Let's Talk About California's $16 Billion Hole
Rupert Murdoch ·
May 15, 2012 at 1:29am
Would love to discuss the California budget.
~~~~~
Editor's Note: Welcome back to Ricochet, Mr. Murdoch.
As residents of California know, the state had a projected $9.2 billion deficit as recently as January. But May's updated projection shows that California is on track to run a deficit of nearly $16 billion for the year. Below is Gov. Jerry Brown's weekend address to the people of California. Brown hopes to pass a November ballot initiative which would raise sales and income taxes.
What do Ricochet Members think of the Governor's proposal? What should the state do to return to fiscal sanity?
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Comments:
Apr '11
Re: Let's Talk About California's $16 Billion Hole
The Federal Government and Courts are preventing them from cutting their spending in ways they deem necessary for their own fiscal health? Madness! This is why California, Illinois, and New York (CINY) if they ever hope to come to grips with their budget mess need a Federal Government that will give them flexibility over things like Medicade, and other rules.
The concept of an Ammendment that locks in spending seems stupid. I think if we are to learn anything from CINY it is, "Never promise something in the future that you can't give now."
In fairy tales conflict is often created when a character makes a reckless vow, the fulfillment of which always forces them to do something they will regret.
Re: Let's Talk About California's $16 Billion Hole
California is losing its businesses and top earners to more business friendly states like Texas. Raising taxes seems like it will only expedite this process.
I'm at a loss as to what measures the state should take to raise revenue. At this point, California really needs to take a hatchet to the spending, and implement measures that keep our successful businesses in the state and to attract new ones.
My dad is in the construction industry in California, which has suffered mightily the last few years. One thing that would really help that industry is addressing the skyrocketing workers comp rates.
Edited on May 15, 2012 at 2:25amRe: Let's Talk About California's $16 Billion Hole
Does the new budget go far enough to really balance the books? How does the governor intend to attract business and employers back to the state with this plan? We are the richest, most beautiful and inventive state, and we're allowing it to be strangled by government unions, endless red tape at all levels and empowered minority greenies!
Apr '11
Re: Let's Talk About California's $16 Billion Hole
One of the primary problems California faces right now is not merely a product of spending versus taxation, though that plays a prominent role. Too often budget conversation center around these as if they were the be-all and end-all of the debate.
California, even with real spending cuts (not reductions in the rate of growth passed off as cuts) will not attract business and wealth to it as long as it remains a regulatory and legal nightmare for those looking for a place to settle. For a real example, the CEO of Carl's Jr. said in an interview it didn't make business sense to open more stores in California, as it took far too long to get through the mass of red tape.
Paperwork, delays in time, all these add to the cost of doing business in California. As long as the state government plans to regulate and act as baby sitters, business has no impetus to move to or remain in our state.
Jan '12
Re: Let's Talk About California's $16 Billion Hole
Ol' Moonbeam sure seems eager to push even more job-creators out of the state. Any bets on how much larger the deficit will be next year?
I suppose I could sympathize knowing that his hands are tied by mandates from the courts and the federal government, but even if he did not support those particular decisions and legislative acts, he supports the progressive philosophy that begat them, so my sympathy runs thin.
Nevertheless, it's unlikely I'll leave my home state. I'll just have to buy less in order to avoid the increased sales tax. At my age, I doubt that anything short of continual civil disorder will force me out.
Jul '10
Re: Let's Talk About California's $16 Billion Hole
The people of California, in their finite wisdom, determined that the eminence gris to steer them past the rocks of fiscal ruin is Governor Moonbeam, previously seen humiliated by a swarm of medflies. And the emigration crisis was already in full tilt at the time (explaining the election results).
The plan, of course, is to achieve an ACORN-manufactured federal mandate for loose money and crony capitalism in 2012, turning back those racist Tea Partyers, and looting whatever is left worth looting from "lesser" states. I take comfort from the way the polls dive every time Obama does something (stupid) to improve his poll numbers.
Of course, a bankrupt federal government bailing out bankrupt state governments in a world where the Treasury has to buy its own paper was once the preciously held dream of a certain Soviet Union.
Re: Let's Talk About California's $16 Billion Hole
Jerry Brown was once in the habit of posing as a fellow who could think outside the box. Since becoming Governor again, he has proven that he is really a hack -- wholly owned by the public-sector unions.
What is required in California is a draconian reduction in the number of those working for the government, in the salaries they are paid, and in the contributions of the state to their pensions. Short of that, nothing will suffice. And let's face it: As long as the public-sector unions dominate California politics, nothing of the kind is going to be done.
In a post below, I raised the possibility that California will have to leave the American currency union and devalue. It was intended as a puckish suggestion. But it might actually be necessary.
I am confident that Governor Brown and the Democrats in California are hoping that Barack Obama is re-elected President and that the Democrats retake the House. What they want and expect is a bailout. In the meantime, they will tread water. It will be interesting to see how the bond market responds.
Mar '11
Re: Let's Talk About California's $16 Billion Hole
Raising tax on the wealthy at the State level has generally only resulted in less revenue. The wealthy hide assets or move. You cannot balance a State budget by increasing taxes on the rich. Look at Maryland, there tax on the rich was supposed to increase revenues by $106 million, instead they lost $257 million.
The rich can leave, the poor can't leave as easily. If you drive out the wealth creators you have no tax revenue to spread around.
http://www.realclearpolitics.com/articles/2010/09/29/taxing_the_rich_107350.html
Jul '10
Re: Let's Talk About California's $16 Billion Hole
Diane Ellis, Ed.: ...
My dad is in the construction industry in California, which has suffered mightily the last few years. One thing that would really help that industry is addressing the skyrocketing workers comp rates.
