Saturday, October 01, 2011

California's Financial Woes Look to Continue

Michael Lewis' newest article over at Vanity Fair, California and Bust is an eye opening article and somewhat depressing. He covers quite a bit including defending Meredith Whitney, interviewing Arnold Schwarzenegger, and going to the city level where most of the pain is being felt. I implore you to read it in its entirety as it is well written and his premise is unique. My critical comments would be that he didn't go after the public sector unions and come to the conclusion that FDR had done in his presidency that they should not be allowed. On the flip side the public workers were unionized long before the most recent devolution of America/California society. Read it yourself and see what conclusions you come to.

Lewis' article inspired me to find the great work that Mish over at his Global Economic Trend Analysis has done on the subject of California. I have been meaning to post these links for sometime now. Mish's blog has done us all a wonderful service by discussing a lot of California's budget problems. Here are his solutions to budget crises in January 2008 & 2011:
Mish's California Budget Proposal
California Budget Balancer Interactive Map from LA Times Misses the Mark
"Look at this disgusting list of California Agencies.

I sorted out some but not all of the more ridiculous ones.

Does the state need a ....

  • Acupuncture Department
  • Office of AIDs
  • Air Research Board
  • 3 different agencies for alcohol and beverages
  • 2 Apprenticeship Councils
  • Art Council
  • Asian Pacific Islander Legislative Caucus
  • Bureau of Automotive repair
  • Barbering board
  • Biodiversity council
  • Calvet Loan program
  • Climate Change Portal
  • Coastal Commission
  • Cool California
  • 4 Delta agencies
  • Digital Library
  • Bureau of Electronic and Appliance Repair
  • Employment Training Panel
  • Energy Commission
  • Equalization Board
  • 2 Fair Employment agencies
  • Film Commission
  • Flex Your Power
  • Healthy Family Program
  • Hearing Aid Dispensers Bureau
  • Home Furnishings Bureau
  • Humanities Council
  • Independent Living Council
  • Indoor Air Quality Program
  • Economic Development Bank
  • Interagency Ecological Program
  • Labor and Workforce Development
  • Latino Legislative Caucus
  • Learn California
  • Little Hoover Commission
  • Maritime Academy
  • Managed Risk Board
  • Museum for History
  • MyCali Youth Portal
  • Native Heritage Association
  • Natural Community Planning Program
  • Naturopathic Medicine Community
  • Outreach
  • Peace Officer Standards Board
  • Postsecondary Education Commission
  • Prison Industry Authority
  • Privacy Protection Office
  • Psychology Board
  • Railroad Museum
  • Recovery Task Force
  • Refugee Branch
  • Regents of the U of C
  • Save Our Water commission
  • Smart Growth Caucus
  • Status of Women Commission
  • Take Charge California
  • We Connect
  • Wetlands Information System
  • Workforce Investment Board

California does not need ANY of those. Moreover I assure you I missed dozens more that could be cut back if not eliminated entirely. What the heck do those cost? And how much can be saved by my suggestions above."

A great quote from Mish... Read both of the links in their entirety. They are excellent. California has had 2+ years of massive budget problems. Early this year it was at the tune of a $25 billion deficit.

My take on this is simple and sensible. People of California and the United States need to ask themselves, "what kind of Government do you want and what are you willing to do to pay for it." I don't think that California residents realize what the costs are of having a fully intrusive government that tries to be all things to all people. Californians already have some the highest taxes in the union with little to show for it. Why not have the state focus on some of the more important aspects of basic governance: education, public safety, public health, infrastructure, and certain basic safety nets. Sure those basics are in need of massive reform, but at least the effort and focus could/should be on them. However if you think that California (and the US for that matter) is too far gone like Michael Lewis hints at then it might have to get a lot worse before it gets better. As time progresses I am leaning towards the later option and holders of  local/city municipal bond should be prepared on what that may look like.

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