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Tuesday, August 10, 2010

Financial Armageddon in California. The State is Going Bankrupt and Civil Unrest Boils Over.

Abstract: California is hopelessly in debt and the legislature is deadlocked on the spending issues. Spending will increase and debt will soar. IOUs my have to be issued and vendors and others may refuse new business and services to the state. The IOUs are not currently taxable under federal and state law and are not transferable but bear a 5% coupon. They are warrants of some kind. A wealth tax for those exiting the state was proposed a few years ago and this is the way to get money fast from the ‘rich.’ The quest for money now sets the state up for some potential revolution.

It is always of interest to watch politicians in their ritual dances as they attempt to be ‘fair’ and egalitarian in their mishandling of spending, debt and taxes. Californians[1][2][3][4][5] are by far the most interesting to watch, unless, of course, you are in their tax clutches.

It is interesting to view the budget and tax numbers and the ‘reasons’ why the state should spend itself into terminal debt. In a previous blog[6] the plunge into a financial Armageddon was outlined, but, interestingly, the basis for running the state still hinges, in the incoherent view of the leftists in Sacramento, on the phony nostrum that tax increases will solve their problems. Any discussion of the numbers is now not worth the while because pointing out that the US is broke doesn’t even pierce the marijuana fumes as the leftists use the courts to block any cuts by the governor. California will willingly accept alms from the fed or anywhere else.

The entire issue now is related to a malignant pursuit for money from any source including dope sales and probably worse. The rants are growing in intensity:

How to best read my blogs:

[I offer extensive quotes in this blog so that the reader can view the exact language and can be confident that nothing was taken out of context or that nobody was misquoted. The easiest way to take in the salient points is to read the emphatic points in the quotes and then peruse my comments. Comments on my comments are always welcome: ryckki@gmail.com.]

First, the furloughs have been recently blocked by some ‘judge.’[7] Next, we hear pleas to be reasonable and the need for some functional budget that has magical properties:

“Continued stalemate is pointless and irresponsible. Legislators should drop the partisan rigidity and craft a budget that offers real, permanent solutions to the state's ongoing fiscal woes. The feasible choices for fixing state finances will be no different a month or two from now. Continued standoff serves no public purpose.”[8]-- Budget bunk Editorial By The Press-Enterprise 10:00 PM PDT on Sunday, August 8, 2010 [Emphasis is mine in all quotes.]

Okay, what does the budget look like? Well, the Democrats have some complicated scheme to cut 1.8 billion [only 10%] and that is all.[9] What kind of plan is this?

“The centerpiece of this latest proposal is an $8.7 billion hike in personal income taxes and a $1.5 billion hike in car taxes. Both of these taxes were already increased last year, and add to the pain of families and small businesses reeling from a prolonged economic recession. Voters rejected extending lesser versions of these same income and car tax hikes in a May 2009 special election.

The Democrats claim these huge tax increases will have a negligible impact on most Californians because they can be written off as a tax deduction on federal income taxes. The problem is that only 38 percent of California taxpayers ---- typically higher-income earners ---- itemize their deductions. Those who don't ---- the poor, seniors, renters and working families ---- will be hit the hardest.”[10]-- FORUM: Irresponsibility marks Democrats' budget plan North County Times San Diego [Emphasis is mine in all quotes.]

Ah, push it off onto the Feds. Sure. It is not possible for a reasonable person to look at these tax hikes that increase the meager tax revenues of about 80 bln or so some additional 10%! A 10% tax hike will have “a negligible impact on most Californians”??

The liberals hungrily hang to their Marxian fetid precept that raising taxes is fine and it will raise revenues as well. The facts argue against this [see the Laffer Curve[11]]. They believe that there is no upper limit on taxation as corporations will want to stay in business and will pay these taxes. The liberals are not genuine here as they can only tax and spend with abandon. Here is an absurdity from 2008 reduced to incoherent mumblings in the case of home owners in trouble in California:

An absurd plan to help homeowners who are about to lose their homes:

“The best way out of the current mess that avoids a taxpayer rescue is for lenders to modify loans.”[12]-- Pia Lopez, Sacramento Bee.

“But the role of loans for people who don't qualify for a lower-cost, prime loan should be to provide them with a loan so they can build a credit history and refinance into a conventional loan with better terms when their credit improves.”[13]—Pia Lopez, Sacramento Bee.

This reference omits any reference as to where the money will come from. Lopez expects the lenders to take a haircut. It also postulates that if we give them money they will use it wisely and thus establish a good credit history so they can borrow more. Here is governor Schwarzenegger’s view:

“Today we stand at a great crossroads. The economic crisis has rocked governments and families around the world and forced us all to confront harsh realities that were ignored for far too long. For California, the reality is that for decades government has been racking up debt by making promises it could not afford.

