Economics

The Golden State Is Made of Lead

Pollyannas say we'll all be going back to Cali. I don't think so.

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“We’ve been living in Fantasyland,” incoming California Gov. Jerry Brown announced in a December forum on the state’s dire budget situation. “It is much worse than I thought. I’m shocked.”

Amid lengthy budget crises and nationwide snickering, you might not think anybody in the Golden State could still be shielded from harsh reality. After all, spending for the current fiscal year is a mere $86.6 billion, only $300 million more than in the previous yearâ€"an increase former Gov. Arnold Schwarzenegger described as “essentially flat.” 

State spending is down almost $20 billion from its 2008 level, but that’s still not nearly enough to get Sacramento’s fiscal house in order. In December, less than two months after signing a putatively balanced budget that had initially come in with a $19 billion deficit, lame duck Schwarzeneggerâ€"supported by Gov.-elect Brownâ€"convened an emergency session of the legislature to close an additional $6 billion gap that became apparent after the budget was enacted. Evidence for California’s looming insolvency is all around: a state of fiscal emergency in Stockton, a potential municipal bankruptcy in Los Angeles, a government bond rating that is the worst among the 50 states, unfunded pension obligations that could run as high as $500 billion over the next decade.

Since the 1990s, California has gone from being a net gainer to a net loser in interstate migration. In its latest census results, its population growth was nearly flat relative to the nation as a whole; for only the second time in history the state will gain no congressional seats.

So who is living in Fantasyland?  

Say hello to Democratic Assemblyman Gil Cedillo, a career politician based in Los Angeles, who returned to the Assembly this year after losing a race for the U.S. House and getting termed out of his state Senate seat. The same month that Brown was lifting the curtain on Fantasyland, Cedillo filed a claim with the California Victim Compensation and Government Claims Board. The state’s independent salary-setting commission for public employees, Cedillo complained, had unfairly cut his pay as a state senator in 2009â€"when the state’s unemployment rate hit a then-record 12.2 percent (it has since increased to 12.4) and the budget deficit was nearly $60 billion. If Cedillo doesn’t get his back pay (more than $20,000, plus various benefits), he is threatening to file a lawsuit.

Also following the Lucy van Pelt principle that Christmas is gift-getting season was the union for San Francisco’s bus drivers, the second most highly remunerated transit employees in the nation. When the deficit-plagued San Francisco Municipal Transportation Agency tried to eliminate a $3,000-per-worker Christmas bonus in December, Transport Workers Union Local 250-A brought in its own lawyers. “The MTA has a legal obligation,” the union’s president, Rafael Cabrera, told the San Francisco Chronicle. “The attorneys are involved, and it’s going to be a legal fight.”

Cedillo and the bus drivers are not necessarily deluded about the state’s poor fiscal condition. People collecting taxpayer dollars know better than the rubes they’re fleecing that an apple only has so many bites. 

But how do you explain the dissociative fugue state of MarketWatch.com columnist Brett Arends, who gave the Golden State a gold star for fiscal responsibility in a late November column titled “The Truth About California: Maligned State Is Actually Saving the Rest of Us”? Launching his argument with a welcome insightâ€"that California remains a large state with good weather and clever peopleâ€"Arends goes on to posit that all this bad news is just pettifogging by conservative pundits. “California bashing is everywhere these days.” he writes.

The column is a masterpiece of decontextualization posing as perspective. Think California’s 10.5 percent state and local tax burden sounds high? Arends is here to remind you that this is only the sixth most punitive tax rate in the country. Later, Arends notes that California companies capture a larger percentage of venture capital now than they did a decade ago. He neglects to add that the current U.S. total, at $17 billion, is less than a fifth of what it was at the peak of the dotcom boom.

The column won applause. Brown and Schwarzenegger both tweeted it with approval. Just before Christmas, State Treasurer Bill Lockyer, along with Stephen Levy of the Center for Continuing Study of the California Economy, repeated Arends’ claims in a Los Angeles Times op-ed bearing the less-than-encouraging title “California Isn’t Broken.”