The 2 million worker federal rise in the disabled number has doubtless been inflated by desperate workers in industries like construction where there are real hazards and some occupational injuries are hard to clinically disprove (e.g., back injuries).
Of course, all of this just stokes the crisis in pure Cloward-Piven style.
Apr '11
Re: Let's Talk About California's $16 Billion Hole
No the budget does not go far enough. Californian bureaucrats are counting on proposed revenues. Their current budget shortfall verifies this and they've shown nothing that should change anyone's mind that they have now become any more serious regarding their budgeting, spending or revenue generation.
Aug '10
Re: Let's Talk About California's $16 Billion Hole
"K - 14 education"? Is that a typo, or does California inflict government education on students all the way up to the 14th grade? And with $53.7 billion in expenditures, one would think that education would be ripe for further cuts. Parochial school and home schoolers are able to get good results on a shoestring--why not government schools? Because of the lovely teachers' unions, of course.
May '10
Re: Let's Talk About California's $16 Billion Hole
I have little confidence that Brown's proposals will realize even the gains he hopes for, which are too little anyway. In a year or two we will be wondering how the new taxes netted so little new revenue, and how the "cuts" that made it through the legislature resulted in no real reduction in revenue. We have many, perhaps all of the systemic ills of the Mediterranean nations, and about as much chance of facing up to the problem short of a major crisis. (Hmm, now we have a "Mediterranean Economy" to go along with our famed "Mediterranean Climate")
Despite the bleak picture in the fiscal data, I don't sense much feeling of panic or even serious concern amongst the public here. Most folks aren't thinking about it. The few that do follow such things, the fiscal policy wonks, are generally cynical about our prospects. Not an encouraging situation.
Credit to the Gov for raising the issue, but expecting courageous action from the CA legislature is a fool's bet.
Mar '11
Re: Let's Talk About California's $16 Billion Hole
C. U. Douglas:
California, even with real spending cuts (not reductions in the rate of growth passed off as cuts) will not attract business and wealth to it as long as it remains a regulatory and legal nightmare for those looking for a place to settle.
I think this is the most important step to balancing California's budget.
This place is absolutely Kafkaesque when it comes to regulations. That so many innovative industries nonetheless call California home, however, is testimony to the incredible advantages the state can still offer growing businesses. If industry's hands were untied, I imagine investment would skyrocket.
If ever there were a case for growing an economy out of debt, it is California.
May '10
Re: Let's Talk About California's $16 Billion Hole
As a Californian I say Brown's proposal is the "same old, same old." It's the traditional Democrat/socialist solution to problems: Tax the rich because we the representatives and elected officials cannot bear to freeze spending, much less cut a cent from the babies who rely on the nanny state.
May '10
Re: Let's Talk About California's $16 Billion Hole
I think 13-14 are including the heavily subsidized state junior colleges.
Apr '11
Re: Let's Talk About California's $16 Billion Hole
Is this post by the Rupert Murdoch? Wow. Ricochet is attracting some top shelf contributors.
California reminds me of NYC circa 1975 or so, nearing bankruptcy and ungovernable. Unfortunately, I don't believe Gov. Brown is capable of taking the necessary steps to improve the situation. Increasing sales and income taxes will only quicken the decline.
I hate to be a braggerly bragger but MY Gov., Chris Christy, for all his bigmouthed bravado, has taken small but effective steps to improve Jersey's fiscal health. In his first year he effectively froze spending levels. Last year he capped increases to property taxes to 2% (Jersey has the highest property taxes in the nation). This year he's proposed (and likely to get) a 10% cut in income taxes. He also changed the funding mechanism for charter schools and made it easier to get a charter.
My advice to Gov. Brown is to put a call into the Big Man for a mano e mano chat.
I love Greg Gutfield. Consider a better time slot for Red Eye.
Bill McGurn has written a piece in the WSJ comparing our Govs.
http://online.wsj.com/article/SB10001424052702304371504577404503988018824.html?mod=WSJ_article_comments#articleTabs%3Dcomments
Edited on May 15, 2012 at 3:21pmDec '10
Re: Let's Talk About California's $16 Billion Hole
A point to remember here is that in 2010, when the rest of the country finally lurched rightward, California went further left. The state is completely run by the D's. At the time Dennis Prager rightly pointed out that California had become a petri dish for leftist governance. We are already seeing the results, and it will get much worse before it gets better.
Mar '11
Re: Let's Talk About California's $16 Billion Hole
And investors - I believe that Mr. Murdoch has been a (financial) supporter of Ricochet from the beginning.
Re: Let's Talk About California's $16 Billion Hole
You can't completely fault the Governor for attempting to spread the misery - income tax on the rich, sales tax on everyone else, and cuts to the state workers.
There aren't many more items in a Governor's tool belt for immediate relief, but his plan doesn't seem to have any long term austerity principles to avoid this repeat of 2008-2010 being repeating again in 2014.
He will likely get sued by the state worker's union as Schwarzenegger did when he furloughed the workers.
The only thing Governor Brown has going for him is the $15 million President Obama just picked up from the FOC (Friends of Clooney). That increases the chances of my money paid in federal tax dollars finding its way to California in a bailout.
Edited on May 15, 2012 at 2:57amMay '12
Re: Let's Talk About California's $16 Billion Hole
California is blessed with an abundance of natural resources, amazing climate and agricultural base, and many of the most entrepreneurial people in our nation.
There are few instances in history of a country, state, etc. so blessed with all that is needed to return to fiscal sanity and have a vibrant growing economy while at the same time being so beholden to a leviathan tax and regulatory scheme that it can't solve its own problems.
Look at Greece, California, then Washington DC. It isn't a matter of if it implodes, it is only a matter of timing and how spectacular.