California (and America and the world)

Paul G. writes:

Have you seen this? Excellent stuff on CA’s budget Armageddon. Just spot on. California seems to be in the process of becoming the society of Atlas Shrugged.

[T]he demography of California today is the demography of America tomorrow, just as the social and fiscal policies of California in the last decade mirror those of the U.S. government today.

One-third of all U.S. wage-earners today have been amnestied from paying U.S. income taxes, as the top 1 percent haul fully 40 percent of that huge load. So, too, in California, the well-to-do and the wealthy are hammered, which is why many have quietly closed their businesses, packed and gone back over the mountains whence their fathers came. …

Demographically, California is where America will be in 2040….

Richard Nixon and Ronald Reagan carried California nine times. But the state is now a fiefdom of liberalism. John McCain’s share of the vote was smaller than Barry Goldwater’s. California today believes in Big Government, open borders, diversity, multiculturalism and the politics of compassion. But what liberalism has wrought in California, its native-born are fleeing.

Still, where California is at, America is headed.

Californians who are running away from the communities and towns in which they were raised have Arizona, Idaho, Colorado, Utah and Nevada to head to. But when all of America arrives at where California is at today, where do the Americans run to?

- end of initial entry -

Dan R. writes:

A great quote from Victor Davis Hanson on the state of his home state:

“At some point we Californians should ask ourselves, how we inherited a state with near perfect weather, the world’s richest agriculture, plentiful timber, minerals, and oil, two great ports at Los Angeles and Oakland, a natural tourist industry from Carmel to Yosemite, industries such as Silicon Valley, Hollywood, and aerospace—and serially managed to turn all of that into the nation’s largest penal system, periodic near bankruptcy, and sky-high taxes.”—Victor Davis Hanson, The Corner, January 18, 2008

LA replies:

“AFTER our society has been destroyed and turned into a Third-World society, we should ASK ourselves how it happened.”

Is that really such a great statement?

That’s the mumble of a neocon who would not dream of lifting a finger to stop the forces destroying our society.

Dan replies:

Your quote is not Hanson’s, but rather your read on the quote I offered. True, Hanson has never lived up to the promise of some of his statements, but the quote here is, in one important sense, not meant to be taken literally—that sense being, “at some point.” To me he is clearly using understatement to underscore the gravity of the situation, and in reality means “now.” I think most conservatives would take it this way, but more importantly, his rhetoric forces liberals to answer a question whose answer is a conservative one.

LA replies:

At some point we Californians should ask ourselves…”

Meaning, at some point in the indefinite future.

To me, that is the voice of a neocon who—despite his high status among paleocons because he lives on a farm his family has owned for several generations and therefore he is automatically imbued with the wisdom of the soil and animated by the voices of his ancestors—looks at his country from a detached distance and won’t lift a finger to save it.

Look at all the credit he got a few years ago for writing about immigration. Yet his writings on that subject came to so little, were so attenuated, so unhelpful.

Neocons can make positive contributions on this or that issue, and they might be good on national defense, but when it comes to anything relating to the cultural survival of our country, there is not a single neocon worth a damn.

A. Zarkov writes:

As a California resident , ( New York City transplant), I’ve watched the Golden State sink into social depravity and fiscal indigence over the last 25 years. I can sum up the causes in one word: excess. Excess consumption, borrowing, hedonism, government spending and immigration. My liberal friends seem to think Proposition 13 (limiting increases in property tax) caused it all. If only people paid their “fair share,” we would have enough money for everything. They can’t do arithmetic. I went to the California Department of Finance website and got “Table B,” which provides a neat tally of California budgets back more than 20 years. I took the 1990 total budget (less federal transfers) and projected it forward to 2008 by increasing the budget in proportion to population growth and inflation. In today’s dollars, it comes out to $106 billion. If only the budget were that amount California would have no fiscal crisis. Clearly the problem is excess spending, not Proposition 13. When I present this analysis, I get a blank stare. Moreover they can’t connect California’s economic and financial problems to the idea of “excess.” Let’s note that I’m talking about mature, highly educated people, not teenagers or even young adults. They should know better, but they don’t. Two years ago when I predicted the real estate and credit crisis, I also got the same blank stare.