After solving a $60-billion deficit last year — which included many tough and unpopular cuts — we face another $20-billion shortfall this year. We have $500 billion in government-employee pension debt alone, a mind-numbing figure that is six times the size of our entire state budget and 10 times the amount we spend on education. “[14]--Fixing California's budget for good

Debt, debt and more debt.

“A state budget that cuts spending and does not raise taxes is the surest way to revive our ailing economy.

And at the same time, our corporate, sales and income tax rates are among the highest in the nation.

This is simply unsustainable. And let me remind you that this debt disease is not just a threat to California. Look at what is happening in other states and other nations like Greece, Spain, France, Ireland, Britain and even the United States. In fact, the co-chair of President Obama's debt commission recently compared our national debt to a cancer. "It is truly going to destroy the country from within," said Democrat Erskine Bowles.

Yet right now, there are those in Sacramento who want to continue tumbling down the same destructive path of more borrowing and higher taxes. That path will lead us to economic suicide.”-- Fixing California's budget for good

Cut spending? Furlough workers?? Not a chance in the Marxist environment we elected to office.

After years and years, it is clear that the rabid left will not willingly cut spending. Indeed, the excess spending is the only hope for expansion of their cancerous growth.

We desperately need an example of what debt can do to an economy and I was hoping that Greece or Spain would show us when [not IF] they default. My choice for California to go down first was set back since some federal monies ooze into the state disguised as ‘education’ or welfare or unemployment gifts. There is no known scenario by which California can recover from this as they are increasingly more anti-business in their legislation and outlook and only invite the inevitable default. Their hopes then rest solely upon Washington for gifts as they cannot finance a loan. There is a strong parallel between the mentalities of the politicians in California and Greece as they both have the same affliction. Both are going broke and refuse to cut spending.[15] New York, New Jersey and Michigan are in similar positions in debt. These entities are almost entirely controlled by leftist elites.

This debilitating debt process is not exactly a new story as we saw the horrible outcome of the French Revolution, the Russian Revolution, Cuba, the People’s Republic during the Great Leap Forward and many other examples of how the far left can grab tangible assets and money and spend it in inefficient ways and bring whole continents down to poverty levels. The prediction circuits were wired in and the red lights blinking for us all to see all the way back to the 1890s and somewhat before that era. But, history’s events are not any reasonable deterrent to overspending and poor economic choices.[16]

We are past the point of reason now. Every person should prepare for wild and unrestrained grunting and pandering for money from Washington, DC and in many of the states. There is no recourse now but to attempt to institute a wealth tax or to attach our 401(k)s and Roth IRAs to state or federal budgets. That means that every citizen must find ways to preserve their wealth because civil unrest, cleptocracy and urban warfare are next on the agenda.

It will probably begin with California’s John Chiang:

Here is some fluff from California State “Controller” John Chiang[17]:

“Visiting the Fresno Rotary Club for the first time, California State Controller John Chiang didn't hold back. ”If you think the tax increases they're talking about are stiff, or if you think the spending cuts they talk about today are drastic, you have not seen anything yet,"[18] said Chiang.”-- Calif. Controller Discusses Budget Crisis in Fresno Monday, January 26, 2009 [Emphasis is mine in all quotes.]

First come the IOUs and then businesses will refuse to accept them because they are unsecured debt with an indeterminate term. You cannot pay your employees and creditors with IOUs. A wealth tax will be proposed.[19] Then the street riots. Then probable looting in the Watts manner in a quest for ‘social justice.’

This only leads to chaos.

rycK

Comments: ryckki@gmail.com


[5] Copulating with Coprolites [II]: The Unveiled Mechanism of Governance by Progressive Liberalism in California[5]

http://ryckki.blogspot.com/2010/08/copulating-with-coprolites-ii-unveiled.html

[6] California Becomes the National Leper like Greece is for the EU II. They Need All our Money and More.

http://ryckki.blogspot.com/2010/07/california-becomes-national-leper-like.html

[8] Budget bunk By The Press-Enterprise 10:00 PM PDT on Sunday, August 8, 2010 http://www.pe.com/localnews/opinion/editorials/stories/PE_OpEd_Opinion_D_op_09_ed_dembudget.29d90d6.html [Emphasis is mine in all quotes.]

