California Sinks into the Financial Abyss: The Media Mentality of this Circus Follows

 Abstract: This is a continuation of my earlier post in which I examine the hopelessness of California and its Marxian Budget.  Here, we look at some bozo that pretends to direct state funds and to the echoes for more money from the LA Times, the LATrines for short.  Today we find no solution but only dire predictions and threats from some ‘person’ who holds the title of California State Controller who can only wave his arms in fear and a ‘commentary’ from the Times on spending caps.  We read some ‘economic’ theory from an ‘independent source’ that is non profit but who instructs in the benefits of tax increases.  Raising taxes is the solution! This is so hopeless as to make me want to sneak across the border into Mexico for political and financial relief. Canada’s taxes are too high for me.

 The leading question, from last blog[1] on this sordid matter, was:  Why cannot these elected ‘leaders’ manage to find a way to keep away from huge debts and inevitable bankruptcy? The answer is: because they don’t have to and don’t want to. They want to keep power by spending and giving the vote to illegal aliens and much more. They will go bankrupt and fall prostrate screaming and bawling before they cut spending.  Are they watching Iceland? Their debt soared to 14X the GNP. What a wonderful way to achieve prosperity! Of course their currency collapsed to zero.  What they should have done was to raise taxes!

 Here is some fluff from California State “Controller” John Chiang:

 “Visiting the Fresno Rotary Club for the first time, California State Controller John Chiang didn't hold back.”If you think the tax increases they're talking about are stiff, or if you think the spending cuts they talk about today are drastic, you have not seen anything yet,"[2] said Chiang.”-- Calif. Controller Discusses Budget Crisis in Fresno Monday, January 26, 2009 [Emphasis is mine in all quotes.]

The Golden State has recently refused to pay state tax refunds[3][4] as they panic and watch their bank accounts vanish.  A blog reader pointed out that this was the equivalent of printing their own money.[5] All this was been predicted by this author. [6] [7] [8] Not alone in their slide into economic oblivion they are accompanied by other large states like New York, New Jersey and probably Massachusetts, where the situation is, of course, also quite hopeless.[9]

 This hopelessness is based on the Snake Pit Theory[10] of politics wherein those politicians who are apt to lose anything, however slight,  will manage to make matters terminal by grappling so as to  lose everything as they dance around the snake pit jeering the opposition and daring them to jump across for bloody war. This is a form of group mental illness that can only be solved by massive loses at the ballot box in a future election. A good bankruptcy judge might have some good suggestions too.

 Comments from the ‘Press:’

“As California grapples with a fiscal crisis, state lawmakers are facing painful choices about where to cut spending and how to increase revenues this year. California is one of only three states that require a "supermajority" vote to pass a budget, a constraint that results in deadlock and chronically late budgets. The economic downturn has contributed to a massive budget shortfall now estimated at more than $40 billion -- roughly $15 billion for the rest of the current fiscal year and $25 billion in 2009-10. Even in good times, California's outdated tax system does not bring in enough revenue to support the schools, universities, programs and services that Californians want and expect.”

And more from Jean Ross:

All we heard here from the drooling socialists was that cuts would be draconian [a cliché] and that taxes would need to rise.

From a previous blog on this issue:

“They have a $104.3 billion budget with a $ 15.2 billion deficit and  $7 billion in spending cuts.

Having passed high school in that state I am at a loss to see what the problem is. In a progressive society, this amounts to only a $ 7.2 billion dollar deficit and the unreasonable and antisocial law that prevents the state from deviating from a balanced budget with no more barrowing is trivial. “[12]--California Crumbles as Paralyzed Politicos Pass Some Phony Budget: Arnold Will Veto This Wreckage by rycK.  Sep 17, 2008. [Emphasis is mine in all quotes.]

Some number crunching for wonderful events past Sep 2008:

Apparently, since Sep of 2008, the deficit has soared to $42 billion! Gee, that happened fast. Could we use some analysis for the words of Jean Ross[13], “sensibly balance[d] budgets” here? It looks like if we look at the $42 bln deficit and try to tax to balance this budget then we get a hefty 40% increase in taxes for the taxpayers in California. Gee.  How long will it take to hit $100 billion or then a trillion?

Ross uses sophomoric reasoning to conclude that tax increases will increase spending in the state quoting Stiglitz[14]:

 “Consumers buy less and businesses produce less when the economy is weak. Therefore,

the key to promoting the state’s economic growth in the short run is to encourage

spending on goods and services.4 Stiglitz writes: “In a recession, you want to raise (or not

decrease) the level of total spending – by households, businesses and government – in

the economy. That keeps people employed and buying things, and makes it more likely

that businesses will want to invest to serve that consumer demand.”5 However, state

spending reductions have the opposite effect: Each dollar less that the state spends

generally reduces consumption by the same amount.6 This dollar-for-dollar reduction in

consumption tends to occur because state spending cuts disproportionately affect lower income

Californians, who typically spend all of their incomes. For example, every dollar of

cash payments to low-income families that the state cuts would reduce the money that

these families have to spend on rent, groceries, and other goods and services by an equal

amount.”

 This doesn’t work for several reasons: 

 [1] People are fleeing California because of the high taxes and raising taxes will only cause more people to leave. Increasing taxes generally results in lower government revenues.  Just giving money to low income families produces debt or comes from higher taxes.

 [2] Raising taxes means lower profits for CA businesses so they will not expand and may choose to leave the state, which with a 40% tax increase would probably be the highest taxed place in the world. Businesses are fleeing California now by the minute.

 [3] Raising taxes means raising property taxes and many only live in the state because of Prop 13.

 Add to this the looming depression where CA’s unemployment levels will soar from the current near 10% to 20% or higher.

 Such mindless bawling and tax mongering is the basis of the left-liberal neo-Marxian party in California. There is no end to their spending and taxation. Of course, they will beg Obama for alms and whimper and beg and then spend some more. They will NOT cut spending. They WILL offer free drugs, free medical, free anything to illegal aliens to get the Hispanic vote.  Jean quotes governor Patterson of NY about the Stiglitz letter, but she does not mention that he said he couldn’t raise taxes as the state was losing 80,000 people a year because of the high taxes and poor business climate.

 "If you start taxing at times when [revenues are] receding, you'll drive job creators out of the state," Paterson said.” Governor Patterson quote.”[15]

 You see, there is no end to the Jean Ross argument: if you raise taxes and people leave the state then you just raise taxes and become more prosperous. This is a mental disorder that infects socialists. They have nothing except what they can pry from others.

 California is finished as a society and now the only hope is that Obama will send them 40 bln so they can enjoy the drugs and sunshine and boost the deficit to 75 bln in 2010, or higher. We are going to see California as the test society in the very near future. Places like Iceland, Estonia, Serbia and soon England and Ireland and Switzerland go bankrupt and it will be interesting to see what happens.

 Financial hysteria like this is spreading and we will soon see a world depression from such massive debt. California can show us how to fail first so we may get a chance to avoid some of this.

 California could wind up looking like Zimbabwe. It already looks like Tijuana.

 Raising taxes is easier than smoking a pipe full of crack in the Mission District so why haven’t we taxed ourselves into prosperity in New York? Well, then let California DOUBLE THEIR TAXES—not just a 40% hike, and we can see their society come into flower!

 Get out of California as soon as you can.

 rycK [a 5^th generation Californian in exile]

 Comments to: ryckki@gmail.com