Will California become America's first failed state?

Will California become America's first failed state?

www.guardian.co.uk

California has a special place in the American psyche. It is the Golden State: a playground of the rich and famous with perfect weather. It symbolises a lifestyle of sunshine, swimming pools and the Hollywood dream factory.

But the state that was once held up as the epitome of the boundless opportunities of America has collapsed. From its politics to its economy to its environment and way of life, California is like a patient on life support. At the start of summer the state government was so deeply in debt that it began to issue IOUs instead of wages. Its unemployment rate has soared to more than 12%, the highest figure in 70 years. Desperate to pay off a crippling budget deficit, California is slashing spending in education and healthcare, laying off vast numbers of workers and forcing others to take unpaid leave.

(visit the link for the full news article)



[edit on 4-10-2009 by grover]

One of the key ingredients to the California disaster that politicians in the golden state hate to discuss is proposition 13 passed in 1978 which limited property taxes to:

en.wikipedia.org...

Proposition 13, officially titled the "People's Initiative to Limit Property Taxation," was a ballot initiative to amend the constitution of the state of California. The initiative was enacted by the voters of California on June 6, 1978. It was upheld as constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn, 505 U.S. 1 (1992). Proposition 13 is embodied in Article 13A of the California Constitution.

The most significant portion of the act is the first paragraph, which capped real estate taxes:

Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed One percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

The proposition's passage resulted in a cap on property tax rates in the state, reducing them by an average of 57%. In addition to lowering property taxes, the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. It also requires two-thirds vote majority in local elections for local governments wishing to raise special taxes. Proposition 13 received an enormous amount of publicity, not only in California, but throughout the United States.

In limiting the amount of property taxes a locality could collect they became dependent on the state to make up the shortfall which has contributed to the draining of the state budget...

When you add to that the two thirds requirement to increase taxes and a Republican blockade to increasing taxes to fix the problem then you have a perfect political storm for the collapse of the eighth largest economy in the world.

This is not to put all the blame on the Republicans...both parties are guilty...but what they are really guilty of is putting their party ideologies before the needs of the state.

I am predicting a wholesale eviction in Sacramento this year of incumbents of both parties. It will be a bloodbath but until the flaws which include proposition 13's stranglehold on state finances the problem will keep repeating itself.

www.guardian.co.uk
(visit the link for the full news article)

[edit on 4-10-2009 by grover]

Well, it is really all of their faults. Liberals and "progressives" tax the crap out people and take away economic opportunities. Fish that are 2 inches long are taking priority over millions of americans in that state, the area now called the valley that hope forgot. So think about that and do some reasearch.

reply to post by kingoftheworld

Specifically the California disaster is caused by both parties refusing to act like adults when it comes to fixing the budget...and if fixing it requires tax increases so be it...it is foolish to think otherwise.

I have to disagree with the basis of your argument, grover.

The problem is not that California needs more money. They have an economy that is larger than many countries. The problem is that California is spending more than it takes in.

The whole idea of a budget is not to determine how many taxes need to be collected, but to determine how much money an entity has to spend. That entity then has the responsibility of spending within its means to accomplish its goals. If the money to accomplish those goals is not available, it must either cut the goals or find more money. In the case of a government, the only way to find more money is to increase the tax revenue through either a more robust economy or increased taxation rates.

If a household wishes to establish a goal, say for instance purchase a larger home, that household can either cut back other expenditures or try and find better jobs or investments for the members of the household. If they cannot do one of these, they cannot have the larger house. If they do get the larger house without properly budgeting for it by one of the methods above, meaning through debt without the ability to pay that debt, the result will be that they lose that house.

I have watched for many years as California made some bonehead decisions in their budget. Money is spent on education for illegal immigrants, welfare for illegal immigrants, tax breaks for environmental companies who have poor business plans (that are unworkable without the tax breaks), contractor fraud, and tons of poorly thought-out programs designed to do little more than exchange benefits for votes. As the load on the government increased, the government continued to increase taxes on the citizenry until the citizenry demanded a cap on taxation. That was Prop 13.

It is a sad fact of modern society that people believe that a budget exists to determine how much income they will have. It doesn't work that way. A budget acts as a limit to outgo, not income. Now it's time to witness the result of California's spending spree.

