CaliforniaIt is ironic that Sacramento chose yesterday to honor Captain Chesley Sullenberger who heroically managed to land his imperiled aircraft into the Hudson River and averted disaster by saving his crew. It is ironic because the plane analogy is a metaphor for what is happening right now in Sacramento. In this case the state is out of fuel and needs emergency money in order to land and avert a crisis.
As Senator Cox spoke yesterday on the floor of the Senate, he made reference to a number of metaphors including a correction of Senator Calderon’s botched reference to “Chicken Little.” Senator Cox spoke about the straw that broke the camel’s back, implying that the state taxpayers could no longer bear the load of the tax burden (a tax burden that by most measures ranks somewhere in the middle of the country). Yesterday was a day of rumors. A day where it was rumored that there was a deal in place and that Senator Cox was ready to flip. It was for that reason that all ears were on the oldest member of the Senate as he rose to speak yesterday afternoon. Instead, those listening, left more confused than they began.
The big news happened in the middle of the night, when the Senate, long rumored unhappy with Senator Cogdill who had cut this deal, finally dumped him and replaced him with the more strident Senator Dennis Holligsworth—a strong opponent of the budget deal that Cogdill negotiated for his caucus.
This is progress? Perhaps only in the sense that Cogdill was incapable of delivering the two other votes besides himself needed to end the stalemate. Where this leaves any deal is now gravely in doubt.
The situation only gets worse from here as Speaker Bass told reporters during her media availability.
“If we don’t pass the budget you know that the situation will get so much worse.”
She went on to lay out the consequences—20,000 layoffs by Governor Schwarzenegger for starters as soon as today. The next step is to stop the remaining infrastructure projects, a process that will lead to the loss of 90,000 jobs and a tremendous ripple effect.
“This is just one more reminder that just one more Republican Senator needs to do the right thing and vote for the bipartisan compromise.”
That appears no closer to happening than it did yesterday.
There are many that suggest that what is actually needed is for some of these dire consequences to occur. There is an air of disbelief. In a sense Senator Cox’s metaphor of “Chicken Little” is apt. There is a sense that some of the voters, residents, citizens of California believe that these things are never going to come to pass. That we will not shut down jobs, close down state agencies, and cease bridge construction mid-span.
They do not believe that the state will run out of cash. They do not believe that tens of thousands will be laid off. They do not believe that the state will default on loans. They do not believe that money for schools and prisons will cease. They do not believe.
The question that is unclear is whether the Republicans do not believe that the sky is falling, or if they know all too well and they do not care.
They should take heed. The lessons of history abound. The year was 1995, the Republicans had just taken over Congress. They believed they had a mandate to shrink the size of government, to end government as we knew. These revolutionaries stormed the barricades and believed they could do whatever they wanted.
They went toe-to-toe with President Clinton, they shut down the government, and they lost. They overreached. Their movement has died.
The people did not like big government, but they did not want their government shut down and its leaders bickering over who was to blame. They blamed the Republicans for this shutdown, their ideological fervor got the better of it. The people simply wanted a better government, not an ideological crusade.
The Republicans are making the same mistake again. No one wants more taxes. But few want to see California’s government to cease to function.
In a way these are the last vestiges of this movement. The people of California do want their government to live within its means. But they also do not want vital services stopped and government to cease to function.
We are not talking about just a little bit of less government. Anyone who read Skelton the other day has to recognize how deep you have to cut to get to $42 billion. It’s not just a little snip here and there. You do not use a scalpel to perform this operation. You use a sledgehammer. A sledgehammer to put it mildly is a blunt instrument. Cut off $10 billion to education. Cut off billions to roads and bridges. Cut off billions to law enforcement. Cut tens of thousands of jobs to state workers who do things such as enforce the law, keep the inmates in prisons, hand out unemployment checks, process forms at the DMV, and the other vital functions that government performs on an everyday basis. Guess what—killing all of that, does not solve the problem.
The Republicans created their own budget in December using only spending cuts, they barely got halfway there and the cuts were deep and devastating.
