California’s Dreaming

I can’t say I have a first-hand feel for what’s going on in California, since I live on the opposite edge of the country, but here’s the story:

Yesterday California voters defeated ballot proposals to deal with the state’s financial problems. These included a spending cap, extending tax increases, borrowing against lottery revenues and tapping dedicated funds.

I take it California voters want to hear some better proposals for dealing with their $21.3 billion budget deficit — something along the lines of mugging the Tooth Fairy.

Jim Christie writes for Reuters:

“The public is under the delusion that they can have everything — have potholes filled, new freeways, a good education system — but they aren’t willing to pay for it … A lot of critical services are going to be cut and there will be serious consequences,” said Jim Hawley of the Elfenworks Center for the Study of Fiduciary Capitalism at St. Mary’s College of California.

There is talk of California getting a cash bailout, along the lines of what’s been thrown at Wall Street. I’m inclined to say no. If the citizens of California are not willing to tax themselves to save their own state, I think they should live with the consequences. This is not like a business failure, in which the bad decisions of a few executives cause a ripple effect of more failure that impacts many blameless people.

Juliet Williams writes for the Associated Press:

Political observers say Schwarzenegger and lawmakers will have little choice but to go after even politically sacred programs such as schools. …

… The choices facing the governor and Legislature are daunting,” said Jack Pitney, a political science professor at Claremont McKenna College in Southern California. … Many Californians have been hearing about the state’s budget problems but have yet to feel the severity of the crisis. That will soon change, Pitney said.

“For a lot of people, the budget’s been an abstraction. But with the next round, there will probably be serious consequences, particularly in the schools,” Pitney said.

Last week, the governor said he will consider shortening the school year by seven days, laying off up to 5,000 state employees and taking money from local governments, which likely would translate into cuts to police and firefighting services.

Only 19 percent of California’s voters bothered to vote, Williams says.

Michael Finnegan writes in the Los Angeles Times that voters share the blame for the California’s dysfunction.

Nearly a century after the Progressive-era birth of the state’s ballot-measure system, it is clear that voters’ fickle commands, one proposition at a time, are a top contributor to paralysis in Sacramento. And that, in turn, has helped cripple the capacity of the governor and Legislature to provide effective leadership to a state of more than 38 million people.

Clogged freeways, the decline of public schools, an outdated water system and a battered economy are just a few of the challenges demanding action by state leaders. Instead, they are consumed by yet another budget crisis, one that voters worsened Tuesday.

“No one’s really stepping back and confronting the harsh realities that face our state in a critical sense, because of constraints put on our elected leaders,” said Mark Baldassare, president of the Public Policy Institute of California. “We’re unable to focus on the long term and the big picture at a time when we desperately need to do so.”

Finnegan’s analysis is very good; I recommend reading all of it.

It’s worth remembering that the Reagan Revolution effectively began in California with the passage of the infamous Proposition 13, which capped property tax rates. Once upon a time California was considered one of the best-run states in the nation, and with the best public school system. In the 1960s California’s schools were ranked first in the nation. Now they are ranked at number 48. Way to go, California.

Update: Via John ColeMegan McArdle writes,

There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice. But actually, we do have a choice: we could let them go bankrupt. And we probably should.

I am not under the illusion that this will be fun. For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you’re going to pay as a result. Your states and municipalities will pay higher interest on their bonds if California is allowed to default. Also, the default is going to result in a great deal of personal misery, more than a little of which is going to end up on the books of Federal unemployment insurance and other such programs.

But on the other hand, Megan argues, if we bail out California, it would amount to shoveling money into a bottomless pit, and ultimately we’re not helping California by enabling the “lunatics in Sacramento.” But in California’s case one can’t just blame Sacramento. California voters and the referendum system have made the state ungovernable. And I’d like to point out that many other states allow referendums without being as irresponsible as California has been.

Update: Rightie bloggers are rejoicing this outcome and see it as validation of conservatism. Just wait until the 2010 midterms! Allahpundit laments that voters “love their government goodies even though they manifestly can’t afford them.”

“Government goodies,” of course, are things like decent public schools, a criminal justice system, firefighters, bridges that don’t fall down, etc. America used to be able to afford those things. “Used to,” as in “before Reaganism.”

59 thoughts on “California’s Dreaming

  1. I remember Hari Seldon, and how his predictions gradually went askew after a few decades.

    It should be noted that Tuesday’s ballot propositions were slammed by both progressives and conservatives – at least that’s what I saw as far as endorsements. Apart from myself (yay on some, nay on others), I don’t know who voted for them.

  2. Let’s not forget the money extracted from the states by Bush to ameliorate his disastrous foreign policies, even before the fan was sullied.

  3. Erinyes: The income taxes could not have been 55 percent. The State of Calif. has never had that high a taxe rate; much less a total collection, of 55 percent.

    It is possible that combined federal, state, FICA, and unemployment taxes, combined with costs (bonding, Workman’s comp, licensing) added up to that, but to propose that was all the doing of the state, in the form of “income tax” is, at best confused, and at worst intentionally misleading.

    The highest rate in California is 9.3 percent of all income above 61,000. The total rate on an income of 90,000 is actually 2,228.56 on the first 61,000; for an aggregated rate of about 5 percent on the first 61,000 (because each increment is taxed at it’s own rate; hence the description of,”progressive” income tax.

    (The complete breakdown of the Calif. income tax is here

    To all and sundry: California does consider taxes. As I said, the majority of Californians have almost always approved of temporary tax increases to solve problems. Take, for example, the problem of buses in the Los Angeles area. In the late ’70s the fares were going through the roof, and the service was being cut. A sales tax increase was passed. Residents in the service area of the Los Angeles Rapid Transit Distrtict (RTD, now MTA) voted to increase local sales tax by .25 percent for five years (1979-1984).

