California economy crashes

[marmar]

from BloggingStocks:



California economy crashes
Posted Dec 11th 2008 12:27PM by Douglas McIntyre


The state of California is nearly out of money and nearly out of options.

According to the San Francisco Chronicle, Gov. Arnold Schwarzenegger sharpened his attack Wednesday against his fellow Republicans as he declared that California's budget shortfall has grown to $14.8 billion for the current fiscal year -- several billion more than the shortfall legislators already have been unable to solve.

One option to balance the budget is to cut state services. Politicians rarely like that. It looks bad to the voters. The Legislature could raise taxes on homes and businesses. That looks bad to the taxpayers, too. With falling home prices, failing businesses, and rising unemployment, getting more money into the state treasury may also be impractical.

That brings the conversation around to what happens on the day California can't pay its bills -- any of them. State workers don't get checks. Neither do contractors. Business failures and unemployment gets worse. The house begins to collapse in on itself.

It is too early to make a definitive statement about the eventual solution, but the only ready source of the magnitude of capital needed is the federal government. That would be the same federal government that is printing money to save banks, car companies, and mortgages. How many states will get into real trouble in the next couple of months? Add Michigan and Florida to the list. Unemployment is rising and property prices are plunging. The situation could give the bailout war a whole new front to fight on.

- Douglas A. McIntyre is an editor at 247wallst.com.


http://www.bloggingstocks.com/2008/12/11/california-economy-crashes/

[Skink]

1. Arnold could lay everybody off like he wants to.

[opihimoimoi]

2. Heck of a job Bush...ya went and fucked America...one State at a Time

[Raschel]

11. And I'm sure there will be more to come after California.

[rvablue]

15. Sorry, and the thought of even coming off for a minute that I'm defending Bush makes me

want to :puke: but California with Prop. 13 in action was fucked a long time before Bush got into office.

[Old Codger]

3. oregon

will probably fall in there some day also, no sales tax and falling unemployment they rely on state income tax...and have no rainy day fund to speak of

[davidpdx]

57. Actually, Oregon does have a rainy day fund

Though it will probably be gone soon. They need to repel the kicker tax for businesses and raise the % of the rate where the kicker will go to individuals.

[lostnotforgotten]

4. Grover Norquist Has Won!

'To Norquist, who loves being called a revolutionary, hardly an agency of government is not worth abolishing, from the Internal Revenue Service and the Food and Drug Administration to the Education Department and the National Endowment for the Arts.

"My goal is to cut government in half in twenty-five years," he says, "to get it down to the size where we can drown it in the bathtub."'

Grover Norquist: 'Field Marshal' of the Bush Plan
By Robert Dreyfuss

This article appeared in the May 14, 2001 edition of The Nation.
April 26, 2001

It's early April, tax time, and Grover Norquist is moving into high gear. The President's $1.6 trillion tax cut package is working its way through Congress, and Norquist--president of Americans for Tax Reform and arguably Washington's leading right-wing strategist--is rushing from meetings on Capitol Hill to strategy sessions with antitax activists. One minute he's putting the finishing touches on planned demonstrations in Washington and all fifty state capitals on tax-return filing day; the next he is juggling appearances on right-wing talk-radio shows and stints on MSNBC and Fox. And, as he has for nearly eight years, Norquist is coordinating the agenda for his signature event, the regular "Wednesday meeting" that draws more than a hundred representatives of conservative groups to a standing-room-only conference room at his organization's L Street offices.

Snip .....

http://www.thenation.com/doc/20010514/dreyfuss

[lostnotforgotten]

44. Kick For Grover Norquist Reference

eom

[davidpdx]

58. He's been doing his best to get Oregon in a bind

through ballot measures via Bill "scumbag" Sizemore. Fortunately, they have had very limited sucess.

[Jane Austin]

5. Um, I don't think states that have high property taxes are going

to appreciate having to give money to the home state of Proposition 13.

[rvablue]

18. No they are not...and if CA voters are going to want any help, they are going to have to overturn

Prop. 13 first.

