CA State Budget Passed – State’s demise imminent

[SD Realtor]

Actually the proposed budget is not a solution at all. How does one call it a solution at all with an 11B shortfall that needs to be financed? What happens next year? Another 11B loan? Do we get a loan every single year?

Unfortunately like our local government then state is insolvent. As painful as it would be, yes the state does need to declare bankruptcy.

Of course we will not do that, and if we did do that, no the current residents of our penitentaries would not be left free in the streets. What would happen? I have no clue because it would be uncharted waters.

What we all realize but nobody wants to post is that it is not a sustainable situation. Talk about simple math… The only way to even get close to sustainability will be taxes in form and function like New York, more likely even higher. The state is growing in overall population but it is losing quality wage earners and businesses. This is a simple fact not speculation.

Eventually it will happen.

Numbers can only be manipulated so long.

[EconProf]

SDR raises a good point. It appears that $11 billion of the closing of the $42 B. budget gap is simply from more borrowing. This is just kicking the can into the future. When the bill comes due we will just have to raise taxes and/or cut services. We have already done this to such an extent that interest payments are now a big part of our “spending”. The credit markets, no fools they, have awarded our state with the worst credit rating in the country. We used to be tied with Louisiana, but now we’ve sunk below them.
In addition, history shows that tax hikes NEVER bring in their projected revenue, because the tax hikers use static analysis instead of dynamic analysis. They figure people never change behavior in response to incentives. Thus, a 10% hike in a tax will result in a 10% increase in revenues. In the real world, people can move, substitute leisure for work, buy their cigarettes in another state, have one spouse stay home, buy on the internet, etc., etc.
Those most likely to change their behavior are also the highest taxed, economically savvy, and productive citizens. Exactly the ones who do the hiring, the big spending, the risk-takers and creaters. Some on this site, like Turtle, are bolting or altering their spending.
Accordingly, the idea that the just-passed budget is balanced is a fantasy. In several months we will discover that revenues are falling well short of projections, the state needs more revenue, and all we need to do is raise taxes to close the unexpected gap.
It is a vicious cycle and our politicians and media, and some on this site are in denial.

[EconProf]

SDR raises a good point. It appears that $11 billion of the closing of the $42 B. budget gap is simply from more borrowing. This is just kicking the can into the future. When the bill comes due we will just have to raise taxes and/or cut services. We have already done this to such an extent that interest payments are now a big part of our “spending”. The credit markets, no fools they, have awarded our state with the worst credit rating in the country. We used to be tied with Louisiana, but now we’ve sunk below them.
In addition, history shows that tax hikes NEVER bring in their projected revenue, because the tax hikers use static analysis instead of dynamic analysis. They figure people never change behavior in response to incentives. Thus, a 10% hike in a tax will result in a 10% increase in revenues. In the real world, people can move, substitute leisure for work, buy their cigarettes in another state, have one spouse stay home, buy on the internet, etc., etc.
Those most likely to change their behavior are also the highest taxed, economically savvy, and productive citizens. Exactly the ones who do the hiring, the big spending, the risk-takers and creaters. Some on this site, like Turtle, are bolting or altering their spending.
Accordingly, the idea that the just-passed budget is balanced is a fantasy. In several months we will discover that revenues are falling well short of projections, the state needs more revenue, and all we need to do is raise taxes to close the unexpected gap.
It is a vicious cycle and our politicians and media, and some on this site are in denial.

[EconProf]

SDR raises a good point. It appears that $11 billion of the closing of the $42 B. budget gap is simply from more borrowing. This is just kicking the can into the future. When the bill comes due we will just have to raise taxes and/or cut services. We have already done this to such an extent that interest payments are now a big part of our “spending”. The credit markets, no fools they, have awarded our state with the worst credit rating in the country. We used to be tied with Louisiana, but now we’ve sunk below them.
In addition, history shows that tax hikes NEVER bring in their projected revenue, because the tax hikers use static analysis instead of dynamic analysis. They figure people never change behavior in response to incentives. Thus, a 10% hike in a tax will result in a 10% increase in revenues. In the real world, people can move, substitute leisure for work, buy their cigarettes in another state, have one spouse stay home, buy on the internet, etc., etc.
Those most likely to change their behavior are also the highest taxed, economically savvy, and productive citizens. Exactly the ones who do the hiring, the big spending, the risk-takers and creaters. Some on this site, like Turtle, are bolting or altering their spending.
Accordingly, the idea that the just-passed budget is balanced is a fantasy. In several months we will discover that revenues are falling well short of projections, the state needs more revenue, and all we need to do is raise taxes to close the unexpected gap.
It is a vicious cycle and our politicians and media, and some on this site are in denial.

[EconProf]

SDR raises a good point. It appears that $11 billion of the closing of the $42 B. budget gap is simply from more borrowing. This is just kicking the can into the future. When the bill comes due we will just have to raise taxes and/or cut services. We have already done this to such an extent that interest payments are now a big part of our “spending”. The credit markets, no fools they, have awarded our state with the worst credit rating in the country. We used to be tied with Louisiana, but now we’ve sunk below them.
In addition, history shows that tax hikes NEVER bring in their projected revenue, because the tax hikers use static analysis instead of dynamic analysis. They figure people never change behavior in response to incentives. Thus, a 10% hike in a tax will result in a 10% increase in revenues. In the real world, people can move, substitute leisure for work, buy their cigarettes in another state, have one spouse stay home, buy on the internet, etc., etc.
Those most likely to change their behavior are also the highest taxed, economically savvy, and productive citizens. Exactly the ones who do the hiring, the big spending, the risk-takers and creaters. Some on this site, like Turtle, are bolting or altering their spending.
Accordingly, the idea that the just-passed budget is balanced is a fantasy. In several months we will discover that revenues are falling well short of projections, the state needs more revenue, and all we need to do is raise taxes to close the unexpected gap.
It is a vicious cycle and our politicians and media, and some on this site are in denial.

