California Declares a Fiscal Crisis! You Think?

After various special sessions of the Legislature, assorted cries from the heart of our Governor, and the usual media sensationalism about an amorphous “they” who did this to us, California is once again broke.


Very broke, it seems, this time around. The only mystery is whether the annual shortfall is to the tune of $20, $25, or $30 billion. (Remember, we cannot print money, though I suppose we could sell bonds to the Chinese in hopes of undercutting the Fed; or we could ask everyone of us 30 million-plus residents to donate $1,000 to Sacramento this year—and in fact every year.)

There are no longer many people here of character and civic-mindedness stepping forward to inform us that we have spent like crazy; and to suggest a modest return to per capita spending levels, adjusted for inflation, of about 5-6 years ago; and to create a more attractive climate for businesses to operate and relocate here. Instead, there will be a common narrative that ensues, one that I would call the five-step, since in my fifty-five years in the state it is becoming all too predictable.

1. The Reality. No one will discuss the mass exodus of a particular type of taxpayer. Thousands of highly-educated, highly-paid Californians the last decades have cashed out their ample housing equities, and left the state due to high income and sales taxes, poor schools, high crime, and an unworkable bureaucracy. We don’t seem to regret why they leave, and whether it says as much about us as them. Many move to nearby low or no income-tax Nevada, Utah, and Oregon where they can commute, work over the Internet, and take advantage of far cheaper costs, but still enjoy a Western-state informal lifestyle. Anyone who flies out of the state gets a good aerial view of these expatriate border cities, these post-California communities—strange phenomena that seem to be referenda on relative state government.


There is no longer the nucleus for any organized tax-payer revolt as in the 1970s; so when the mob-like chorus chants ‘Soak the rich!’ and the “they should pay” rhetoric heats up, the targeted now flee rather than fight.

The number of those with bachelor’s degrees who flee is made up by those without high school diplomas who arrive. The state is tailor-made to destroy the 200-acre farmer or independent small businessperson who deals with new myriads of state regulations, fees, income and sales taxes, mandates and environmental, as well as social, and cultural disdain.

And California is tailor-made to enhance his law-suit-minded employee who slips on his shop floor; the official in the state-owned car who shows up to fine him for the inorganic two-by-four spotted in the farm brush pile; and the drunk driver without registration, license or insurance who plows through his orchard, fleeing his wrecked car carcass and thousands in damages behind—without punishment but with a possible legal grievance for the farmer’s pipeline standpipe being in his way, some thirty yards in from the road. I kid you not.

I say all this sine ira et furore, because it is a done-deal, and I accept that I used to know dozens of such entrepreneurs and now know very few in agriculture. And in the place of the occasional mosquito abatement officer, I encounter a plethora of ubiquitous mobile clerks. A call to an EPA officer might get through much more quickly than in extremis to a constable. We need a pause and philosophical reexamination of what creates and what monitors and regulates wealth.


2. The Taboo. No one is to mention the presence of several million illegal aliens in the state that might make California’s meltdown a little bit more severe than say Montana’s or Utah’s. To do so is to be labeled racist, nativist, and indulging in illiberal scapegoating, even though it is a question of funds not culture, much less race. We dare not explore the reality that very hard-working young Oaxacans come illegally across the border at 18, work terribly hard for 20 years and contribute mightily to the economy, but by their late thirties and forties—still often without legality, without a high-school diploma, and without English—either become mired in low-income, perennial entry-level jobs, or are finally worn out by sending half their hourly wages back to Mexico, or have been cited, arrested, or jailed for various activities, or have become injured in jobs on ladders and on their knees that take a terrible yearly toll on one’s body, or due to smoking, dietary changes, psychological stresses, or alcohol have premature serious illnesses, or have several children in need of special bilingual prep or anti-poverty program attention. Any illegal alien is one tragedy, or chance mistake away from financial oblivion.

There are thousands of exceptions to that narrative (and they are now the hope of the state), but it is an accurate enough politically-incorrect generalization to explain at least some of the state’s structured deficits. Far better it would be to let in a finite number of Mexican nationals, do it legally, try to insist on high school diplomas, and ensure there are citizen sponsors on this side of the border.

3. The solution—on the spending side. We all know the California method here too. Municipalities that have all sorts of overpaid and redundant bureaucrats target for cuts first Police and Fire. These departments then in turn are supposed to galvanize their unions to protest that we will be subject to the vagaries of flame and mayhem if any cutting goes through.


