Sunday, October 04, 2009

Will California become America's first failed state? | World news | The Observer

Will California become America's first failed state? | World news | The Observer: "The crisis is so deep that Professor Kenneth Starr, who has written an acclaimed history of the state, recently declared: 'California is on the verge of becoming the first failed state in America.'"
Yes, indeed. Things are that bad. The state and local governments are in a state of budgetary crisis and political paralysis. The problems are structural, not temporary. The public schools are horrible, the great system of public higher education is in trouble, infrastructure is crumbling, the middle class is leaving and the poor are still arriving in droves, the prison system is overflowing, the housing market is in chaos, and on and on. The state is at this point impossible to govern. But if you go to California, as I did this summer, you will find that the people who live there are going about their lives as usual and not even talking about this sort of thing except in passing.

Wile E. Coyote chases the roadrunner until he runs off a cliff, but he doesn't fall until he looks down.


DBX said...

It's a circular firing squad of dysfunction. Local governments can't fend for themselves, and have to go to Sacramento. The tax system is way over dependent on income and capital gains. Businesses get huge and unwarranted breaks on property tax, paid for by huge and unwarranted property taxes on new homeowners. People who've been in the same place for 40 years pay practically nothing. Supermajority rules enable the state to be hog-tied by an extreme minority, while the extreme majority ring-fences its special interests through abuse of the initiative.

And why?

The root of the dysfunction is Proposition 13. That knocked the stool out from under local government that started the death spiral, and it brought in the supermajority on taxes to add to the supermajority on budget California had already had for a long time.

Time to go back to local governments fending for themselves and attack the death spiral from its root. But to do that you have to get rid of Prop 13. And that's a political challenge to which I'm afraid California won't rise unless forced sharply. Meanwhile the rest of the country's politicians need to be mentally and emotionally strong enough to resist the temptation to bail California out.

Evan McKenzie said...

I think you are absolutely right. Prop 13 was a time bomb. California is on an untenable fiscal foundation that has collapsed. There are few issues harder to deal with than reformation of tax laws. People being what they are, some sort of weird shift into irrational politics is at least as likely as intelligent policy making at this point.

Anonymous said...

Say what you will about Prop 13. It's not any better to have unlimited spending by government at the expense of the citizens.

Why are you trying to do so much with "property tax" in the first place? Property tax has got to be one of the most evil taxes of all since you must give part of what you have to the government regardless of income.

What was unfair about Prop 13 was the inequities in distribution of the property tax - not the fact that it attempted to overall quell them. By the way, the government found ways around Prop 13 such as by using "Mello-Roos" taxes and still went bust. It would not have been any better to allow the government tab to continue ballooning by distributing the problem among more taxpayers.

DBX said...

Anon, the first basis of a tax system is responsibility. And Proposition 13 started off a spiral in California of shifting responsibility on to someone else. Local governments get the state to pay for it. Long-time property owners get newbies to pay for it. With the supermajority, policy-makers can get someone else to pay for it, through voting for the policy but not for the funding.

And with the 1990s boom in the stock market, California's substantial use of capital gains taxes enabled everyone to deny that there was anything wrong with this, because in a booming market, capital gains are a tax cash cow. But for every boom, there's a bust -- and a huge capital gains write-off that savages revenue.

Now all that's left is governments, political parties, unions, anti-tax groups and voters pointing the finger at each other, because they all thought someone else was responsible for their problems.