Socialism in California
“Today, California boasts the highest tax rates, the highest number of unemployed residents, the lowest credit rating and the largest deficit in the U.S.”
California is facing a debt crisis. The election scheduled for May 19 may authorize the state to raise new revenues, but polling consistently shows the electorate voting down the new propositions. What comes next? Will the Treasury or the Fed back up California’s debt?
Chriss W. Street provides a financial scenario for the future at Forbes Magazine.
Mish tracks the California state revenue stream. Tax collections are falling 16 percent short of revenue estimates.
Hugh Hewitt comments on the tax revolt.
California’s state controller defines the crisis.
The L.A. Times reports on state contingency planning in case the ballot proposals are defeated. Cuts to programs, yes, but these proposed cuts run up against federal mandates. If California cuts too drastically, it will not receive federal bailout funds already allocated. Another obstacle to raising tax revenues: bills require a two-thirds majority in the legislature, and the Republicans don’t want to raise taxes. The Obama administration has already threatened to withhold federal funds unless health care workers’ salary levels are restored. Some talk about union influence over Obama’s response here. Why does the state of California provide nursing care for 400,000 elderly people?
In March California’s unemployment rate rose to 11.2 percent. Dan Walters projects a 14 percent unemployment rate next year.
The city of Contra Costa has decided not to prosecute misdemeanors because of budget cuts. Might as well invited all the criminals in the state to come to your city. The state’s cost-cutting plans include releasing 38,000 inmates from jails. Scare tactic?
The mayor of Los Angeles has called for a fiscal emergency declaration to allow him to lay off thousands of city workers. Los Angeles is scheduled to go bankrupt around the end of the year.
What happens next? Even if the feds guarantee California’s debt, there might not be any buyers. California’s debt has been sold off hard recently. Union interests are difficult to break, and there are no proposals to stop funding for illegal immigrants. State and city workers have hard feelings as they have not gotten their usual pay raises, and it seems inevitable that thousands will get laid off.
Socialism produces disillusionment when it can’t find pools of money to appropriate.
Is this merely a healthy, overdue correction as socialism gets rolled back? Or is California facing an ugly future with increasingly desperate unemployed people meeting a cutback in law enforcement?
We found a debate on California’s future at ChicagoBoyz.
We don’t endorse this analysis of a “tipping point” between taxpayers and tax consumers. This threat has been with us since the federal Constitution was ratified, and several founders warned against the ability of voters to vote themselves benefits at the expense of taxpayers. That is how the system has been working from day one. It took a global financial crash to bring into focus the absence of sources of credit for continued deficit spending. It’s understandable that the Democrats would continue to spend recklessly as revenues decline and credit becomes unavailable. Democrats have no fiscal responsibility, and the only way to turn them back is to defeat them in elections.
The Obama administration is following California’s policies into greater deficit spending even as California-watchers are counting down to Doomsday. Will California become the first failed state? If so, the same fate must be in store for the United States under Democratic government.
Taxpayers are angry, and the interesting part of the discussion at ChicagoBoyz has to do with disillusioned and unemployed people leaving California. We are surprised at how much discussion there is around the net regarding migration. We’ll have more to say about this in future posts.
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