[9] Even if the Democrats won approval of their plan, it would raise just $1.8 billion, and that is by their own suspect calculation. The other 90 percent of the budget deficit would remain unsolved. http://www.insidebayarea.com/opinion/ci_15720952

[10] FORUM: Irresponsibility marks Democrats' budget plan North County Times San Diego http://www.nctimes.com/news/opinion/commentary/article_5da7f666-a13f-512b-9e3e-5bf4d473d611.html

[12] Pia Lopez: The party's over; now comes the big cleanup With state at heart of credit crisis, it's up to governor to propose bold steps By Pia Lopez plopez@sacbee.com Published: Sunday, Oct. 12, 2008 http://www.sacbee.com/110/story/1305207-p2.html

http://www.sacbee.com/110/story/1305207-p3.html

[14] Fixing California's budget for good

A state budget that cuts spending and does not raise taxes is the surest way to revive our ailing economy. http://www.latimes.com/news/opinion/commentary/la-oe-schwarzenegger-20100810,0,5674221.story

[18] .”-- Calif. Controller Discusses Budget Crisis in Fresno Monday, January 26, 2009 http://abclocal.go.com/kfsn/story?section=news/politics&id=6626028

[19] Shavian Notions Revisited: The Wealth Tax and Other Mistakes

Thursday, November 15, 2007 12:05 PM

http://rycksrationalizations.townhall.com/g/2d8b7149-45c1-452a-85fa-2121160e1e30

“Earlier this month, a California activist began gathering signatures to put a state wealth tax on the ballot. The measure would impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate), and penalize people who leave the state by seizing 55% of assets exceeding $20 million. The money raised would be used to eliminate the state's budget deficit and for purchasing controlling shares in large corporations.”

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Sunday, August 8, 2010

Copulating with Coprolites [II]: The Unveiled Mechanism of Governance by Progressive Liberalism in California

Abstract: This was written about this time a year ago[1] and seems to read is if it is current. The slale liberalism that has plagued the Golden State has not abated and the very same fiscal problems still burn with passion. I have decided to repost this with updates and some editing are those are written in green for emphasis. It is asatonishing that such mental and governmental stagnation still persists in the West.

There has been much imbecilic blathering and blue sky gazing since our ancients attempted to organize various societies into some form of governable mass. Most of the attempts [and even histories of the attempts] are worth not so much as their weight in dry cat litter given even a brief reflection on how things turned out in many societies. The historians are not reliable, we find after some analyses and comparison of parallel accounts of the same incidents, as the temptation to redact the original records and to insert excuses and plain lies are irresistible. There are so many theories that the path forward to what some think might be a just and equitable society is merely an overgrown jungle festooned with toxic notions and far-away pipe dreams lurking near every tree. The quest for firm solutions to such problems is like copulating with coprolites; there is no possible issue so to speak—unless you are a Californian.

The Greeks were marginally successful, arguably in a limited sense, until they lost hegemony of their security awareness and became slaves or all sorts and flavors to an interesting array of masters. The Romans did a bit better for a thousand years although they were practicing unvarying warfare with the known world and many times with themselves. We can wonder how societies progressed from cave dwellers to high priests and note, with some cloudy visualization, that most social systems were failures if you care to inspect the outcomes and compare them with modern notions of societies. In theory, we might want to put up a rigid set of metrics to measure and evaluate various governments based on human rights, murder rates, caloric intake, war, opera and other key parameters and bring into line governments from the ancient Egyptians to the present in some proper order. When we attempt this we tend, not surprisingly, to notice that nasty leaders like Attila, Hitler and Genghis Khan have had their counterparts all along the historical trail. It is difficult to ignore the similarities among Hitler, Stalin, Robespierre, James Jones, Pol Pot, The Ayotollah Khomeini and Robert Mugabe when you start to count bodies and look at the supply of food and tabulate who sleeps where. The salient fact that these unsavory creatures are randomly spaced along the historical timeline from the earliest known periods of recorded history, or from legends, which is probably more accurate in some cases, thus this observation nullifies the perception that we, as a society, learn from our mistakes and misdeeds and make continuous improvement in our states. Actually, the data point to the reciprocal conclusion: we have learned nothing from the past. Repeating the past is good politics. Worse, we probably know less about the present[2] than the redacted past[3] and essentially nothing about the short-term future. [4] The ignoranti have a cornucopia of alternatives thus broad license to experiment.

Thus, we find a compelling reason to adjust or redact certain obtuse portions of history for social reasons and can safely ignore complaints about accuracy if the outcomes are potentially rosy or aligned with leftist wishes. Observers of our society like the Fabian maverick George Orwell have fairly well characterized the ultimate methods of governments with the following:

"Who controls the past controls the future; who controls the present controls the past".—Slogan from 1984 by George Orwell.