Our plane is out of fuel. The passengers on that plane only has a small sense of what is to come. Unfortunately unlike the heroic Sullenberger, the pilots of this state, are arguing and bickering. Some of them appear to actually want the plane to crash. Only then will people realize the danger.
—David M. Greenwald reporting
That is, if your soul is in the right place.
I guess that the Democrats and Republicans want the federal government to own the State financial system? That appears to be short sighted, but there don't appear to be any other suggestions. After the major banks and states are nationalized, then who will reorganize the financial system? The SEC? The Federal Reserve Bank?
I honestly think that the Republicans know what's coming, and believe it will come, but they think that Californians are going to blame the Democrats for pumping up spending so dramatically over the last decade. That is completely foolish. Even if we took a completely academic, nonpartisan approach to determine who caused this mess and see that it was the Democrats, Californians are not going to see it that way. They are going to see that it was the Republicans whose obstructionism brought down the state. The Republicans think the ball is in their court, but really the game is theirs to lose.
From Capitol Alert:…Newly minted Senate GOP leader Dennis Hollingsworth said Wednesday morning that he opposes balancing the state's books with any new taxes and that he would like to reopen budget talks….How's Mr. Hollingsworth, you show us a balanced budget with no new taxes and we can talk. Until then, you are wasting our time.
DMG: …a tax burden that by most measures ranks somewhere in the middle of the country…The revenues from taxes may put California …somewhere in the middle of the country….However, our tax rates are the highest of any state. We have the second highest state gas tax; by far the highest state sales tax; and the highest state income tax.Even with Prop 13, our property taxes* as a percentage of income are higher than in all but 16 states.On top of all those taxes, California has higher than average DMV-related fees than most states; and (I don't know how this compares with other states) we have a large number of local taxes to supplement statewide taxes and fees.One of the negatives of having such high rates of taxation is that we have encouraged taxable income to move outside of California. I know personally some people in the film industry who used to pay state income tax, but no longer do. They moved all of their income to Nevada. I know of another case, involving a Silicon Valley company, where the owner of the company reincorporated in Florida a month before he went public, in order to avoid all California taxes on the capital gain from the sale of stock in his company.I don't suggest that there is any easy solution to the financial problems of the state. But there is also little to be gained over time by raising our tax rates any more. That's self-defeating.* It's possible that, right now, this is not the case.
I'll have to find it again, but the overall tax burden as a percentage of income from what I saw was in the middle.Regardless, this specific proposal the taxes actually would have a definite sunset date at which point they would need to pass with two-thirds votes in both houses of the legislature, be approved by the governor, and then approved again by the voters.I agree, taxes are not a long term fix, but this is a short term emergency and growing.
…the overall tax burden as a percentage of income from what I saw was in the middle….That …tax burden… figure, I would guess, is ony a reflection of the taxes collected, not the rates charged. In other words, people in California, because our tax rates are so much higher than they are in other states, are avoiding taxes by moving their income and purchases out of state. What that suggests, also, is that more people (especially high income people) will have an even greater incentive to avoid California taxes after this big tax rate hike is passed by the legislature, and therefore it might generate smaller marginal revenues than our legislators assume. If that happens, then the tax burden will probably shift more in the direction of middle income earners, most of whom cannot as easily move taxable income out of state. Of course, many middle income retirees can move their income out of state by physically leaving California, if the cost of living here becomes too high.
…Even with prop 13, our property taxes as a percentage of income are higher than in all but 16 states….Of course if you live in your house for a long time or live in a house that you inherited your property tax burden is low. Still one of the consequences of prop 13 was that it made property values go up because if you have lower taxes you can afford higher pincipal payments. As a result when prop 13 passed property values in California had a huge increase in value. This along with many other factors has led to the housing bubble that has made the property tax burden above the median nationally. As property values have become a greater percentage of net worth so has the property tax receipts generated. We can expect this trend to reverse with the collapse of real estate values in California. As a result we can expect ever greater deficits as the Republicans in California believe that the only solution is to lay of the public sector because they don't believe in taxation. A move that will only intensify the downturn. Oh, and by the way, many locals protected by the Williamson Act actually are taxed at a tiny fraction of the value of their property values. Maybe the new Republican leader of the State Senate would like to take on his farmer friends and have them pay their fair share.