Imagine this: In the 1970s a young couple buys a modest home in the LA suburb of Culver City.

It cost, oh, I don't know, let's say $95,000.

Cut to today. Culver City is one of the hottest, up and coming neighborhoods in LA. You want to know in today's market how much that house is worth: probably $1.2 million

And according to Prop. 13, that couple, even though they may now be retired, are paying the 1974 tax rate on that house.

Yep, that's how it works.

I lived there for more than a decade and it always floored me. Especially when the majority of the rest of the country is pulling its own weight.

[EFerrari]

23. Are you on crack? Do you know how much more CA puts in than it takes out?

[rvablue]

26. No, I'm not on crack and I lived in CA for more than a decade

I take ZERO issue with the fact that CA puts more into the federal coffers than other states.

Those are federal taxes. And I have argued vehemently in the past to folks living in red states when they complain, that they would be up shit's creek without blue states.

With that said, Prop. 13 deals with property taxes....those taxes go to pay for things in your cities and towns.

Because of Prop. 13, municipalties have gone to the state to fill the gap. Now the state no longer has any money.

Before you spew your outrage at me, being an expat of SF, you must of heard of the great and heralded columnist, authoer and historian Peter Shrag.....here's a littel article he wrote this year dissecting how Prop. 13 has eviscerated CA:

http://www.sacbee.com/110/story/986912.html

And if you have not yet read his book, "Paradise Lost", you must do so before trying to sound like any kind of authority of anything regarding California in the last 25 years....expat or not.

[JDPriestly]

31. In an economy in which large numbers of people are losing their

jobs and their homes, property taxes will also prove to be a poor source of revenue. It will just take more time for the government to realize that it isn't getting the money. A decline in sales tax revenue and income taxes is immediately perceptible.

[rvablue]

34. As far as CA goes, this has nothing to do with the current financial crisis

because of a referendum the voters passed capping property taxes in 1973 the state has been in trouble for many, many years.

Read this and you will see why: http://www.sacbee.com/110/story/986912.html

[JDPriestly]

35. I was responding to a post that was claiming that property taxes

are better sources of income than sales and income taxes. It's all the same in the end. But sales and income taxes are less regressive on people who happen to have owned a property for a long time. My elderly neighbor is 91. His daughter lives with him in a house they have owned for some 40-50 years. If they had to pay the property taxes, they would lose their home. That would be tragic for them and all of us who live in this stable neighborhood (which is surrounded by gangs).

[rvablue]

36. You were responding to my post....maybe by mistake....but I NEVER

made the argument that property taxes were a better source of income than sales and income taxes.

And I agree that it is not fair that that 91 year old lady lose her home because of property taxes.

But you know what the old lady down the street here does? She applies for a special low-income senior waiver.

And CA should do the same. But there are millionaires living in the hills of San Diego and LA and Santa Barbara and San Francisco and on and on and on who are paying 20 yr. old tax rates on their homes.

CA can continue to justify and ignore that Prop. 13.

It has to be repealed our CA will stay a mess. But that would depend on the CA voter who think they are entitled to pay less property taxes than the rest of the country, so I doubt it will happen.

[JDPriestly]

30. The couple that bought the house in 1974 are probably retired

now and living on a fixed income. And their taxes have risen by a specific percentage each year. They have not, however, risen at the same rate as the value of the houses of their neighbors have risen. The idea of Prop. 13 is to encourage stability in neighborhoods and help elderly people stay in their homes. It is an essentially good idea, but needs modification. Why? Because the same rules that apply to the now elderly couple apply to corporations. And the elderly couple and the corporation are very different. The elderly couple will eventually die. Their heirs will sell their house, and the buyer will pay the tax applicable to his or her purchase price. With a little attention to legal niceties, the corporation never dies, and its tax base never changes. So, it's the corporations like Disney (think Disneyland) that benefit unfairly from Prop. 13, not the homeowners.