Never mentioned is that the rate of government spending increases always exceeds the rate of both inflation and population growth. The state’s public universities (recall the 1993-4 meltdown) are particularly adept at cutting the vital to protect the superfluous.

When the money runs low, they immediately try to target things like Italian, Classics, philosophy, or English that are bound to garner headlines like, “College to eliminate study of Dante” or “Tenured philosopher faces lay-off”.

They know well that should they gut the twenty or so replicated centers for enhanced learning, or projects for a new literacy, or CSU Monterey -like classes on transgender narratives, the public would shrug and sigh only “about time.”

By the same token, the $150,000-$200,000 (in salary and benefits) administrator (“Special Assistant to the Provost”, “Associate Dean for Special Projects”, “Vice-Provost for Community Affairs”) who does not teach and does not enhance the learning of any students is always sacrosanct. Instead university budget operatives go straight for the only faculty that are a real bargain: the poor part-time PhDs who teach Humanities or Western Civ or Bio 1A for about $5,000-$7,000 a class with about 50 students per course. These poor souls who cobble together classes at multiple campuses make the universities millions, but have absolutely no clout and so often are the first to go—bargains though they are. (The one dividend for the university is that the ensuing cancelled essential courses cause outrage among the students and a belated reaction from their parents.)


Remember, at a UC or CSU, a full tenured professor might on average per year cost between $15,000 and $20,000 a semester course and is, with tenure, untouchable; the part-timers will cost a third of that and always with their head in the budget guillotine. Again, if Wal-Mart paid one greeter at the door $8 an hour and another $25, we would hear mass outrage. I suppose the university’s defense for their 1890s Robber Baron employment practices is Animal-Farm-like, e.g., “We are a bastion of liberal humanitarianism and therefore de facto incapable of illiberal exploitation.” How strange that in times of duress, egalitarian institutions prove hardly egalitarian.

4. The solution—the revenue side. We are not a populist state, but rather now a demagogic people. In the California mentality, there exist tens of millions of zillionaires in the upper aether who easily can afford to increase their state income tax liabilities well over the current 10+%. When told that under proposed Obama tax scenarios a Californian might pay 65% on much of his income (39% federal, 15% FICA/Medicare without caps, and 10.3% state), the average Californian nods and thinks that is cosmic justice at work, as if all got their money through Lehman Brothers’ bonuses or skimming off the top of Frannie Mae. Right now 1% of Californians pay 40% of the state’s income tax. Soon sales taxes will top out at 9%, the nation’s steepest. We brag we have Prop 13 property tax protections, oblivious that our assessed values are so inflated that the rate itself matters little. Likewise what is unusual about our state income tax is not that it is the nation’s highest (reaching 10.3%), but that the top brackets are set so low: at little over $43,000 the rate is already at over 9%. And yet less than 380, 000 Californians still pay 40% of all the income taxes. I think they might not object if they believed there was ever an end to rising rates, or that each new cash infusion led to more sober and economical governance. But it never does, and resembles instead force-feeding alcohol down the throat of the drunk, or providing drugs tothe addict.


In California, a conservative means a Governor who came into office five years ago, grew per capita government spending by 33%, extinguished the entire general fund reserve, and thus can brag he did not give the Legislature all the spending they wanted. The subtext here is the following—”Abandon all hope, ye who stay here! We will always up your taxes—since the weather, the natural beauty, and your own family heritage tie you to the state as our hostage. So silence whiner, as we shake you down.”

5. Reality. There is always a reality. At some point even the Silicon Valley liberal engineer who hires the illegal nanny for his infant, or the Hollywood utopian producer who is forced to pay union rates beyond the comprehensible, or the triangulating college President who is left with a therapeutic curriculum, half his students in remedial classes and no more money to exploit temporary lecturers cries “enough already—this financial madness cannot continue!”

How close are we to the iron laws of economic correction? Very. When the money runs out and the squeezed taxpayer has no more juice, and the state employee is left with a bounced check, then we either change or begin to resemble Third-World countries where everyone works for the government; nothing gets done; no one is accountable; the wealthy hide income and live in guarded seclusion; the bemedaled thug in sunglasses promises the turba bread and circuses from the balconey, and the middle class turns to drink—and dreams of once-upon-a-time California.


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