Posted on 07/11/2018 8:19:42 PM PDT by SeekAndFind
I’m pretty sure I know how California will fail.
I don’t know exactly when it will happen, but after the result in the Democratic primary in New York’s 14th Congressional District two weeks ago, the Golden State’s rendezvous with fiscal perdition is going to happen sooner than we think.
Let’s talk about the “how.”
California’s foundering won’t be precipitated by a single catastrophic event. Apart from the threatened CalExit, voter initiatives to partition the state, or the Big One shaking us into the Pacific, it won’t be the equivalent of a sudden, unexpected stroke on a random Tuesday that brings the state down.
Instead, California will fail in the way an elderly person with pneumonia fails. It will be a systemic, protracted, and spiraling demise; a sniffle becomes a fever that leads to a cough that turns into a chronic wheeze that results in - The End.
A couple of facts make me certain of this.
First, California’s Democratic Party rulers, already in an apoplectic lather about the Trump administration, are going to boil the statistics and demographics and distill exactly the wrong lessons from the young “Democratic Socialist’s” victory in Brooklyn.
They will conclude that the big “S” socialism Uncle Bernie dragged out of history’s root cellar is a more broadly sellable political commodity if properly packaged. Like a political Rorschach test, those who want to see it will view the results and determine voters energized by the wild-haired Vermonter are still out there and will turn out on Election Day to support an openly socialist candidate, particularly if that candidate is a new, young, Latina face.
Break out your Mao suits and red-starred Che berets because for the American political Left, Socialism is suddenly cool.
And like someone who loves chocolate suddenly learning that eating more of it might be good for them, California’s uber-liberal Democratic vanguard will infer that universal healthcare, guaranteed government jobs, and an open border are winning issues. They will perceive a liberal riptide running just beneath the political surface and will be encouraged to do more of what they’ve already long-aspired to do.
For example, nothing that transpired in Brooklyn is likely to convince the odds-on favorite to be California’s next Governor that his plan for universal, state-run healthcare isn’t a political winner. On the contrary, the lesson will be that moderation isn’t the path forward. California’s liberal elite will see it’s finally time for the Socialist full monty.
But these promises, like universal healthcare and its $400 billion price-tag, will accelerate California’s demise because to paraphrase Prime Minister Thatcher’s famous quip, California’s aspiring new Socialists have already run out of other people’s money.
Which brings us to the debt bombs.
The cities, counties, school districts, and myriad other local government agencies across the state have unfunded pension liabilities that by some estimates now total nearly $1 trillion. This sum represents money that has been promised to public employees in pensions and benefits that local governments simply do not have, and but for taxes, cannot get. The deals elected officials made with the public sector employee unions for labor peace or political advantage have compounded over time and now represent a liability of more than $60,000 for each household in the state.
The problem is that these obligations continue to compound and grow, and money needed to service them are consuming ever-increasing portions of local municipalities’ budgets.
It’s a debt bomb, and cities up and down the state have them.
These bombs will explode when the money needed to pay pension and other legacy obligations exceed revenue.
Maybe you’ve already seen the effects where you live.
Like passengers on a sinking ship, cities are throwing the non-essentials overboard first. Maybe programs for seniors and after-school activities for kids in the town where you live have been cut. The problem is these things represent only a tiny fraction of most city budgets and will never be enough to stop the inevitable detonation.
Maintenance and capital will go overboard next. Service lives for police cruisers, city vehicles, and equipment will be extended. Ever wonder why the computer systems at City Hall are somewhere between ancient and East German surplus?
What about capital projects? Road maintenance, for example.
Forget about them.
If you’re reading this in California, how is the pavement of the streets in your neighborhood?
Your city may be closer to The End than you know.
Unlike the state, California’s cities are effectively cash businesses. They can’t borrow like the politicians in Sacramento can, so there’s a straight-line correlation between money spent on pensions and benefits and a city’s ability to pave streets and repair sewers.
Cities aren’t learning how to do more with less, they’re learning how to do less with less.
Which brings us full circle to the Golden State’s newly-emboldened Socialists.
Cash-strapped cities and local governments are already being forced to raise local taxes to maintain services while supporting their growing pension obligations. Voters are being asked to support parcel taxes to raise money to pay for new teachers because school district budgets have been overwhelmed by the pension obligations to the retired ones. Add another $400 billion program for universal health care and California’s sky-high taxes will become stratospheric. Other currently popular ideas like guaranteed government jobs and free college education will only add to that burden.
Economist Herbert Stein once said: “If something can’t go on forever, it won’t.” California, on its current trajectory and with its new Socialist-inspired leadership, cannot go on forever. There simply isn’t enough money. The state will ultimately fail because the math says it has to.
Unfortunately, the city where you live is going to fail first.
RE: California’s in-state revenue is nearly $474 billion
Enough to cover the entire pension liabilities with enough to cover all other state expenses?