By yet another gimmick, California postponed the day of reckoning to July 30 instead of June 30. I suppose the Democrats are hoping they will either get a tax increase or federal money. But I doubt it. The Democrats say that they will not cut the social safety net no matter what. The Republicans say that they will not raise taxes, no matter what. Something has to give. Somehow Obama will have to come up with money for California without it looking like a bailout. I suppose if all else fails California will print its own money in the form of IOUs and try it use them to pay its bills.

LA writes:

I don’t think Buchanan’s article is well argued. I’m sure a connection could be made between California’s disastrous diversification due to non-European immigration and its present fiscal catastrophe, but he doesn’t make such a connection. He refers to fiscal excess, he refers to the wealthiest bearing the brunt of taxation and so escaping from the state; but he doesn’t actually make an argument that ethnic diversity is the cause of the economic woes. For example, he goes on at length about Robert Putnam’s finding that in diverse communities there is less trust. This is true, and important. But what does it have to do—directly—with California’s financial crisis? Buchanan had two different articles in his head, couldn’t decide which one he was going to write, and ended up writing two articles that don’t fit together.

Ken Hechtman writes:

A. Zarkov writes:

By yet another gimmick, California postponed the day of reckoning to July 30 instead of June 30. I suppose the Democrats are hoping they will either get a tax increase or federal money. But I doubt it. The Democrats say that they will not cut the social safety net no matter what. The Republicans say that they will not raise taxes, no matter what. Something has to give. Somehow Obama will have to come up with money for California without it looking like a bailout. I suppose if all else fails California will print its own money in the form of IOUs and try it use them to pay its bills.

This Sacramento Bee article suggests IOUs are likely.

State controller John Chiang warned today that if legislators and Gov. Arnold Schwarzeneggerfail to come up with a budget-balancing package in the next week, he would begin paying California’s bills with IOUs on July 2.

It gets worse. Last time California had to issue IOUs, in 1992, the banks accepted them as cash. Now they’re saying they might not. From yesterday’s San Francisco Business Times:

Bank of America and Wells Fargo are taking a wait-and-see attitude on whether they’ll accept IOUs that the State of California may start issuing as early as next week to small businesses, taxpayers and others due money from the state.

Unlike the last time the state issued IOUs, officially termed registered warrants, in 1992, the nation’s banking industry isn’t flush with capital, so essentially making loans to California’s cash-strapped government may not be a high priority for bankers.

“Any action pursued by the state, such as issuing registered warrants, will require much greater specificity about rates, timelines, terms and many other variables for banks to determine ability to support such actions,” said BofA spokeswoman Colleen Haggerty in Los Angeles. “Speculating on a plan before the Legislature and governor have completed budget negotiations is premature.”

Personally, I think the banks are bluffing. Bank of America took $45 billion in federal bailout money. Wells Fargo took $25 billion. They’ll do what they’re told.

Hannon writes:

A key element in the fiscal difficulties of present day California has not been mentioned here thus far. Mr. Zarkov writes: “The Democrats say that they will not cut the social safety net no matter what.” But what are we talking about here when we say “social safety net”? Programs for the poor? MediCal? The CHP? The real stubbornness and intransigence in all of this is that the private sector has already taken its lumps in reduced revenue and job losses—and continues to do so—while the state funded union workers have dug in their heels against suffering any comparable cuts at the hands of Sacramento lawmakers.

We, the non-government workers of California, pay every dime that state workers get in salary as well as very generous pension packages, health coverage and an overall benefits windfall that most in the private sector can only dream about. It is the unions and the politicians unduly influenced by the unions that “won’t budge.” They have refused to make any concessions in this current crisis while the rest of us have no choice because we do not have the political insulation (or armor plating) they have.

Just how inept and fiscally over-extended CA state government is can be seen in the annual budget figures and by the clear evidence of zero planning for future lean years. It can also be seen here, where the list of state agencies goes on for miles.

