable to pay their employees.
If Nevada doesn't want legal pot, and California has no measures to prevent their legal pot from crossing the border, the Feds are more likely to get involved. At least then if you got pulled over with five pounds in your car on the highway just before the Nevada border they could call you on intent to smuggle or something.
Prepare for ULTIMATE FLAVOOOOOR
Marijuana tax is simply not a viable solution, California needs money in the next few years, not in 5 years. It's not like huge brand name Marijuana companies will spring up overnight, or that people will suddenly be able to close down supply chains for other crops and grow weed. The whole 'people will grow it themselves' thing is completely absurd though, I can make coffee myself, is Starbucks out of business. I can bake my own bread quite simply, are there no bakers?
And now the state government is at the bottom of its long, slow slide into bankrupcy.
And people are surprised?
Spending increases proposed by the legislature need a 2/3 majority, however the constitution can call for more spending if propositions are added and voted on. It could also call for more taxes, however people rarely go out and make a big fuss demanding to pay more money!
Perhaps then the solution is very simple. Repeal Proposition 13, and get some of these outdated tax laws fixed up so that the burdens are back where they should be.
There's a reason that California is "the land of fruits and nuts".
Man, what a fucking retarded state. You guys deserve all of this.
Keep in mind that all of the problems that seem to come up always seem to stem from referenda.
I feel like a little boy who's lost his first tooth, put it under his pillow, waiting for the tooth-fairy to come. Only two evil burglars have crept in my window, and snatched it, before she could get here...