California’s only path to economic survival involves the expulsion of everybody on welfare, starting with illegals. That won’t happen with Democrats in charge.
They will precipitate a crisis and they’ll get a Federal bailout, just like the banks did in ‘08. Bank on it.
They already have a backdoor “exit tax”. They have weaponized the Franchise Tax Board to enforce it.
Every year since we escaped, we get an odd tax bill for some alleged underpayment from years ago. Along with huge penalties and interest, of course.
If you have ever had the misfortune of being forced to deal with the FTB, you already know you would prefer dealing with the mafia. By a wide margin.
I attended a Big Data Analytics conference about three years ago and met a guy working for a California orange growing company there. They were investing heavily in determining precisely how much water to put on each tree throughout the season to grow the best oranges and optimize profits. It was fascinating how they were bringing high tech (data, analytics, IOT sensors, irrigation tech) to ag.
“I assume that you didn’t bring the Left Coast mentality with you, so...WELCOME!”
Windflier is still searching for good arugula, a good artichoke heart, and a properly ripened avocado.
c.f. Missouri 2019 budget of 6.1 billion
If you get on the backroads of the Central Valley, you will still see lots of dead orchards. BUT, those are being ripped out and replaced with trees that require much less water. It’s part of the natural cycle of the ag industry. When you tour the wine growing regions, you regularly see entire vineyards being pulled out and replaced for various reasons — old vines on the down-side of the productivity curve, wine tastes have changed (hence different grapes are more profitable), planting pest-resistant vines, etc. It is natural and part of good business to see old trees and vines being ripped out. It took me a long time to realize that.
“When you tour the wine growing regions, you regularly see entire vineyards being pulled out and replaced for various reasons — old vines on the down-side of the productivity curve, wine tastes have changed (hence different grapes are more profitable), planting pest-resistant vines, etc. It is natural and part of good business to see old trees and vines being ripped out. It took me a long time to realize that.”
I drive to Napa nearly every day having a business there. While there is the removal of old vines and replanting of same, that activity pales into insignificance when compared to the new planting. As of today, new vineyards are on the borders of the Napa Airport and the City of American Canyon, reaching up to nearly the tops of the surrounding hills. There is nearly no open space left in the Napa Valley. I suppose only the salinity of the soil and the environmentalists will stop the grapes from actually reaching the shore of SF Bay.
That is true. The expansion all over the western states is astonishing. How much wine can the world drink?
Of course not enough to cover pension liabilities. Not even enough to cover the year’s spending, of course. We’re seeing the same sorry trend in quite a few states now, to lesser extents only because of smaller populations.
I know that both Vallejo and Stockton reneged on their pensioners. We had someone living in my development who had sold their house and were moving in with their kids - both were retirees of Stockton, and both lost their pensions overnight.
It will be the cities, then the counties.
If the state divides into three, its a huge opportunity to restructure or just jettison a bunch of that pension debt.
The spiking that happened down there ten years ago, apparently, has stopped. Crazy it didn’t happen sooner.
The Democrat leaders don’t believe that socialism will make life better for the average California.
The Democrat leaders in California believe that promising socialism will get them elected.
The Democrat leaders don’t care about the average Californian.
The Democrat leaders in California promise socialism so that they can be elected so that they have access to the public treasuries in order to enrich themselves.
To believe that the Democrat leaders promise free stuff to help out people is to believe in The Great Pumpkin.
“That is true. The expansion all over the western states is astonishing. How much wine can the world drink?”
Yes, and although I don’t get out there very often, some of the “biggies” in the jug wine business (like Gallo) are out in the Central Valley. I had a friend who was a contractor, who made a living putting up SS storage tanks for wineries. Gallo was actually fermenting other fruits, to get alcohol to “hype” their wines to speed up time to market. Years ago, the guy who started Ironstone Winery in Angels Camp, an immigrant farmer, switched from growing tomatoes to grapes on land he owned in Lodi, and turned those grapes into a fortune.
“The Central Valley is a modern day dust bowl.”
Utter nonsense.
Thanks, Marine.
We've been in Texas long enough now, that we're more or less foreigners when we visit California these days. I still love the place, but I hardly recognize the people.
It's like I explain to friends and family; my California disappeared a long time ago. At least in the parts where I'm from. Maybe it still exists in the rural areas of the state. I suspect that America can still be found in those areas.
And don't forget the good Napa Valley wine ;-)
What part of Cali are you from? I'm originally from Monterey, but Los Angeles was my home base for decades.
We are in the heart of Silicon Valley. Been there since ‘78. We cant leave for various reasons, so we bought a second place in North Idaho where I’ve bee now for two months. Doing lots of repair and fix-up work. It is SO nice getting out of Cali with the grind, noise, traffic, over-population, rude people, and horrendous politics. I do miss the good summer fruit, though.
I hope you’re not paying them.
Eventually, you run out of your grandchildren’s money.
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