There is much to be said about the political efficacy of this slogan. It contains all the necessary elements to fix up the present, future and past and roll then into one tight and juicy egg role for all to enjoy. Karl Marx had a grand opportunity to meld the romantic elements of J. J. Rousseau with some vigilantly selected tidbits of history, glossed over, necessarily, by forcing a strict theory upon the helpless little accounts, and thus by manufacturing a grand plan to eliminate not only inequities in our production of goods and services but government altogether. You can have a nice administration that way if you merely use lies and firing squads to glue together some of the more flaccid elements of a given society.

Winston Churchill summed up the results of his opposing line of thinking some three years after the October Revolution:

"....But my hatred of Bolshevism and Bolsheviks is not founded on their silly system of economics, or their absurd doctrine of an impossible equality. It arises from the bloody and devastating terrorism which they practise in every land into which they have broken, and my which alone their criminal regime can be maintained...."— Text of Winston Churchill's July 8th, 1920, British House of Commons, Amritsar Massacre Speech By Winston Churchill given July 8th, 1920[5] [Emphasis is mine in all quotes.]

Of course, he had a bad attitude. This inspection sweeps a lot of mystery, fluff and hokum away from the totalitarian chimera and unveils in bright lights the sordid prevarication that Marxism was making some contribution to society at that early date and, recall for a moment, that the acolytes of Bolshevism persisted until 1989 in the USSR alone. In Africa, it has flourished since 1948, or so, and is the most popular form of government on the southern half of that continent. In order to get positive results from the process of Marxism it is necessary to plaster up a stipulation that shooting the dissidents in order or at random provides extra staples and good times for the blindly obedient even though the theory for this positive outcome borders and brushes upon the recalcitrant capitalist supply and demand schedule that was summarily abolished. A little tribalism helps too. Pol Pot was able to homogenize his people by fairly and judiciously deselecting members of his society using a reverse cognitive skill scale. This worked out quite well and most of his people were finally essentially equal. A lot of knowledge is a dangerous thing.

This, then, leaves us with a fine theory, although unworkable as it is in the primitive sate, to move forward and convince or intimidate the masses with the indomitable notion that capitalism is at the very root of all social problems. The obvious conclusion [and also the posted premise before any tedious research], thusly, is that we must eliminate or suppress capitalism and that that commission, alone, will offer society the kind of relief from capitalist oppression and that we need to restructure government. California has reached that authentic shining pinnacle with their current government. [6] It has also broached a stubborn conundrum. Can this process bear fruit? Can we continue to make political love to ancient rocks that bear opposing messages? Yes, in California! All it takes is massive quantities of somebody else’s money in grand supply and some drugs. It is as simple to understand as a late-term abortion.

Everything is running smoothly in California and other state entities that emulate the Sacramento government. They mature politically as they noisily proffer ‘concern’ for the Little Guy and lament the meager intake of tax returns. Others can approach the apex of their educational skills and egalitarianism by exercising California-style norms. We offer examples such as New York[7], New Jersey and probably Maryland. Of this esteemed group, the wheels of education and levers of government are serenely greased by narcotics, high taxes, reverse racism and lofty song. They have solid majorities in the legislative branches, strong support in the executive and judicial branches in most examples and have fine educational and instructional programs in place to train or retrain, if necessary by force, the polis. The ballot boxes are overflowing with the absentee votes of illegal aliens who are thankful for the tax-free work environment, the state’s placid toleration of violent crime, which is a necessary element of their dope business, and free medical service. There is no reason that well-meaning Californian legislators cannot create fine ideas in the form of offspring from love-ins with boxes of rocks, some handy crack pipes or other phantasms. This is just a rerun of Woodstock.

This was all achieved by being generous and progressive with hiring state employees of the strictest union bent, of running the tax spigot at full throttle whenever possible and of showing benefits unseen in the world to date upon their loyal partners in government. Gladness is everywhere and the degree of happiness spreads arithmetically with each and every greedy capitalist who flees the state in search of a less hostile environment to do traditional business at tax levels that permit small profits. Profits are evil and CEOs are lazy and stupid. California is refining its society in the image of pure liberalism.