We pay high sales taxes and income taxes in California. That money is not coming in right now. But just wait, property taxes across the country will also decline in 2009 thanks to the foreclosures. Empty, abandoned properties do not generate property taxes. The books may reflect the taxes as past due, but they will never be paid.

[ContinentalOp]

46. It's a tax on the young. We subsidize older homeowners.

Our property taxes in L.A. are about $8000 a year, so it's not like us Californians are not paying our fair share. It's just that the young who were unfortunate enough to buy during this housing bubble are subsidizing our parents.

[ContinentalOp]

48. Yeah, because nobody here has high property taxes.

:eyes: Do you even know what Prop 13 is? My property taxes are HIGHER because of it, not lower.

[Ian David]

6. So, who is the "Economic Girle-Man" NOW?

Don't Be Economic Girlie Men!
http://www.youtube.com/watch?v=SUzUbtIptqQ

[Ian David]

7. Self-delete. (duplicate) n/t

[KakistocracyHater]

8. freeze federal taxes

& keep it all for the state? Create the new American auto industry, put it all "on credit", they've been doing that for decades anyway, pass a law forbidding instant payment on California Bonds? Sell War Bonds?

[glitch]

9. Sounds good to me. nt

[sam sarrha]

10. they have been wanting to do this for decades, it will split the state in 2 or 3 states

about 70+% of state taxes go to LA, LA doesn't want to lose the 25%, the north doesn't want to lose the 70%

i always wanted partition..

[ContinentalOp]

51. We don't need to split the state in half, we need to secede!

Then we could stop sending so much of our money to the federal government for red state welfare. We should then eliminate any immigration from citizens of the U.S.A. but open our border with Mexico. :P

[Odin2005]

12. I hope this kills the "taxes are evil" mindset of most people.

You Californians REALLY need to get rid of Prop 13, that was a F-ing disaster to you state. Same with that BS rule that you need a 2/3 majority to raise taxes.

Here in Minnesota we have a Puke governor who will veto any tax increase, so we are truly fucked. "Timmy the Tool" Pawlenty's anti-tax insanity is ruining us.

[rvablue]

16. There is one more facet to the CA that contributes to them tanking financially

and it is tied to Prop. 13.

Prop. 13 capped property taxes at the level of when someone purchases a home.

Property taxes go to municipalities.

Municipalities fund the majority of education....hence, no growth in education funds.

So California voters went to the ballot box and voted in Prop. 40 (I may have the number wrong but this is now law) that said that 40% of the state budget had to automatically go to funding education.

Put on top of that the power the of the state prison guard union (guards with only a high school education make upwards of $100,000) and quite a few other things and you have an unbalanceable budget.

CA's sorry state, unlike most of the country, has little do with the current economic firestorm, it's only been enhanced by it.

[rvablue]

13. 1st way to solve this, as a former Californian.....they need to start paying

property taxes like the grand majority of other Americans do: based on the value of their property.

As long as Prop. 13 exists, California will remain in debt. Forever.

[Odin2005]

17. IMO Prop 13 was, really, a theft of tax money by senior citizens from future generations.

:puke:

[rvablue]

19. I don't entirely disagree with you, but remember, it was passed on a referedum

and so there had to be millions of more people that voted for it in order for it to pass.

Prop. 13 should be the fucking poster child to fight the anti-tax crowd.

Taxes pay for schools and road and police and a lot of other shit we need to function as a society.

Until, CAers come clean and overturn Prop. 13, they should not be eligible for any federal bailout.

Not while I am, and every other person I know, who pay taxes based on the value of their home are paying a higher tax rate.

And a fabulous by product.....it would drive down the ridiculouly inflated prices of homes in CA.

[EFerrari]

21. We send tens of billions of dollars in federal taxes more than we get back

every year. But your acrimony is noted.

[rvablue]

22. Federal tax dollars don't pay for school, police departments, fire departments, etc.

I get you.

I go back just as hard against the still remaining red states, making the point, "Hey, what the hell would you do without the blue states."

