California is an example of what happens when a state is taken over by its public service unions and indulges in stupid environmental policies that have nothing to do with a sound economy.
As a lifelong resident of New Jersey, one of the most fiscally imprudent states, it may be deemed unfair for me to say bad things about California. But having lived in a state that has "been there, done that," it also endows me with an understanding of what happens when a state is taken over by its public service unions and indulges in stupid environmental policies that have nothing to do with a sound economy.
Governor Arnold Schwarzenegger declared an economic crisis last week in order to demand some fiscal sanity that has not been forthcoming from its legislature. By the end of the month, California will be forced to pay bills with IOUs and we all know that won't work. The U.S. Constitution reserves to the federal government the right "to coin money, regulate the value thereof . . .." As a form of currency, IOUs are forbidden to California.
A recent issue of The Heartland Institute's "Budget & Tax News" monthly newspaper had a disturbing article by Jason Sorens and William Ruger, two members of the University of Buffalo faculty who studied the issue of personal and financial freedom in the nation's 50 States. Their study ranked states on government spending, taxes, and regulations on market transactions and private behavior.
Since Americans pride themselves as a free people, the actions of state government have a direct impact on how much actual freedom they have because "states and local governments regulate workplaces, land use, and health insurance. They tell individual citizens how to educate their children, where they are permitted to smoke, which kinds of firearms they may own, and when they are allowed to buy liquor." And, of course, they levy taxes.
The five least-free States, from the bottom up, are New York, New Jersey, Rhode Island, California, and Maryland. New York State's legislature has been in a complete meltdown, unable and unwilling to tend to business. New Jersey is locked in the run-up to an election pitting an ultra-liberal Governor, Jon Corzine, against a Republican candidate who promises to do a better job of governance, but in New Jersey that is no guarantee of any improvement.
California, ranked fourth from the bottom in terms of freedom, reflects the study's finding that "Liberal states tend to be nanny states when it comes to issues of personal choice." Linked to economic freedom, states that impose excessive taxation and regulation tend to chase people and business away.
New Jersey has had more people leaving than coming to live there and, in the 1990s California saw 2.08 million more people leave than moved there from other parts of the nation. According to the U.S. Census, this loss was offset by a net immigration of 2.02 million from Latin America. To put it another way, California imported poverty along with an increase in the social services these new immigrants (many illegal) require.
One of the factors contributing to the population loss was the high cost of housing in California, about 53.1% above the February 1999 median of $129,300 in the rest of the nation, making housing in California less affordable than anywhere else. When the housing bubble burst in late 2008, California's homeownership rate was only 55.7% as compared to 66% for the entire nation. In more blunt terms, California's white (non-Hispanic) population has been leaving in droves.
The result of this has been a dramatic increase in costs relative to the rise of its population of illegal aliens. By 2004, a study by the Federation for American Immigration Reform (FAIR) that examined the costs of education, health care, and the incarceration of illegal aliens committing crimes in California, concluded it costs Californians $10.5 billion per year. The K-12 education system spent approximately $7.7 billion to school the children of illegal aliens and another $1.4 billion in taxpayers' money went toward providing healthcare to them and their families, about the same spent on incarcerating illegal alien criminals.
Doing nothing about immigration comes with a big price tag and this is increasingly true of the entire nation that is estimated to have some 12 million illegal aliens. Neither the Bush administration of the past eight years, nor the new Obama administration, will stem this wholesale invasion of the nation, not just burdening taxpayers, but reducing the number of jobs available to natural born and naturalized citizens. Amnesty would double or triple the number of new citizens as family members join them.
Of equal concern are the nation's energy policies and, in this regard, California is the template for doing everything possible to restrict the development of its own energy sources and reserves.
The state's oldest oil refinery, the massive 104-year-old Richmond facility, was in the process of modernization, but environmentalists sued and a judge ordered Chevron Corporation to stop work for yet another "environmental impact report." A hundred workers have been laid off and as many as a thousand more may lose their jobs as the project shuts down. That is insanity.