June 28

Dan replies:

I don’t think it’s worth pursuing this any further, as it was just a quote, but still a good one, I think. I agree with you on neo-cons and the disappointments of Hanson and am content to let things stand. And at least I haven’t claimed that Hanson “radiates” or “emphasizes LOVE.”—

LA replies:

Sorry if I was too contrary. It wasn’t his list of the problems that set me off, that was fine; but the limp wristed passivity of his “at some point we should ask ourselves.” Maybe I’m oversensitized to language which gives the impression that it’s confronting a problem but really is not.

Dan replies:

Yes, there’s a semantic issue here. And Hanson’s record is, as I’ve mentioned before, disappointing. I guess we’re in the territory of the Mark Steyn debates. Though I think Hanson’s statement stands well on its own, I have the fear that when push comes to shove both he and Steyn will find a way to give comfort to the “mixtopians.”—Dan

An Indian living in the West writes:

California is a microcosm of America. The profligacy of the Californian state government is matched by the profligacy of the federal government. This is a link is to a movie which is a must see for all Americans (the numbers in that movie are astounding but they are actually small compared to what they have become after all the bail outs and Obama’s spending plans):

Most Americans haven’t got a clue how deep a hole America has dug for itself. The federal government’s unfunded liabilities currently add up to a staggering $113 trillion by some calculations (in 2009—the number is balooning due to compounding of interest on debt). How many Americans know this?

There are some very astute investors who are now convinced that the U.S. government will go bankrupt and that the dollar will become worthless. There are three very astute investors who have stated this openly: Marc Faber, Jim Rogers and Peter Schiff. There are videos on the internet of these men that cover the issues.

What is very striking to me is how difficult it has ebcome for any politician to discuss openly the measures that are necessary to fix the problem—all politicians pay lip service to the idea of reducing the debt but no one is serious about it. All Americans get from their politicians is rhetoric, soundbites and cliches.

LA writes:

I don’t know anything about Marc Faber’s economic ideas. But his website, which deals with investment advising, is dominated by a picture of The Dance of Death. That does not, to put it mildly, suggest a sound person with a sound view of things. If you wanted medical advice, would you go to a doctor who used The Dance of Death as his logo?

Indian living in the West replies:

Marc Faber’s record as an investor has few paralells. He has called the top of almost every bubble or boom correctly the last few decades. His most famous call was before the stock market crash of 1987 (which he correctly called just a few weeks before).

He correctly predicted the crash of the U.S. housing market in 2006 and the top of stocks globally in 2007. He also predicted the boom in Asia in 2002.

As an investor, his record is impressive and enviable. I would not disregard him on the basis of a painting on his web site. The painting also has a meaning attached to it—Faber is of the Austrian School of Economics and regards fiat money economic systems as fundamentally unstable—with ultra-speculative booms and busts caused by central bank monetary policy. The dance of death perhaps depicts the perennial economic disasters wrought by fiat money.

Faber showed in a recent Wall Street Journal article what caused the American economic bust of 2008. Unlike Nobel Prize winning geniuses like Paul Krugman, Faber did not blame lack of regulation (anyone who has any familiarity with the sheer volume of banking regulation would never make such a silly assertion). He attributes the U.S. economic bust to the expansionary monetary policies of Fed Chairman Alan Greenspan who kept interest rates artifically low for three years and precipitated the greatest bubble in American history—the housing bubble of 2001 to 2006.

ILW continues:

Also, here is Peter Schiff on America’s economic woes.

LA replies:

The Faber article, published in Februrary, ends with this:

So what now? Unfortunately, Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner were, as Fed officials, among the chief architects of easy money and are therefore largely responsible for the credit bubble that got us here. Worse, their commitment to meddling in markets has only intensified with the adoption of near-zero interest rates and massive bank bailouts.

The best policy response would be to do nothing and let the free market correct the excesses brought about by unforgivable policy errors. Further interventions through ill-conceived bailouts and bulging fiscal deficits are bound to prolong the agony and lead to another slump—possibly an inflationary depression with dire social consequences.

Posted by Lawrence Auster at June 27, 2009 04:04 PM | Send

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