The federal tax dollars you send, that may be more, are based on salaries and population, everyone else is paying the same exact thing, although it may be less because wages are lower and there are not as many people.

Prop. 13 has to do with the fact that CA can no longer properly fund their municipalities, then they turn to the state to fill the gap, and now you are where you are.............

[EFerrari]

25. Yes, I'm a native so you don't have to explain Prop 13 to me.

It's been horrible for our municipalities. When I went to school, we had schools -- not these awful hollowed out replicas of actual schools.

Regardless, if the Feds want those checks in the billions to keep coming, they better damn well bridge this. And I have to say, it's creepy as hell for you to talk about fabulous falling real estate prices as if that didn't affect real people who have been trying to surf this crazy economy as best as they could all these years. CA is not full of rich people. It's full of people living in different numbers. We may make more in some sectors but we all pay more for everything, too.

[rvablue]

27. You need to read "Paradise Lost" by Peter Shrag.....the federal

government will never be able to solve CA's problems until they pay property taxes like everyone else, based on value of the property.

Why should the rest of us pay more to subsidize you?

And no, you are merely trying to smear me by saying I think is it fabulous that home prices are falling, but when there is a seller's market for tiny, one-bedroom home, 30 minutess outside the city selling for $500,000 something had gone horribly wrong.

[rufus dog]

42. Explain your logic

You agree CA is the largest donor to fed taxes compared to $s received. How do your property taxes in another state subsidize me?

[rvablue]

32. Was just trying to pass on some insightful information and background

sorry if that hurts so much.

[JDPriestly]

33. Given the exaggerated rise in property values in California

over the past ten to 15 years, elderly people would lose their homes without Prop. 13. Prop. 13 needs to be changed, but not eliminated. Taxes on properties owned by corporations should be revalued to current market values every so many years or upon certain events. It is the failure of corporations to pay their rightful share of taxes on their properties that is causing the shortfall.

Another advantage of Proposition 13 is that it encourages people to stay in their home neighborhood as they age. If we did not have Proposition 13, we would have even more social problems in low income neighborhoods. And we already have gang injunctions because of the serious problems. Keeping older people in their neighborhoods and homes is an important social policy.

[rvablue]

37. How about what most other states do: give low income seniors a waiver for prop. taxes.

But I have one prediction:

If someone/organization put up a referendum with both the increased taxes on corporate holdings mixed with the senior low income waiver and it would fail.

Because no one wants THEIR property taxes to go up.

And, hence, the quagmire for CA, because no CA lawmaker is going to commit political suicide to get the margins they need in the State Legislature to overturn a voter referendum.

[JDPriestly]

40. In California, people over 55 are entitled to delay paying their

property taxes until they sell their home. That sounds great, however, in many cases, the homes of the elderly are only sold when the elderly person goes into a nursing home. The money generated from the sale of the house is used to pay the nursing home expenses. If the money is mostly owed in property taxes, the government will get its taxes upon that sale, but have to pay a larger amount share of the nursing home expenses for that very elderly person. So, the waiver of taxes is not the solution.

[XemaSab]

68. If yuppies moved in and old people moved out

do you think that would help or hurt gangs? :shrug:

[girl gone mad]

39. Prop 13 also contributed to CA's housing bubble.

Artificially low taxes means that older people, divorcees, etc., who ordinarily would have downsized or moved to more affordable areas held on to their close-in property and created a shortage of housing for young people just starting out. It also added to the "buy now or be priced out forever" mentality.

[gardenista]

65. Bingo

We pay over 7,000 per year, and the codgers down the street pay a few hundred.

Same size house. Except there is a Reagan shrine in one of them.

[XemaSab]

67. That AND we need to stop funding

propositions. x(

[kickysnana]

14. Legalize and tax pot n/t

[readmoreoften]

20. Forced gay marriage. Reversal of Prop 8. All gays must have an expensive wedding immediately.

Loans provided by Sallie Mae, courtesy of their soon-to-be-next-crisis-but-they-probably-don't-even-know-it-yet student loan shark program.
Gays save California.
Gay governor elected becomes first Gay President in 2016.
First gay president absolves gays of all Sallie Mae marriage debt because of their service to humanity through their job-creating, 11th hour wedding industry intervention.