Jes, this is off-point:…As a result when prop 13 passed property values in California had a huge increase in value. This along with many other factors has led to the housing bubble that has made the property tax burden above the median nationally….1. Prop 13 passed in 1979. The housing bubble, that has since deflated, began 21 years later in 2000.2. Prices for real estate in California DID NOT boom in the 5 years after Prop 13 passed. The big inflation took place in the 5 years prior.3. Insofar as Prop 13 ever had an inflationary effect on real estate prices, that would have been factored in 30 years ago and would have remained factored in by the market.4. The 2000-2005 real estate bubble was national in scope. It affected states which have higher and lower property taxes than California. So to blame Prop 13 (which I agree is an inequitable law) for the current mess is bogus.
Don't raise taxes for Californians. What they really mean is don't raise taxes to their rich constituents. I think that the republicans should call for a 10% paycut for anyone in government making more than 100,000 per year. With all the rich firefighters, police officers, dea agents, community developmnent works, board members, councils, etc etc that make more than 100 thousand a year, I can guarantee you, that alone will solve the budget crisis. Let's start with the governor's salary. He should be doing this for free, He doesn't need the money. I think we should start impeachment proceedings against Schwarzneggar. They voted to recal Davis because of the budget deficit. Why not Arnold? He failed and we should recall him.
I wasn't blaming peop 13 I was explaining why property taxes are high on a relative basis.
David,Is declaring bankruptcy and renegotiating loan payments to the state's creditors (i.e., bond holders) a legal option?
Guess I better have mom sell her California Tax Free Fund before she turns 86. Of course those bonds curently have first call on the state treasury. They are even senior to schools. Of course nobody other than the completely boneheaded would suggest bond default as a solution. Then again what would you expect from people who think the solution to the world financial crisis is tax breaks for people buying foreclosed properties.California already has the lowest bond rating of any state in the nation defaulting couldn't hurt too much. Of course the state would need to pay cash for everything for years to come but who cares, certainly not those who complain about paying any more taxes. Simpler solutions that are not dogmatic are out of the question.
No New Taxes:You're missing the point as usual. It doesn't matter if California spent itself silly or was extremely frugal.Here are the FACTS:1. the state is in a $40 billion hole2. the state has to have a balanced budget3. if the state does not fix this problem, all state functions will stop4. if the state does not fix this problem, it will default on payments5. if the state does not fix this problem, it will have to stop funding state government, even the parts of government you like6. as Skelton laid out earlier this week, there is not enough stuff to be cut to balance the budget7. the Republicans couldn't fix the problem with cuts alone, they only got $20 billion shortSO WHAT IS YOUR SOLUTION?????
…Let's start with the governor's salary. He should be doing this for free, He doesn't need the money….I don't think the governor takes his salary.
Boner: …Of course nobody other than the completely boneheaded would suggest bond default as a solution….Nobody suggested we should. I simply asked if it is legal, Boner….Then again what would you expect from people who think the solution to the world financial crisis is tax breaks for people buying foreclosed properties….Boner, Obama's Treasury Secretary said yesterday he favors capital gains breaks for investments in foreclosed properties, as part of the $50 billion package Obama is proposing for the housing recover act….Of course the state would need to pay cash for everything for years to come….Boner, that's far, far less bad than overborrowing, which is what the state has done for the last decade. If we had voted down Schwarzeneggar's $15 billion bond when he first came into office and lacked the courage to cut spending at that time, we would not be in nearly such terrible shapre, now. Even worse, we added to our indebtedness, massively, by passing that idiotic high speed rail and other things we cannot afford.
