Wednesday, July 1, 2009

California kicks the can, again

So today was just another day in the lovely state of California. The legislature failed to pass a balanced budget as required by the state Constitution (as expected), the state is now roughly $26,000,000,000 in debt, and apparently we're going to be issuing IOU's to contractors, vendors, a few classes of welfare recipients, and residents for tax refunds. These will pay interest, will be due October 1, and will likely be accepted by some banks and credit unions for deposit, making the impact nearly negligible for the effected recipients. In essence, we're kicking the can down the road, again.

Now, I've probably written enough already about how screwed up California is, how corrupt and utterly despicable the Democrats in the legislature are, how a state with more incoming revenue than many large countries can't pull it's legislative head out of its ass long enough to just spend less than, say, $100 Billion dollars a year. I've been amused at the running contest between California and New York as to who can have the most unhelpful, juvenile, and thoroughly repugnant legislature. This time, though, I just want to point out some darkly humorous irony.

The big pitch from the Republicans in California's government, and the Governator in particular, has been for the state to solve the budget problem and balance the budget, and not just kick the can down the road again. Yet, by allowing the Controller to issue IOU's, that's exactly what the state is doing: kicking the can, again. If you really want progress on the budget, stop paying people. No payments for anyone while the state has no budget, and no accounting for the payments on a deferred basis: no payments means no payments for that time, ever. Force the legislature and the bare minimum of infrastructure people to work during that time in order to work on the budget; everyone else can work optionally, but you won't get paid for your work, now or after the state has a budget. Note: security for the legislators is not included in the bare minimum of infrastructure.

I would be willing to bet you'd have a budget within a month, if not sooner. Right now California doesn't have a budget because the legislature can still kick the can, and that has got to stop for the state the make progress.


  1. I thought I left California just in a nick of time, when I moved back to NY, only to find in the morning news the day after my return that the state legislature were acting liek 5th graders =/

    As a result, many police officers and highway patrol have been laid off. There's more damage I'm sure, but the news is too depressing...

    However, I think CA still has a sizable lead for the most inept state government lol

  2. If I ;ived there, I would send an IOU when income tax time came. I would also do every business transaction possible over the internet so that the state gets no tax revenue. Such actions by the masses would cause big changes quickly. This was an excellent point

    By the way, Kook and I both did posts on our blog showing a little bit about ourselves and showing how capitalism affects our lives. I do not hype posts often so than when we do really special ones, our hype really means something. Check it out and get to know us a little better.

  3. If banks accept the IOUs as cash, I wonder if it creates some banking issues. Could these IOUs become a form of currency? What happens if people start using them as a medium of exchange? CA's central bank could expand or contract the money supply just as the US Fed Reserve Open Market Committee does. Might that affect interstate commerce and be unconstitutional? It just seems like this has the potential really to get out of hand.

    CA should just make its hard choices. At worst it should take the amount of the deficit and cut 50% of that amount in programs and institute a tax on people who earn well above the poverty line to make up the other 50%. In WI we are tightening our belts. State monies to municipalities are decreasing. We will be accepting cuts in gov't services, and those of us doing well will have to pay a little more taxes.

    IMHO CA could use a dose of Midwestern work ethic. Bite the bullet, half on services and half on tax increases, if you want to live in a top-notch state.

    I will have to eat my words, of course, if we find ourselves in the same shape thanks to Gov Doyle's juggling of funds in the budget. I hope, however, we live up to the Midwestern myth and avoid the crap that CA is in.

  4. I don't think we'll need to worry about IOU's becoming another form of currency. By all accounts, banks are only taking them reluctantly, and at this point the big banks have said they are not going to accept them beyond July 10 (which is probably prudent, although we'll see if they stick to the timeline when more political pressure is applied then). Of course, it's not like they could do worse than the Fed: they are only printing $3 Billion of "IOU money", and the Fed is already over $11 Trillion in new US currency and guarantees... they would have to print the entire California deficit 500 times over to approach the Fed's level of monetary damage (so far).

    As you know, I 100% disagree with the "raising taxes as a 'solution'" approach: it's never a good answer, it never works, it never fixes anything, and it just encourages more irresponsible legislative behavior, but you already knew all of that (I hope). I think we can agree to disagree on the value of taxing to implicitly discourage people from trying to make more money than the average: I don't think it's productive for the government to punish the people who create wealth through private enterprise and/or work hard to earn a good life, but I concede that my perspective is not shared by everyone, especially now with our socialist leadership. I think it's too much to hope that America learns from all the other failed, suffering, miserable, or collapsed socialist states before it devolves into the same state, especially given our current direction, but hopefully we can serve as another painful, miserable example to the next free country who's people succumb to the nanny tyrant state, and break the cycle of utter political failure somewhere down the line. It's a dream, anyway.

  5. The problem is California is supposed to be recycling that can that they are kicking. THe biggest hope for California is that thing get that the place gets so bad that the Mexicans go home.