    This was because the RTD had raised rate from $.50/.10 (base fare, and unlimited transfer for 2-4 hours), to $.85/.25/.25 (Base fare, one tranfer, with option for one more, or confiscation by the driver). That was in 1979. I was paying $10.50 per week to get to/from school (5 times the base fare, plus five transfers).

    So we passed a rate limit ($.50/10) and a tax. When the tax expired, the rates went to $.85/15.

    The problem isn’t that we aren’t willing to pay. It’s that a minority is able to prevent us from paying.

    What’s happene here is this: The lesgislature can’t get the 66 percent it needs to pass the tax directly, because the Republican Caucus won’t have it (mostly because, I think, it would give the lie to huge amounts of their platform).

    Which means the legislature has to do nothing, or pass a bill out to the voters for approval. Even that comes with poison pills (because the Republicans insisted on compromise, or they would just torpedo the whole thing and bottle it up in procedural delays.

    Then they told the electorate they had to do it. Well we looked at it, and there was no way this was in the long term interests of the state. The spending was something like 3:1 in favor. It died. That’s because it was bad.

    They did a good job of selling it, outside the state, to people who won’t have to live with it. But it was a bill of goods.

    s: California is a mixed state (or perhaps 3, or 4). There’s the Urban Near Coast (From Point Reyes down to the Mexican Border). That’s mostly liberal leaning; with some mixed pockets in the central area (Monterey to Ventura) where there’s a lot of farming just behind the hills.

    Then there is the Rural Central Valley. From Sacramento all the way down to the Border. Very Conservative.

    The Desert is also pretty much “Self Sufficient Individualists”, are pretty conservative too.

    Then there is the area N. of Pt. Reyes. That’s more like western Oregon, only with trees.

    The Eastern side of the Sierras (Owens River Valley, etc.) is more to the temper of of the Central Valley. So the state is, by population, more liberal than not. But it’s only more, not completely. Which means a bit more than 1/3rd of the legislature (and just barely above half of the Congressional Representatives; to include on very Blue Dog senator) are Conservative. And some of them are REALLY conservative (or just whack-a-doodle nutcases like Rorhbacher).

    Calif. is the state that gave us David Drier (who it has been my occaisional privelege to vote against, not that it will do any good in Arcadia, which is a mixed enclave of folks who trend to the Conservative side of the fence; despite pocket of Quakers and the like)

  4. Crap: I screwed up, and managed to grab the unmarried head of household rates.

    The single rate is a bit higher, but not much: The max rate is still 9.3, but it kicks in at 44,000.

    For Business, we keep hearing how expensive it is to operate in Calif, well it’s not so.

    Corporations other than banks and financials 8.84%
    Banks and financials 10.84%
    Alternative Minimum Tax (AMT) rate 6.65%
    S corporation rate 1.5%
    S corporation bank and financial rate 3.5%

  5. I’m sure the voters had their reasons for voting down the tax increase, good or bad, but as a teacher I worry that the children are the ones who will suffer the worst from CA’s current budget issues. I left the state three years ago, before the situation got REALLY bad, and even then, the school I worked in was being strangled horribly with budget cuts. Teaching had become a cutthroat profession, with teachers literally stealing from teachers to get the supplies they needed to get the job done. I spent easily a thousand of dollars each year to buy what the school wouldn’t give me. My budget supplied me with less than a penny per student per day to teach. (To the Californians on this post: you have to know that you are hemorrhaging teachers. I am only one of the exodus that is wandering to find more supportive states and schools, or to easier jobs in the private sector. I hope the state figures out how to retain your good teachers soon: you’re losing them faster than you might suspect.)

    No doubt it’s worse now, and will only get worse as time continues. I can guarantee you that the children are being cheated of the education that might help them fix the sins we’ve committed against them financially. Adults get what they pay for: the kids don’t get a say in the matter, and I think their health care, social services and education should stay untouched, even if the voters have to tighten their belts and suffer a few indignities.

  6. The problem with the 1A/1B “solution” was that it made a temporary fix, which would, about five years from now, have started to strangle the schools again (that, or other services) because it would remove money from the General Fund, and any increase in income would have to first go to making sure there was a fixed ratio of money set aside for rainy days.

    All while there are mandatory minimums for ecucation (as a result of Prop. 98, which Arnie was all for). You can’t have money for schools without taxes, and you can’t get nre taxes when it takes 66 percent of the legislators/public to sign off on it. There are too many people who will say, “It doesn’t affect me”.

    People who send their kids to privates schools can say, “I don’t see why I should have to pay for public schools,” etc.

    It’s not about tightening belts. It’s about losing our shirts.

  7. Hey Terry, I’ll send you one of my pay stubs. I saved them, being the pack rat I am.Granted , all the payroll deductions added up to 55%, but as I said, I still lived better back then than I do in this tropical depression called FLA. My wife worked checking groceries in the retail clerks union, and I was added on to her insurance, both dental and medical.
    Believe me,I’d rather pay 55% and get what I got than have things as they are now. back then, none of my union “brothers ” wanted to work overtime becaues of the hit you’d take between state and fed taxes.

  8. Erinyes: I believe you the total withholding was 55 percent. I’ll also bet you saw a fair bit returned. What you said, however, was, “My income tax was 55%.. Not only could that not be true (because even with the highest marginal rates ever at the federal level, your stated income would have been taxed at less than 55 percent. With the tax code for the years you specified, the highest marginal rates [which didn’t kick in until somewhere in the 250,000 range] were less than that).

    Contextually it also appeared to me you were sayig California was taking that much out of your pay.

  9. Let’s not forget the money extracted from the states by Bush to ameliorate his disastrous foreign policies, even before the fan was sullied.

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