[anigbrowl]

29. I think you're onto something here...it could be a musical!

[XemaSab]

69. You forgot the tax on movies made before 1970

x(

[JI7]

24. term limits are to blame for this

you need people with experience and time to work out budget matters. but with term limits we don't get that.

this is why i will never support term limits for United States Congress.

also we have a shitty Governor that won by being propped up by the media and morons in our own state who liked the idea of the terminator being Governor.

and of course it is way too easy to get a proposition on the ballots.

fucking idiots.

[tjwash]

28. What the fuck you expect? They put tax increases to up and down votes here to the general public.

And then everyone acts surprised when they get voted down by the general public.

[Waiting For Everyman]

38. Maybe Arnie could try eliminating outsourcing in CA???

Tax the hell out of it. That might work. Oh and, a really friggin' severe tax on outrageously excessive personal incomes, and a luxury sales tax. Whoever the gougers are, go to them and make them cough it up - maybe they'd go away, an added benefit.

Let the heavy-lifters (!) pay the freight for a change.

Cutting services doesn't just look bad to voters - in severe times like this, they're necessary... even more necessary, so that wouldn't be a particularly smart move.

[XemaSab]

70. Cutting services is an abstract thing

Until:

You went to a state school that is about to lose accreditation.

You have been burglarized, and you called the cops last week for a brawl on your street, but you are about to lose police funding.

You almost had a fire on Thanksgiving, but you are about to lose fire funding.

You can't get a job because projects aren't being built in the state.

In short, it's easy for you to say. x(

[Mind_your_head]

41. California and *I* have a LOT in common

The state of California is nearly out of money and nearly out of options.

I'm willing to talk with/listen to anyone who has any good ideas.

[Hekate]

43. Enron raped us, guys. And we send way more taxes to the Feds than we ever get back, unlike Alaska...

Our economic situation is a lot more complex than any one or two things, and for all of you California bashers out there -- millions of people live here who never did anything to deserve this, including me and my husband. Mr H is about to be working for free by the time February rolls around, because the community college where he teaches is running on reserves right now. Money from Sacramento? Sorry. Not unless a mighty big rabbit gets pulled out of the Governator's hat.

Hekate

[Nikki Stone1]

45. Hekate, you are 100% right

As a Californian, I wish I could bump your post. Community colleges have been in trouble since the late 80s.

[mondo joe]

47. I feel for Californians. But I'm also pointing out that Prop 8 further damages the CA

economy.

[depakid]

54. How so?

:shrug:

Californmia's got plenty of troubles- not the least of which is the ridiculous supermajority required to pass a budget (which renders the state hostage to self-destructive right wing ideologues, but Prop 8, while odious- doesn't look me to to have substantial economic impacts.

[mondo joe]

55. Same sex weddings = revenues.

Not enough alone to turn the economy around, but significant $ anyway.

[depakid]

56. No doubt that there are some revenues foregone

but my guess is that it's chook feed compared with California's systemic problems.

Curious. Do California ballots have economic impact statements included with ballot measures? Oregon does- so people can actually weigh the cost/benefit of their decisions if they choose to.

[mondo joe]

62. As I said, it wouldn't turn the economy around. But $63million is nothing to sneeze at.

"In June, the Williams Institute at the University of California, Los Angeles, which studies sexual orientation and the law, estimated that legalizing same-sex ceremonies in the state would result in about $63.8 million in government tax and fee revenue over three years."

http://www.nytimes.com/2008/11/07/us/07marriage.html?_r=1&hp&oref=slogin

[northernlights]

49. they're slashing & burning budgets here in Maine

UMA has been told to cut a huge chunk of its budget. The new prez is looking at everything, including faculty and possibly eliminating entire programs.