[EconProf]

SDR raises a good point. It appears that $11 billion of the closing of the $42 B. budget gap is simply from more borrowing. This is just kicking the can into the future. When the bill comes due we will just have to raise taxes and/or cut services. We have already done this to such an extent that interest payments are now a big part of our “spending”. The credit markets, no fools they, have awarded our state with the worst credit rating in the country. We used to be tied with Louisiana, but now we’ve sunk below them.
In addition, history shows that tax hikes NEVER bring in their projected revenue, because the tax hikers use static analysis instead of dynamic analysis. They figure people never change behavior in response to incentives. Thus, a 10% hike in a tax will result in a 10% increase in revenues. In the real world, people can move, substitute leisure for work, buy their cigarettes in another state, have one spouse stay home, buy on the internet, etc., etc.
Those most likely to change their behavior are also the highest taxed, economically savvy, and productive citizens. Exactly the ones who do the hiring, the big spending, the risk-takers and creaters. Some on this site, like Turtle, are bolting or altering their spending.
Accordingly, the idea that the just-passed budget is balanced is a fantasy. In several months we will discover that revenues are falling well short of projections, the state needs more revenue, and all we need to do is raise taxes to close the unexpected gap.
It is a vicious cycle and our politicians and media, and some on this site are in denial.

[cr]

Well said EconProf.

Pretending this will solve our problems is the delusion those you mention are brainwashed into believing, so they laugh it off, as if California will be fine because everyone wants to live here. As if our state defaulting is ‘inconceivable’.

Bi-partisan politics has blinded people into complacency as long as their party is in power, but what they fail to understand is the party doesn’t matter. It’s the system that’s broke. Voting new people in may help, but the system needs an overhaul.

I can’t say for certain if or when our state will fail, but as bad as it is, this new budget will only make things worse. Anyone who disagrees with that will have a hard time coming up with the $100 billion in taxes the state spends if they’re the last one living here.

[cr]

Well said EconProf.

Pretending this will solve our problems is the delusion those you mention are brainwashed into believing, so they laugh it off, as if California will be fine because everyone wants to live here. As if our state defaulting is ‘inconceivable’.

Bi-partisan politics has blinded people into complacency as long as their party is in power, but what they fail to understand is the party doesn’t matter. It’s the system that’s broke. Voting new people in may help, but the system needs an overhaul.

I can’t say for certain if or when our state will fail, but as bad as it is, this new budget will only make things worse. Anyone who disagrees with that will have a hard time coming up with the $100 billion in taxes the state spends if they’re the last one living here.

[cr]

Well said EconProf.

Pretending this will solve our problems is the delusion those you mention are brainwashed into believing, so they laugh it off, as if California will be fine because everyone wants to live here. As if our state defaulting is ‘inconceivable’.

Bi-partisan politics has blinded people into complacency as long as their party is in power, but what they fail to understand is the party doesn’t matter. It’s the system that’s broke. Voting new people in may help, but the system needs an overhaul.

I can’t say for certain if or when our state will fail, but as bad as it is, this new budget will only make things worse. Anyone who disagrees with that will have a hard time coming up with the $100 billion in taxes the state spends if they’re the last one living here.

[cr]

Well said EconProf.

Pretending this will solve our problems is the delusion those you mention are brainwashed into believing, so they laugh it off, as if California will be fine because everyone wants to live here. As if our state defaulting is ‘inconceivable’.

Bi-partisan politics has blinded people into complacency as long as their party is in power, but what they fail to understand is the party doesn’t matter. It’s the system that’s broke. Voting new people in may help, but the system needs an overhaul.

I can’t say for certain if or when our state will fail, but as bad as it is, this new budget will only make things worse. Anyone who disagrees with that will have a hard time coming up with the $100 billion in taxes the state spends if they’re the last one living here.

[cr]

Well said EconProf.

Pretending this will solve our problems is the delusion those you mention are brainwashed into believing, so they laugh it off, as if California will be fine because everyone wants to live here. As if our state defaulting is ‘inconceivable’.

Bi-partisan politics has blinded people into complacency as long as their party is in power, but what they fail to understand is the party doesn’t matter. It’s the system that’s broke. Voting new people in may help, but the system needs an overhaul.

I can’t say for certain if or when our state will fail, but as bad as it is, this new budget will only make things worse. Anyone who disagrees with that will have a hard time coming up with the $100 billion in taxes the state spends if they’re the last one living here.

[paramount]

I believe it was Hollingsworth (R-Temecula) who said in the not to distant future the assembly would be doing this all over again because the tax increases will not work.

[paramount]

I believe it was Hollingsworth (R-Temecula) who said in the not to distant future the assembly would be doing this all over again because the tax increases will not work.

[paramount]

I believe it was Hollingsworth (R-Temecula) who said in the not to distant future the assembly would be doing this all over again because the tax increases will not work.

[paramount]

I believe it was Hollingsworth (R-Temecula) who said in the not to distant future the assembly would be doing this all over again because the tax increases will not work.

[Author]

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