The state’s newspapers strain after blips of good news. A slight uptick in new private-sector hires late last year (after years of decline) and a brief easing in new mortgage delinquencies in late 2009 (subsequently reversed) were both seized as evidence that California, without having made any structural changes, was entering a period of economic recovery. Maybe this Micawberesque optimism is a reflex of cultural memory in a state where history has been driven by both real and metaphorical gold rushes.

But these days, even gold rushes are getting harder to conjure. Two mining companies have been trying without success to reopen the untapped mineral veins at Grass Valley and Sutter Creek, estimated to hold about $1 billion worth of undiscovered nuggets. Emgold, which has its eye on Grass Valley, has been dealing with paperwork, environmental regulations, and NIMBY challenges since 2003. When I spoke with Emgold CEO David Watkinson in November, he cited, among other reasons for the delay, the state’s immensely burdensome regulatory structure. “The investment community looks pretty negatively on California,” he said. “It’s very hard for businesses to do work here. Not just mining. Any industry or manufacturing.” Watkinson warns that while California remains unusually hostile to business, “the rest of the country is catching up fast.”

There is a bright spot: California provides a pure test case of interventionist economics in the United States. With effective one-party rule under the Democrats, the most restrictive environmental laws in the country, a rapidly growing public sector, and regulations on virtually every aspect of human behavior, the Golden State is the perfect laboratory for the managed economy the rest of the country rejected in November.

When the experiment inevitably fails, perhaps the self-defeating mind-set that created it will finally dissipate. Or that hope may prove to be the biggest fantasy of all. 

Tim Cavanaugh is a senior editor at reason.

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79 responses to “The Golden State Is Made of Lead

  1. TRIATHLON RETURNS!!!!

    [MISSION INTO WISCONSIN]

    Now, We [TRIATHLON] have been absent from (Www.reason.com/blog) for the past few days, well, let Us tell you, this wasn’t any lark, no sir, we were on a mission [OPERATION CHEESEPACKER], that brought us into the Heartland of the [Empire] Israeli American Empire, to observer the [PSU] Public-Sector Unions, who are fiscally strangling the [Empire] even though most [Empire] Imperial Citizens are still See Nothing, Hear Nothing, Know-Nothing Robots and will not sacrifice!

    [OPERATION CHEESEPACKER: PHASE I]

    Now, we began by driving due West on Road [17] Seventeen, from our [Headquarters of the TRIATHLON] Sudbury, Ontario Province, [CC] Canadian Confederation, later, then We came to the Empire-Canadian border, and crossed into the Heartland of the Empire.

    [MICHIGAN]

    Now, the first part of our journey we entered into the Empire State of Michigan very lovely state yeah its the heart of the [Empire] American-Israeli Empire automobile industry recently bailed-out by the [FED] Federal Empire Israeli Reserve Bank so [GM] General Motors made some profits that is in the cards it’s true but not without cost such as the coming Super-Hyper Inflation like [ZIMBABWE] the true Cost will be known soon enough, we know it’s true.

    [UPPER PENINSULA]

    Now, the part We [TRIATHLON] entered is knowns as the [UP] Upper Peninsula Occupied Territories, they dream of seceding and joining our [CC] Canadian Confederation but their Overlords in the State of Michigan Empire Capital of Lansing will NOT LET THEM, this is a travesty, the [UP] Upper Peninsula is the West Bank of North America.

    [LODGING ACCOMIDATIONS]

    So We kept driving and driving and driving in our [1999] Nineteen-Ninety-Nine Honda CR-V until We saw a sign on the [IHS] Interempire Highway System for a Motel in the Imperial Township of Gladstone [MI], the [LMI] Lakeside Motor Inn so We came into the office such as it was and told the fine young lady at the front desk that yes indeed We are Hercule Triathlon Savinien she laughed but we still signed in under Our name and went to Our room, tomorrow you WILL read [PART II] of our travels to Madison, [OPERATION CHEESEPACKER]!

    HERCULE TRIATHLON SAVINIEN

    1. I know what you mean. I have a distant relative who lives in South Bend, and one time someone stole his favorite piece of string.

    2. I’m from the UP, and we certainly don’t dream of becoming Canadians. Heck, we don’t even like trolls from South a da Mack, don’t cha know?

  2. The Wisconsin bill passed. Let’s hope all the strikers have pink slips waiting for them when they show up for work on Monday.