What's scary to me is that she's looking at enrollment levels in classes and programs. There is a ww shortage of MLTs, and healthcare is one of the last growing fields. But while the 1st year of the MLT program is general pre-med sciences so has high enrollment and student/faculty ratios, the 2nd year of the MLT program has a very, very low student/faculty ratio because it's such a small, specialized clinical program limited to MLT students.

We'll find out in January. Hopefully if they cut it in UMA, they'll merge it with UM Bangor. Otherwise I'm sort of screwed...again. Actually, I could be seriously up shit's creek with a borrowed paddle.

[all.of.me]

50. Maybe Billy Joel will write a song about it... nt

[XemaSab]

71. "And there won't be snow in California.... this Christmastime"

http://www.youtube.com/watch?v=xoJf-9j2kNs

(Frankly, it's looking pretty grim here.. there was supposed to be teh HUGH storm this weekend... nothing so far. :scared:)

[Fumesucker]

52. There are two basic solutions to a budget crisis..

Increase income or cut spending.

Of course you can combine the approaches but those are the two basic options.

Increasing income doesn't seem to be an option at this juncture.

California must cut expenses, the only question really seems to be which expenses should be cut.

[davidpdx]

59. Nice chart. I think unfortunately the worst two areas that will be

hit are health and human services, K-12, and higher education. The problem is you can't cut prisons that much, once you lock someone up you are pretty much stuck paying for it.

[Fumesucker]

63. Changing the law retroactively was done not too long ago..

In order to absolve some people of crimes they had committed.

But those were corporate big wheels so there were a different set of rules than for the lumpenproletariat.

[Cleita]

64. Increasing income is the best option at this time.

We are still one of the richest economies in the world. It's time to start making those moguls who benefit from our golden state pay their taxes, most of them from out of state and out of the country. Of course Ahhnold can't do that because he will lose his base of support.

[Cleita]

53. Governor Grey Davis isn't looking so bad now is he? n/t

[blue_onyx]

60. I never understood why people went along with the recall

Was Davis that bad? To me, a recall is meant to remove a person who is corrupt and/or who has broken the law. The person you voted for may not make the decisions you approve of but that's the chance you take when you vote. There's never a guarantee that the candidate you select will do a great job. The way to fix this is to vote him/her out of office in the next election, not to have a special election because you have buyers remorse.

I remember when people were talking about changing the Constitution so that Arnold Schwarzenegger could run for President on the Republican ticket but I haven't much about this recently...I guess things really do change quickly in politics.

[Cleita]

61. I don't understand why Californians didn't fight it either.

I doubt if the petitions that were signed were actually accurate. Darryl Issa paid an army of people to go across state wide and get petitions signed. These weren't volunteers but paid operatives. I talked to a lady who told me that the people with the petitions had two petitions, one against Grey Davis and if you weren't against him then you could sign another petition for him. DUH OH! I petitioned our local Democratic Club to look into it, but they didn't. The way the whole thing unfolded was like a really manipulated publicity stunt. I don't believe Issa had the money for this so I think it was being fed by out of state money. Governor Ann Richards once said so in an interview that she believed high Republican Washington wheelers and dealers were behind it. I really want Issa, Schwarzenegger and this whole issue investigated one day. That was one smelly Austrian fish we were served.

[gardenista]

66. There was absolutely NO leadership from the Democratic party

during that heinous time. None.

My hope is that Obama has taught the California Dems a thing or two about something called a ground game.

Dems were complacent, lazy, and completely disorganized and incoherent. Did we learn? Somewhat, but we still let Prop 8 pass and we would have been able to kill it with the right ground game.

Never again.

[XemaSab]

72. When has there EVER been a ground game in California?

It's a whole 'nother rant, but I am pretty pissed about California democratic organization. x(

[Cleita]

73. I've stopped going to Dem meetings in my area because they are controlled

by DLC types and everyone that is involved is ancient, not that I'm not, but still there are hardly any young people involved. I hope that young people get involved throughout the state because that's what it's going to take. About prop 8, I suspect that my county was influenced by the various mega churches in the area. I can walk to three of them myself.