California Nightmare


Maha’s post on the nixed ballot measure gets the Best Title Award, and Maha gets a thank you for inspiring mine.

Hullabaloo’s dday, a Californian, tells the rest of us how things got to this sorry pass.

Via Neptunus Lex, Megan McArdle rather uncharacteristically nails it:

California is completely, totally, irreparably hosed.  And not a little garden hose.  More like this.  Their outflow is bigger than their inflow.  You can blame Republicans who won’t pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession.  You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets.  Whoever is to blame, the state was bound to go broke one day, and hey, today’s that day!

There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice.  But actually, we do have a choice:  we could let them go bankrupt.  And we probably should.

I am not under the illusion that this will be fun.  For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you’re going to pay as a result.  Your states and municipalities will pay higher interest on their bonds if California is allowed to default.  Also, the default is going to result in a great deal of personal misery, more than a little of which is going to end up on the books of Federal unemployment insurance and other such programs.

Then there are the actual people involved.  Whatever you think of, say, children who decided to be born poor, right now they are dependent on government programs, and will be put in danger if those programs are interrupted.

Kevin Drum — another Californian — does not have the solution (who does?) but he does an excellent job of defining the problem:

Californians are living in a dream world.  Prop 13 slashed property taxes and nobody wants to amend it, even for commercial property.  Arnold Schwarzenegger got elected in the middle of a budget crisis by promising to cut taxes.  When that proved to be an unsurprising disaster, the voters approved billions in borrowing, making the budget situation even worse.  It’s easy to blame Sacramento for this mess (and I do!), but the public has been complicit every step of the way.

Historically, California has been a high tax/high service state.  That’s fine.  Some states prefer a low tax/low service model.  That’s fine too.  (It’s a lousy idea, I think, but fiscally it’s fine.)  But over the past few decades we Californians have somehow concluded that we can be a medium tax/high service state.  It’s a fantasy. …

Dr. Steven Taylor points to the state’s infamous 1978 anti-tax initiative, Proposition 13, as the source of Californians’ present-day woes:

Of course, the institutional parameters in California, including (but not limited to) the 2/3rds threshold for passing tax increases in the state legislature and ballot initiative process have worked to exacerbate the problems.

Indeed, conservatives often point to California’s Proposition 13 (passed in 1978) as a triumph of taxpayers. And yet it created the 2/3rds limitation mentioned above, which makes managing the state problematic and also created perversions in the real estate market. This is because it creates incentives for people not to sell and upgrade properties because taxes are assessed on the original valuation plus a small capped increase. …
[…]
It its own way it is like rent control in NYC–it keeps monthly payments artificially low for long-term residences but sticks it to newer residents. I have a family member who found it impossible to make a move from one home to another, because even though they could afford a nicer house, they couldn’t also afford the radical increase in property taxes. It is also unfair, as it shifts the burden of paying for services that all the residents of given community enjoy to newer home owners.

For more commentary, including plenty of reality-free opinionating from right-wing bloggers, go here.

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One Comment on “California Nightmare”


  1. Maybe California’s default is the necessary precedent to the repeal of Prop 13, either way it needs to go, and we can replace it with protection for individual homeowners without hamstringing the budget for the benefit of the wealthiest land owning corporations.


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