    1. I think it just passed the Assembly. I don’t know if the Senate has finally decided they can take up a union-only bill without the larger quorum needed for budget bills.

      1. Ah, you’re right. Damn, I had my hopes up. I’m still going to enjoy listening to the Democrats throw a hissy fit because the Republicans cut the voting off once there was a majority vote to pass the bill because they are “subverting democracy!!!11!” given that Democrats are backing Senators hiding out in another state to avoid a vote.

    2. — We have plenty of doctors to write long-term-illness excuses for us. We wildcat strike and get sick pay at the same time. All the while giving the middle finger to the counter-protesting taxpayers. How can it get better?

    3. “Let’s hope all the strikers have pink slips waiting for them when they show up for work on Monday.”

      Not going to happen.

      1. Kind of a shame. I can’t think of a better way to easily distinguish between the teachers whose priority is educating their students, and the ones just in it for the money.

        They should really pass a law stating that, absent declaration of a state of (plague-based) emergency by the governor, all sick leave will be considered a form of striking if more than 15% of the work force is sick on a given day.

        1. Yes, but it isn’t going to happen!

  3. “It is much worse than I thought. I’m shocked.”

    I’m shocked, shocked that it is much worse than I thought.

    1. Here are your union donations, sir.

      1. Oh, thank you very much.

  4. the Golden State is the perfect laboratory for the managed economy the rest of the country rejected in November.

    And they’re mass-producing a political ebola virus.

    1. Having the exploding shits is good for the sewage treatment industry.

      1. At your service!

      2. I smell $$$$!!!!!

  5. When the experiment inevitably fails, perhaps the self-defeating mind-set that created it will finally dissipate. Or that hope may prove to be the biggest fantasy of all.

    The fall of the USSR didn’t put an end to communism, did it?

    1. Nope, it just put under a red, white and blue flag.

  6. “The investment community looks pretty negatively on California,” he said

    NOOOOOOOOOOOOOOOO!!!!!

    1. Except for the fools who HATE THEMSELVES enough to actually WANT to live there, who the fuck DOESN’T look at California negatively?

      1. California would be great if it weren’t for it’s governments (at all levels.)

      2. I’d live in California if I was wealthy and my assets were liquid. I’d live in an RV, like a poor man, but I’d be rich, and immune to as much taxation as possible.

        1. This idea of being rich and living poor is ridiculous on its face. The fact that you can move where you want, and you can spend time with your family, and can choose to live in such a way means that you are, in fact, already living rich. The poor do not have such choices.

          Even if I agree with the premise, what’s the point of being rich if you’re living in squalor? In other words, what’s the point of enriching yourself if you don’t use it?

          Which, as a reminder, is crux of the argument against the distribution of wealth. No one will produce enough to enrich themselves if they can’t use it.

      3. But dude, we got like the best beaches, the best babes, the best pot, the best….(zzzzzz)

        1. I will argue against “best beaches.”

          Redneck Riviera.

          1. I second this. The Gulf Coast in FL and Bama is the best.

              1. Sorry Pablo, Coronado blows it away.

                As a native Californian, its pretty fair to say that our state’s main problem has been the influx of trash from all the other states (thanks for raising your children to be clueless, spoiled hippy brats!)

                All this crap was imported, spawned in Massachusetts. Yes Brown is a clown, but he’s a state level clown, Boxer (from Brooklyn) and Pelosi (from Baltimore) are national liabilities.

                If Kurt Russell or someone could seal off NY and perhaps a large section of Boston, it would greatly decrease the sewage flow, and at least we’d stand a chance dealing with our own hippies.

                If not the oppressed gun totting crowd out here is going to get angry, stop by Texas, then drive east and give the original 13 a serious ass whooping for original introducing the plan, then screwing it up entirely.

                1. Most of the trash came from the South, not from Mass and NY.

                  1. That’s funny, because here in TX we seem to be getting a lot of your trash. Maybe we could do a trash exchange? After all, our native girls are hotter, and we could use even the trashy ones back.

                  2. Most of the trash and the morons I see in Atlanta came from New England.

                2. Most of the trash came from the South, not from Mass and NY.

      4. But dude, we got like the best beaches, the best babes, the best pot, the best….(zzzzzz)

  7. The fall of the USSR didn’t put an end to communism, did it?

    Pretty much, yeah, it did. Other than Cuba and North Korea, I can’t think of any other Communist countries. And no, China doesn’t count.