Everything wonderful has happened that could happen except that some Republican has signaled that the spending is too high and taxes cannot be raised high enough to pay for the current government. He was actually elected after a recall of a Democrat. There is a major error here. There is the tacky right-wing problem of debt. This unnecessary distress that has interrupted this melodrama of late is caused by the ‘rich’ avariciously avoiding taxes coupled with the constitutional inability of the state to tax them to such an extent that we can all enjoy prosperity and sing songs of joy at every special increment in the tax load. California’s progress is limited only by Winston Churchill’s aversion to devastating terrorism and the absence thereof. They cannot, for the moment, just whack their opponents Cuban style. Thus, we face some alternatives:

[1] The state can receive well-deserved alms from the federal government or elsewhere while the tax battle continues to whittle down capitalists, private property disputes and tax levels or…

[2] The state can confiscate wealth in any and every form and monetize those assets to pay for the current social programs and cover the 19 bln deficit[8]

“"Their plan is predicated on a giant tax increase," Schwarzenegger spokesman Aaron McLear told reporters in a briefing in the state capital of Sacramento. "Tax increases are DOA. [Emphasis is mine in all quotes.]

Assembly Speaker John Perez said lawmakers from both parties would be able to support the plan he crafted with Senate President pro Tem Darrell Steinberg.

"It reflects the core values of Californians and makes decisions that will help, rather than hurt, our economy," Perez said. "It restores cuts the Governor's budget made to education, closes costly loopholes and doesn't impose broad-based taxes on Californians."

Steinberg said the plan includes $8 billion in budget cuts but rejects Schwarzenegger's "gratuitous cuts that would devastate our economy, our people, and eliminate hundreds of thousands of jobs."--- California (Reuters) - The Democratic leaders of California's legislature unveiled on Tuesday a joint state budget plan, which a spokesman for Republican Governor Arnold Schwarzenegger had declared dead on arrival ahead of its release.

There is so much folly here it is difficult to proceed without anger. In a down economy like California’s self-inflicted wreckage massive tax increases, especially on businees, will only drive down the tax revenues as people flee the state.

The bleeding begins:

“State Controller John Chiang has released a list of the more than $2.19 billion in bills he says the state cannot pay in August without a budget in place.

Chiang posted the full list for August on the controller's website. It includes $284 million to community colleges, $130 million in payment due to K-12 schools and nearly $450 million from businesses that have contracts with the state.”[9]-- Controller: $2.19 billion in California bills may go unpaid without budget

By Shane Goldmacher in Sacramento August 3, 2010 | 12:34 pm

Could this be more hopeless??

The amusing part here is to think that this tax barrage would be acceptable to the Repubilcans who hold the 1/3 votes or so in opposition and that there is no hint of cost cutting and firing usless employees in this bill.

“From a management perspective, giving 200,000 workers the equivalent of a 14 percent pay cut will stave off the day when the state's cash reserves are gone and its lack of a budget forces the issuance of IOUs to service providers and vendors.”[10]-- Analysis: Recent California newspaper editorials By The Associated Press

[3] They can use the Cambodian Method of Social Cleansing to eliminate those excesses that clog the system with capitalists and their greedy corporations.

With [1] we return to bliss and continue on building the ideal society. Why shouldn’t the Other 49 be charged for this advanced instruction in government? With [2], as only a few Republicans stand mired in the error of their ways, the natural flow into egalitarianism follows in due course. The money will be properly collected and more properly spent. The greedy will be made to apologize for their abuses. But, [3] is still a little messy with the current state of talk radio and other communication avenues. They cannot, as yet, pull a Waco in just any old political district in California without good cause. But, a tax revolt might set up such a tactic. Full control of the media is mandatory for a successful society as we find in Cuba and the shrunken remains of the USSR. Such programs were highly successful in Cuba and North Korea and continue today to offer a faultless example of how the best societies can be had only by solving the difficulties in identifying and promoting the right leaders to power with minimal opposition.

But, saved by the notion that ‘California is too big to fail’ we can press onward with our educational systems[11], confiscative taxation of the rich and control of most goods and services, particularly medicine, food and transportation. The hope that Obama will bring gifts of quantitative easements and such are promising and the only proper solution to the problems they face in the Golden State.

Thus, the direction is clear and we need to dig deep into our white male pockets and extract as much money and wealth as we possibly can to give the artists and innovators in Sacramento the freedom to create the kind of society they deserve. Call your legislators today and beg them to hike your taxes so Obama can send some of that to California. We have to be fair.

rycK

Comments: ryckki@gmail.com


[2] It takes time to explain thing to imbeciles.

[3] Given revisionism and other corruptions of history.

[4] Even when the choice is either A or B never do they get up to a correct answer 50% of the time.

[9] Controller: $2.19 billion in California bills may go unpaid without budget

August 3, 2010 | 12:34 pm http://latimesblogs.latimes.com/california-politics/2010/08/more-than-2-billion-in-california-bills-may-go-unpaid-without-budget.html

[10] Analysis: Recent California newspaper editorials By The Associated Press http://www.mercurynews.com/breaking-news/ci_15670656

[11] Read propaganda here.

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