…what would you expect from people who think the solution to the world financial crisis is tax breaks for people buying foreclosed properties….Minnesota has a plan to help people buy foreclosed houses. It's worked, too. I heard an NPR story a few days ago, which was a follow-up on this story, where they said 90% of all houses foreclosed in Minnesota in the last 18 months now have new owner-occupiers and most of the rest will soon. NPR said other states and the federal government are trying to copy what Minnesota did, which is give buyers an incentive to buy foreclosed properties. NPR said this plan has helped stabilize all home prices in that state and now banks there are lending on other projects.
It seems that the financial management of our state has gotten quite out of hand. Perhaps David is correct that we have to increase taxes to get ourselves out of this hole, but there can be no doubt that we have to chart a new course and a new way of managing our business in this state. The financial crisis of today wasn't created in the last few months, any more than the housing crisis in the US was created in the last few months. This has been a long time coming.CA expenditures have increased at an unbelievable pace over the last 5 years – increasing by 40% or 40 billion dollars since 2003 (it couldn't be a coincidence that 40 billion is the budget gap, could it?). Furthermore we are beginning to see an exodus of businesses and population from the state, in part because we have created an inhospitable environment of high taxes, barriers and bureaucracy that burden and cripple the businesses operating here and an extremely high cost of living that leave many of our residents wondering where there next meal will come from. How do we start a new course here in CA – the same way the US is trying to do – throw out the party in charge, and put some folks in office that can drive the necessary change. Some of you will say that the governor is in charge, but that just isn't true in this state. This state has a very weak governor system – the legislature rules the roost here, and the democrats have been in charge for years, with very conservative republicans acting together from time to time to block the most egregious spending/taxing acts. We need moderate democrats and republicans to be elected and work together to significantly lower spending and taxes, put some programs in place to encourage businesses to locate here and get our educational system back on track.In the words of Rahm Emanuel – never let a crisis go to waste – we need to do the same in CA. And whatever you think about Maldonado and his motivations – he is right that we should not let this moment pass without trying to get rid of the current primary system and move to the open primaries. The current system is the primary reason we have a non-functional legislature made of hardline democrats and republicans.
Hey Lexicon Artist, that was another brilliant article you wrote in tonight's newspaper. I wish we had you on the City Council. Thanks for shining a light on the problems.
But these are the …End Times…, so who cares?
This is becoming a quality of life question. Do you want accessible public libraries? Good schools? Good roads? Help for those unable to help themselves? Adequate police protection?Well, it ain’t free. Republicans are showing a tendancy that they don’t want this quality of life.Six years ago they promised to bomb Afghanistan back into the stone age (not a huge change, really), now they’re doing it to California to great effect.
…I think that the republicans should call for a 10% paycut for anyone in government making more than 100,000 per year. With all the rich firefighters, police officers, dea agents, community developmnent works, board members, councils, etc etc that make more than 100 thousand a year, I can guarantee you, that alone will solve the budget crisis….You have a lot of problems with this statement. First, most of the people you have mentioned do not work for the state or receive state money. So what are they going to do, issue 10% taxes on just those classifications?If you read Skelton’s article from Monday, you’d realize that they could cut all state workers and still not come close to balancing the budget.
The Republicans created their own budget in December using only spending cuts, they barely got halfway there and the cuts were deep and devastating.If the spending increases weren’t so deep and devastating, the cuts wouldn’t be either. Our plane is out of fuel.Yes it is. California spent itself silly until it could not do so anymore.Now the problem is coming home to roost. Maybe that bond $ for massive education spending is looking good now.
Of course Obama’s plan is to keep people in their homes not give a capital gains break to people who buy them at foreclosure as Rifkin foolishly suggested. Of course Obama’s plans does much more than Rifkin’s simplistic notions.
if your aim is to destroy through starvation what you don’t have the votes to destroy through legislation, i’d say the CA GOP has done a pretty effective job. until we repeal the 2/3 budget and tax rule, the GOP minority will effectively govern the state through inaction. next election had better have an initiative on the ballot to go to majority rule. if voters don’t like the higher taxes (or slashed services, in an imaginary california where republicans won a majority), they’ll be able to vote the party out of power.