Grapes of Wrath Goes East

I was listening to an official from California  being interviewed about that state’s budget shortfall and the pending stimulus plan.  Of course California will receive more than any other state from this source.  The last number I heard was over 20 billion in direct grants to the state.  Of course California has been spending on lots of pet projects and programs that they apparently think are essential to the welfare and benefit of its citizens.  Unfortunately they didn’t provide for the funding to balance their books and operated at a tremendous deficit for the last several years.  You all know where they are now– furloughing state workers to save cash and obviously planning on getting that big check from Washington.  That check comes  from the citizens of the whole US.  The rest of the country is being asked to underwrite their fiscal and spending choices.  Of course some of the other states are making the same appeal and will also be receiving large sums of Federal money.   This official was going on a great lengths about how necessary all the various programs were for California and that they couldn’t and shouldn’t be cut back.  His basic attitude was that what is good for California is good for the US.  To some degree I would agree with that.  We are a country made up of our parts.  However we do have a Federal system of Government.  Or at least we are supposed to and used to. 

It is interesting to note that California has increased the size of its Government by 100% over the last decade.  That means thousands upon thousands of new hires.  I wonder if the people of California think they have gotten their money’s worth out of those new employees?  I know there are those who argue that those government employees are good for the state economy because they have jobs and pay taxes.  The same argument is often made for Federal employees.  Of course there is one really serious flaw in that logic.  Those governement employees are the ultimate zero sum accounting.  The money to pay them has to come from the real economy.  It comes from taxpayers.  So the money those employees pay in taxes is merely replacing some of the money taken in the first instance by the government from taxpayers.  The result is a significant net cost to the taxpayers.   The percentage of taxes paid by a governement worker is only a fraction of the money it took to employ him in the first place.  I recognize that there are some services we do need from government employees like teachers, etc.   But how can California justify its gargantuan increase in size in such a short period of time?   How can it justify not balancing its books?  I know the Federal governement has been doing the same thing for a long  time.  And look where that has gotten us in the last several decades.  It has been a problem for decades not just a recent mushroom that grew overnight.  I wouldn’t think they would want to emulate the Feds.  Remember California can’t simply print up new money like the Feds can.

We know that only about half of us pay Federal income taxes now.  The new proposals from those with power will reduce that even further.  I would wager any amount that the percentage of actual taxpayers in California is even lower than the national average.  It is a matter of demographics and math.  How much more pressure can those who are paying for the operation of state government take?   It won’t be long before only 25% of the workers in California are paying all the taxes.  I know that everyone pays sales and property taxes but it is the income tax that is in theory supposed to close the budget gap and that tax collection is coming from a smaller and smaller group.  And sales taxes are equal for all.  You don’t spend, you don’t pay and there a loads of exempt ideas to cushion the blow for those with lower incomes. California has had net population growth over the last 20 years.  It has been great large.  But again look at the demographics and illegals.  California is now suffering a net outmigration of its productive citizens.  They are moving to more friendly economic climes.  As long as freedom exist people will “vote” with their money and their feet.  Many in California are voting now and leaving the state. 

I cherish and endorse our Federal system because it encourgaes innovation in government and social programs and certainly in economic practice and application.  Just as I think we should not be bailing out Wall Street I don’t think we should be bailing out California or others like it for their own decisions.  I think many of their decisions are bad, like the car standards.  But those are matters for California to decide.  I recognize it is not my business how they choose to live and run their state, but, but, it is NOT my obligation to pay for their mistakes.  If they wish to have a large government and many welfare programs that is fine but they need to pay for them.  I don’t like their policies and I don’t live there.   I believe I am not the only one holding these beliefs.  I offer the stats on outmigration  as evidence.  The old Okies from the Thirties are heading back east.  Many should ponder the implications of that pounding of feet hitting the highway for what they believe are greener pastures.  Why are the leaving?  

Are you surprised at all that the market was negative on Geithner and the Administration’s revised bailout plan?  He can’t figure out his own taxes but we are supposed to trust him with maybe over a trillion dollars?

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Filed under Economics, geography, government

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