    1. Forget me already?

      1. Vietnam is communist like China is communist. They don’t count.

        1. Cool. You can cover our elections.

          1. I’ll cover China’s too. Doesn’t change the fact. Read and learn.

            Teaser:

            The economic reforms carried out in socialist Vietnam since 1986 have made it a favorite of multilateral lenders and development agencies. The movement away from a planned, state-controlled economy has brought this once impoverished, war-torn country economic growth rates close to those of China.

    2. Its all Central Planned Economics which is all collective planning, communism, socialism, fascism. In other words its not free and will eventually collapse because central planners like to try and steer the Titanic instead of letting the people just get the hell off the boat!

      1. Exactly. The Soviet Union didn’t collapse because its planners were commies, it collapsed because its commies were planners.

        1. yes and since WWII we have become planners!

  8. Her bikini – small; heels – tall
    She said, she liked, the ocean
    She showed me a beach, gave me a peach
    and pulled out the suntan lotion

    Do the Ladies Still Love Cool James?

    1. This is a wonderful metaphor for Progressive philosophy.

      But will you be accused of sexual harassment for applying the lotion as the lady desires?

      If a Progressive, it depends.

  9. Those doctors who wrote notes for the absent Democrats should have their licenses pulled too.

    1. I’ve got something you can pull.

  10. When the experiment inevitably fails, perhaps the self-defeating mind-set that created it will finally dissipate. Or that hope may prove to be the biggest fantasy of all.

    Tim, Tim, Tim. How can you make me optimistic and pessimistic at the same time?

  11. This article mentions that people are leaving California, should not all the progressives be flocking there ? The strong regulations, union pay etc. should, according to them, be causing unprecedented prosperity.

    1. “, should not all the progressives be flocking there ?”

      In CA, there’s a surtax on anyone making above $1M/y (I think that’s the number; I don’t make enough to qualify). Rob Reiner and the rest of the Hollywood lefties were all on it.
      Seems some of those folks have residences outside of CA, and I’m just cynical enough to wonder if there is a loophole requiring in-state residency for X days per year.

    2. I’ve gone there regularly to visit family, and my impression is that the middle class is quickly disappearing, at least from the areas I’ve seen. There are the super-wealthy lefties (who want to live there regardless of cost, and have $ to burn) and the poor, who are on the dole and don’t pay much/any taxes, and thus don’t give a shit about the deficit.

    3. Could we imagine a remake of “Kentucky Fried movie” where Dr. Khlan said:”Take him….to California”? 😉

  12. There’s a similar test case in Illinois, but Indiana and New Jersey are doing things differently; so in a few years we can actually do some apples-to-apples comparisions. That’s a pretty good feature, I think. Unless, of course, California and Illinois try to drag the rest of us down with them.

    1. “Unless, of course, California and Illinois try to drag the rest of us down with them.”

      We’re on it. We’ll do what we can to ensure the federal government buys up as much toxic debt as possible from our states.

      1. That’s the nice thing about secession — it’s like a get-out-of-debt free card. Last one out’s a rotten egg.

        1. Can we do an opposite secession…you know, kick out a place? Like Washington DC?

  13. >>When the experiment inevitably fails, perhaps the self-defeating mind-set that created it will finally dissipate.

    Yeah, sure, perhaps some day those Californians burdened by that mind-set will just suddenly begin to conceive of the correlation after all these decades of nescience. ‘Long about the time Satan hands Charles Manson a popsicle.

  14. “We’ve been living in Fantasyland,” incoming California Gov. Jerry Brown announced in a December forum on the state’s dire budget situation. “It is much worse than I thought. I’m shocked.”

    Wow – he’s shocked.

    There is a bright spot: California provides a pure test case of interventionist economics in the United States. With effective one-party rule under the Democrats, the most restrictive environmental laws in the country, a rapidly growing public sector, and regulations on virtually every aspect of human behavior, the Golden State is the perfect laboratory for the managed economy the rest of the country rejected in November.

    Yeah, an experiment I refused to partake in, by leaving to dusty, dirty, environmentally-unfriendly (sort of), business-friendly, lovely beautiful Texas.