California is highly dependent on imported electricity. As of 2008, its failure to provide for the energy needs of its citizens meant it was short by 23% of the total demand for power. California has been loath to permit the building of coal-fired plants and slow to build those based on nuclear power. California has been a big proponent of wind and solar energy, the least practical means of providing electricity.
Today, California consumes 65% more electricity than it did in 1980. Coal-based electricity imports from other states grew by 60% from 1998 to 2005. Intent on emphasizing "efficient" power use policies, California has discovered that efficiency improvements do not reduce its overall energy consumption and, as often as not, lead to more energy use because people perceive such "efficiency" savings as freeing up more dollars for other energy-consuming devices and activities.
Meanwhile, demands for greater energy "efficiency" have driven up the cost of housing and driven out manufacturing firms because of high energy prices. If the states from which it imports electricity were to reduce or cut off supplies, California would swiftly decline to the status of a third world nation.
Estimates of the amount of untapped oil off its coast on the continental shelf are in the millions of barrels, possibly billions. A reversal of this policy would generate lots of high-paying jobs and reduce the nation's dependence on imported oil.
As this is being written, California faces a $21.3 billion deficit. Its citizens have defeated all of the proposed measures to close it, probably in retaliation for the spendthrift insanity of its legislature.
These are the same policies — immigration, education, housing, energy — being pursued by the Obama administration and, if California is a template for what will occur nationwide, it portends a very grim future.
Re: California’s Fiscal Lunacy
A generation ago, when the democrats achieved their absolute stranglehold on the California State Legislature; prominent progressives proclaimed California as “Liberalism’s Laboratory”. They said “We will lead the nation in liberal government. In the future, as goes California so eventually will the entire country”. Today this prediction is coming true.
California is a utopia if you are a member of an unproductive group i.e. an illegal immigrant, a welfare recipient, or a union member. The state budget is extremely friendly to these groups, at the expense of the balance of the population. Housing costs soar as more onerous limitations are placed on builders by environmental groups. Of course, we should not neglect to mention that housing costs are also affected by California building codes which are the most stringent in the nation. Higher taxes and fees has always been the state legislature’s solution to California’s budget woes. The annual budget kabuki dance between the governor’s office and the state legislature has been going on for decades.
Now, California is at the precipice. In May Governor Schwarzenegger attempted to limit the pay of IHSS (In-Home-Supportive-Service) employees. These employees, represented by the SEIU, petitioned the Federal Government to block the governor’s initiative, which they did. California’s deficit currently stands at $24.3 billion. Every attempt to reduce this through fiscal discipline is blocked by the liberal majority legislature. Working Californians are currently strapped with some of the highest fees in the nation. Private property owners are even taxed on the amount of water they pump from wells drilled on their property!
On Feb 17th in his blog Keynesian Economist Paul Krugman laid California’s current budget crisis at the feet of Proposition 13. Essentially Proposition 13 does not allow for the re-assessment of real estate unless the property actually changes hands. So, in his estimation, since the legislature cannot just reassess and raise all real estate taxes at their whim, Proposition 13 is a “straightjacket” binding the legislature.
It has nothing to do with the estimated $20 billion that the care, incarnation, education, healthcare, & feeding of an estimated 12 million illegal immigrants. NO! It’s all those mean uncooperative property owners that won’t willingly open their wallets! The attitudes of social justice and union paybacks have destroyed the Golden State. This is exactly why productive members of California’s society are leaving almost as quickly as the illegals are pouring in. If California were to deny all apyments of all types to all illegals and agree to exploit the natural gas and oil reserves along the coast, they could not only close the defecit gap but probably turn a profit.
At some point in time we can reasonably expect the federal government to step in and ‘save’ California. I imagine this will take the form of a bond sale by California with connecting federal legislation explicitly giving federal backing to the state’s bond performance. The most indebted nation on the planet will become, in essence, the ‘lender of last resort’ to the most indebted state in the nation.