I only hope other states will wake up and see the result of unrestrained spending before we have 50 such stories.

TheRedneck

They made their bed, let them lie in it.

If California implodes now, there still might be time to save the rest of the country. One can only hope.

reply to post by grover



If you want to restrict something you tax it. If you want less people to smoke you increase taxes on it. The same thing goes with revenues. If you want less revenues, increase taxes.

Why can't California understand this?

reply to post by grover


I wish I could do that with my employer. You know, the people that give me money in exchange for my services. "Hey, I spend too much money so you need to pay me more. What? I should cut back my spending? No can do- I've budgeted in a mandatory increase in spending for feel-good things. What? I'm fired?"

You are correct but at the same time the drain on the state budget by localities relying on the state to make up the loss of revenue from property taxes is a major consideration as well.

Back in the late 90's James Gilmore was running as the Republican for governor here in Virginia. His only real platform was a promise to repeal the hated car tax which went to localities...well he got elected and to fulfill his promise he had to jury rig a system where the state promised to refund the loss of revenue to the towns, counties and cities and the system almost bankrupted the state.

yes they will... which is bad news for the rest of us as california itself could be a leading country in the world, if they are failing then you can expect the rest of us to be close behind.

Originally posted by abecedarian
reply to post by grover

 

I wish I could do that with my employer. You know, the people that give me money in exchange for my services. "Hey, I spend too much money so you need to pay me more. What? I should cut back my spending? No can do- I've budgeted in a mandatory increase in spending for feel-good things. What? I'm fired?"

How liberals/progressives can fail to understand your logic borders on criminal to me.

Since California cannot print money like the federal government does, it must balance its budget.

The other thing going on in CA as the crisis deepens is something I call the "taxpayer drain". Simply put, businesses and individuals that are net payers of taxes are leaving CA at an increasing rate. Immigrants and low income people with high birthrates - net users of taxes - are coming in behind them to take advantage of CA's attempt to become a nanny state.

Previous prediction of mine now coming true: CA's infrastructure would start to fail as revenues no longer keep up with spending.

The liberal/progressive attempt to create a nanny state in CA has failed. Still they want to now try it on the whole country. They foolishly believe that it failed not because the entire concept is flawed (which has been shown in many places), instead they still cling to the misguided belief that CA somehow just didn't do it right.



[edit on 10/4/2009 by centurion1211]

It sounds to me like they need to cut out their welfare programs and.....OMG.....only spend as much as they make!


I know...I'm crazy....WTF am I thinking?

Originally posted by JIMC5499
They made their bed, let them lie in it.

If California implodes now, there still might be time to save the rest of the country. One can only hope.

I assure you if Cali collapses it's bringing down some States like a Yellowstone eruption would..

reply to post by bismarcksea


What State are you residing in that does not spend more then they make?

Originally posted by silver tongue devil
reply to post by bismarcksea

 

What State are you residing in that does not spend more then they make?

As I said before, no state can spend more than they make - without a federal bailout of some type.

reply to post by grover


there is a good reason why the property tax is limited. because of limited income for older americans, there was a time where they were thrown out of their homes because they could not pay their rising property tax. prop 13 was the solution. there are many places you could cut fat. university hiearchy are paid like royal subjects. non-violent criminals are being jailed too often for too long. too many state commissions, where directors and staff are paid 6 figure salaries, redundant jobs in differnet state agencies, federal money not coming in for federal mandates imposed on the state. these are just a few off the top of my head, but there several more.

Break the State up into smaller states, then managing debt becomes easier.

Lowering taxes, especially corporate tax, allows expansion of the private sector and wealth creation. Tax increases destroys wealth and private investment.

If you cannot borrow, to restrict the limited revenues, tax increases do not make sense.

[edit on 4-10-2009 by infinite]

reply to post by jimmyx

It was a solution and the state has done much of what you suggest and it is still tanking.

It reaches a point when just cutting services won't suffice and when that happens the whole system either has to be redone or taxes need to be increased or both.

Just cutting taxes and/or services is simplistic.

Oh no I live in Califorina

I don't Understand how you people blame the Liberals for California's problems when the state is run by a Republican...


*SNIP*

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[edit on 4/10/2009 by Mirthful Me]