  15. Just before Christmas, State Treasurer Bill Lockyer, along with Stephen Levy of the Center for Continuing Study of the California Economy, repeated Arends’ claims in a Los Angeles Times op-ed bearing the less-than-encouraging title “California Isn’t Broken.”

    “The owl of Minerva flies only at sunset.”

    We have the winners for the Head In Sand award.

    1. So…the ostriches can’t see the owl?

  16. Geographically California is great….population wise it is shit!

  17. Governor Moonbeam will save California.

    1. And at my age, I’m prepared to do exactly that.

      1. I spent $140 million dollars on an election and now all I got is $1.3 billion dollars and the means to live wherever I want. Sorry Jerry.

  18. When the experiment inevitably fails, perhaps the self-defeating mind-set that created it will finally dissipate.

    I predict this: “We have a great, Progressive plan. We just had the wrong people implementing it. Now that we have the right people in office, this time it will be different.”

  19. Clearly, Tim Cavanaugh, or at least his editor, has never been to California. How do I know? Because of the headline. NOBODY in California calls it “cali,” much as nobody in San Francisco calls it “frisco.”

    We do however, enjoy chuckling at newcomers in the airport who insist on saying “cali” as if it makes them “kewl.”

    1. Dude, it’s an LL Cool J song, from the soundtrack to Less than Zero.

      1. Not to mention that plenty of Californians call it “Cali,” irrespective of what JJ might think.

  20. “…the Golden State is the perfect laboratory for the managed economy the rest of the country rejected in November.”

    Not too happy about being a lab rat, I must say.

  21. Just don’t let Geithner bail the bastards out.

  22. “It is much worse than I thought. I’m shocked.”

    NeoCon: Liberal, mugged by reality.

  23. California’s situation reminds me of the Gospel story in Luke where Satan took Jesus to the summit of the Temple and said, jump, for the angels will surely catch you. Jesus refused.

    California’s answer to that same temptation is: “Geronimo-o-o!”
    Just as the Chinese Mandarins simply refused to believe that anything could happen to their world without their permission, California’s governing (looting) classes hold it as a bedrock article of faith that somebody, somewhere, is supposed to give them all the money and goodies which they and their clients are graciously pleased to desire. And make someone else pay for it all.

    The bottom is coming up fast.

  24. They aren’t broke, but their badly bent.

  25. Their badly bent what?

  26. As a Native Californian, Idaho is looking better all the time…

  27. The thing about living in California or Wisconsin, or any other state for that matter, is you can move to another and see how it goes with minimal hassle. Having been born and lived in California for my entire life I’ve witnessed such migrations first hand as friends have come and gone to and from various states for a variety of reasons. Some have left for affordable housing, for a better job, marriage, others because they wished for a better environment for their kids or even a few because they didn’t like the fact that some Californians spoke languages they didn’t understand. No matter what the reason, for those that have moved on almost all claim that wherever they are, it’s the best place to be.

    Like most everywhere else California is the best place as well and it seems when looking at this year’s budget we now have the opportunity to make things even better. And now after a couple of attempts by our Terminator Governor to do so we’ve turned to our infamous governor Moonbeam as he is affectionately known to make this happen.

    Back when Moonbeam was first elected I was just a high school kid and I remember at that time the State had a big surplus, in fact so big that the citizens got together and voted to return the excess to property owners by passing proposition 13. The other thing I remember about those good old days is there were a lot of reports and comments being made across the Country which were quite similar to this article; that California was soon going to fall into the ocean.

    Perhaps some actually believe or even hope it will. As for myself, I have a couple of reasons to hope it does not. First is I hate to see my property value decline further, and second, I’d hate to see the federal deficit grow worse due to the loss of $55 billion surplus revenue Californians annually provide to the rest of the union. But I guess since I’m a Californian I won’t be around to worry. Perhaps before we all go, the rest of you will find it in your hearts to return say $20 billion or so of that surplus so we can stay afloat. It seems only fair since we’ve been so accommodating for so many years; rather than just let us slip away into the big blue Pacific.

  28. ost $20 billion from its 2008 level, but that’s still not nearly enough to get Sacramento’s fiscal house in order. In December, less than two months after signing a putatively balan

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