We can also clearly see that the nation’s elite has closely paid attention to California and is busy urging the enactment of the same prescription nationally. Once again I reference Keynesian Paul Krugman, who in an appearance on Face the Nation last December expressed concern that the new administration’s spending was not enough. He said “I’d like to see it bigger.” Krugman said. “I understand that there’s difficulty in actually spending that much money, and I–they’re also afraid of the–of the T word. They’re afraid of a trillion dollar for the two-year number.”
No one on the federal side seems to be the least bit afraid of the T word. The current administration broke the former administration’s eight year deficit record within the first 45 days. Instead of liquidation, the administration steered two major auto manufacturers into structured bankruptcies that culminated in the UAW owning significant majority positions in the emerging companies. We nationalized the banking industry; and now that TARP money is being re-paid and profit realized, those profits are being redirected by the chairman of the House Financial Services Committee into low income rental housing programs. http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/Barney-Frank–49649362.html
This above paragraph demonstrates the federal government’s determination to follow in the footsteps of California. Ensuring that ‘favored’ groups i.e. unions and the unproductive, are ensured majority positions in this country’s social contract at the expense of taxpaying citizens.
California’s recipe for disaster has new federal recognition. The Waxman Markey cap & trade bill looks to California to inscribe many of those state wide job killing measures into federal law. Particularly laws regarding the construction of new buildings, both residential and commercial, and the refurbishment of existing structures to comply with the latest ‘green’ initiatives. This is no surprise as a California Congressman Henry Waxman, was put in charge of drafting this legislation for the administration.
This is a continuing problem for the Obama Administration. The President himself has so little experience in these matters that he is constantly tapping congressmen and senators to draft mountains of legislation for him. It happened with the stimulus package, where Pelosi and Reid were virtually unencumbered by the White House as they created this ‘porkfest’. It is beginning to look as if this same thing will happen regarding health care. The Obama Administration seems to care little for the ‘nuts and bolts’ of any piece of legislation as long as it grants sufficient control to the federal government.
The MSM is complicit in all this. Case in point: There were over 2,000 tea parties held across this country by fed up taxpayers this 4th of July weekend. Hundreds of thousands of citizens took time from their relatives and families to protest the current spending binge being carried out in Washington. If you did not personally attend one of these rallies, where exactly did you see or hear the MSM reports regarding these protests? If you did attend one of these rallies, where did you see or hear any MSM reports regarding the persons who, agreeing with your position, attended rallies in other portions of your own state? What about other areas of the country? Nothing! Zip, zero, nada. There were no MSM reports regarding these demonstrations against continued government spending. I wonder why?
Could it be that the ‘powers-that-be’ have already decided this issue and the voters’ opinion is no longer welcome? With the current deficit over $11 trillion and rising, and unfunded mandates for Social Security and Medicare totaling additional $50 trillion, a group of politicians that knows they cannot be held accountable for another 18 months is busy re-drawing the boundaries of the American social contract. Their hopes are to re-direct so much of the nation’s remaining wealth to their favored constituents; the unproductive, the illegal, and the unions, that ordinary citizens will be ‘forced’ to pay the cost of the new social contract they will devise. I suspect that at some point our government will simply renounce its debt; not only severing the social contract with its citizens but with the rest of the planet as well.
Is the policeman’s union also taking advantage of the taxpayers of California?
You mean just because they’re utilizing a government-granted collective bargaining monopoly to obtain higher pay and more benefits at the expense of the taxpayers of California when the state has a 22 billion dollar deficit that will be payed for by the taxpayers of California, as well as federal taxpayers by way of federal “bailout” money for the state? Why heavens no! That’s just a silly thing to even suggest!
Thanks. I don’t know much about California, but maybe it’s like Massachusetts, in which the policeman’s union acts as if they think we have unlimited amounts of money with which to pay them. Then if a city councillor or mayor gets on their bad side, they screw them up.