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 $400 billion program for universal health care and California’s sky-high taxes will become stratospheric. Other currently popular ideas like guaranteed government jobs and free college education will only add to that burden.
Economist Herbert Stein once said: “If something can’t go on forever, it won’t.” California, on its current trajectory and with its new Socialist-inspired leadership, cannot go on forever. There simply isn’t enough money. The state will ultimately fail because the math says it has to.
Unfortunately, the city where you live is going to fail first.
| State | VC Funding ($M) | Individual Deals | Avg Deal Value ($M) | %$ | %Deals |
|---|---|---|---|---|---|
| California | 11,579 | 513 | 23 | 59% | 51% |
| Massachusetts | 2,629 | 110 | 24 | 13% | 11% |
| New York | 2,357 | 170 | 14 | 12% | 17% |
| Texas | 747 | 55 | 14 | 4% | 6% |
| Florida | 511 | 20 | 26 | 3% | 2% |
| Maryland | 406 | 16 | 25 | 2% | 2% |
| Illinois | 375 | 36 | 10 | 2% | 4% |
| Colorado | 337 | 37 | 9 | 2% | 4% |
| New Jersey | 315 | 10 | 31 | 2% | 1% |
| Washington | 289 | 30 | 10 | 1% | 3% |
Those are Q1 2018 numbers. Forgot to state that in my haste.
AG is in a death spiral in CA because of the manmade water shortages.
The Central Valley is a modern day dust bowl.
"As the number of investments in other states has grown, the number of California deals has shrunk by 16 percent in the past two years. Venture activity in Washington State, Illinois, Massachusetts, and Colorado has increased almost every year since 2010."
The US is actually long overdue for more diversification of VC funding outside CA. Of course, Washington State, Illinois, Mass., and Colorado are now all socialist hells with the same public pension unfunded liability problems as CA -- or worse. Who in their right mind would pump money into Illinois? How are they going to attract talent?
California’s in-state revenue is nearly $474 billion.
I actually fear this may be here already. Physically you can leave, but no matter where you go they will still demand you pay the balance of the year’s income taxes to CA also.
I can easily see them passing laws that if you sell property and leave the state, you get assessed some huge extra ‘Fee’.
President Reagan destroyed the old Soviet Union via economics. He did not fire one shot in anger. With the aid of Saudi Arabia the world market was flooded with oil. Oil and natural gas is Russia’s total economy. Their economy thus collapsed.
The same economics will destroy California. You can not spend what “you aint got” when your credit rating goes down the tubes. Just ask Venezuela about credit ratings.
“You actually haven’t driven the 5 and noticed the signs on the dried up fields that say ‘Congress Created Dust Bowl’? Or maybe they aren’t there anymore.....I haven’t driven that route in 9 years.”
There are still some remaining signs of 2007 along I-5, but a lot of acreage has bee replanted and it’s interesting to see groves of fruit and nut trees being “drip irrigated.”
But no matter, as big as CA agriculture is, and it does, in many areas “feed the entire country,” is it a pissant by comparison to Silicon Valley. So if our Ag goes under, the country will suffer with fewer fresh fruits, nuts and vegetables, but it isn’t going to cause the State to collapse, although I wish that that were the case.
“The Central Valley is a modern day dust bowl.”
You are FOS! I drove up the Central Valley a couple of weeks ago and there is NO fallow land!
All power and money moves away from cities and toward the state ... controlled by Democrats.
Whee!
Didn’t they kill agriculture when they shut the water to the Central Valley off? All in service of the Delta Smelt and 23 trout.
And the state is currently under severe water restriction. Like crazy severe. Don’t plan on taking a shower and doing your laundry on the same day. And the restrictions are progressive (see what I did there?), they will keep getting worse.
I’m always amazed that Prop 13 hasn’t been repealed yet. That would obliterate a lot of people, especially seniors.
We are so grateful that we fled in 2015. It comes up almost daily.
its them against the multitude who suffer...
communism....its simply a small group taking from everybody else..
Puerto Rico gave us a clue—natural disaster that took away the façade of normalcy.
In California’s case a few big earthquakes, loss of power for several weeks, and world-class urban riots might be the straw that breaks the camel’s back.
Tech doesn’t work well without electric power...
Calipornia’s recent millionaire tax has driven out 183 millionaires as of last week. States, county, city, and special district taxes aare raised and imposed with no consideration of the total burden on the taxpayer. Cali’s whole year tax for partial year residency is now before the courts and is expected to be declared illegal. The same will occur to any concieved ‘exit’ tax as it generally creates conditions of ‘servitude’ which is illegal. It literally imposes serfdom on those subject to such taxes.
Cali has already crossed the financial suicide line and it is just a matter of time until the panic starts. Once the panic does start the whole states financial edifice will crumble overnite.
One of the reasons for the $10bil surplus is deferred maintenance. The Oroville dam spillway project will cost $2bil alone and the Feds just told them no FEMA money for it as the causation was “deferred maintenance”. California is using deferred maintenance of previously paid for capitol infrastructure as a piggy bank to fund their socialist wet dream. That money would evaporate in a nanosecond if it were to be plowed into just maintenance, let alone capitol projects such as water infrastructure that has been identified as a “dire need”. Don’t even get me started on the $65bil high speed train to nowhere.
The debt bomb explosion will be precipitated by The Biggun
And AG means water and they are squeezing us big time on a commodity we don’t have much of, they won’t spend to stock pile (new reservoirs), and are taxing us big time in tiers based on use. The mass restrictions get worse each year. When you mention we are #1 in the nation with AG, makes me wonder how much the taxpayers are taking up the slack there for them to allow this to happen. Basically robbing Peter to pay Paul in both water and in funding the cost of it. We all noticed the taxes and pricing on water didn’t go down when the drought ‘temporarily’ went away.
My daughter and her husband left Studio City for a new home in a suburb of Phoenix. They earn the same money they did in CA, but the taxes are significantly less and the new home cost a quarter of what it would have in their area in CA. And they love the hiking and biking in AZ.
Vallejo was a precursor to exactly what this article is talking about. That was several years ago.
One thing that will help this to collapse sooner rather than later is that, unlike the old USSR, people are free to leave.
And they will. They already are. But it will get MUCH worse.
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