Wednesday, May 6, 2009

Special Election - California

"Arnold Schwarzenegger, the best governor the states contiguous to California have ever had" George Will

An incompetent governor + an incompetent legislature = A special election with six incomprehensible and inane propositions that will have the effect of helping California sink deeper into the abyss.

I have written about California's woes here and here

When Governor Davis was recalled, the terminator was elected on a platform of pro-business. California's business costs have grown 20% higher than the average business costs of any state in the union. How is that for business friendly? As the saying goes, "Be careful what you wish for, you just might get it."

Columnist George Will states the following:

If, since 1990, state spending increases had been held to the inflation rate plus population growth, the state would have a $15 billion surplus instead of a $42 billion budget deficit, which is larger than the budgets of all but 10 states. Since 1990, the number of state employees has increased by more than a third. In Schwarzenegger's less than six years as governor, per capita government spending, adjusted for inflation, has increased nearly 20 percent.

Liberal orthodoxy has made the state dependent on a volatile source of revenues -- high income tax rates on the wealthy. In 2006, the top 1 percent of earners paid 48 percent of the income taxes. California's income and sales taxes are among the nation's highest, its business conditions among the worst, as measured by 16 variables directly influenced by the Legislature. Unemployment, the nation's fourth highest, is 11.2 percent.

California should be a test case for Barack Obama. While government spending increases, there is a continuous brain drain from the once golden state. Those with means and those with the entrepreneurial skills to grow the state's economy are leaving in droves. California is left with Mexico's unskilled and poor. Obama in his last press conference stated he was unwilling to close the border. So now, it's off to the polls. Will Californian's vote themselves a 16 billion dollar tax increase? Or will they finally say enough is enough and vote no on these propositions?

May 19, 2009 – Californians head to the polls to vote on six propositions. Californians will do the job the California legislature seems to be incapable of doing. There is no need to put too much sweat in trying to decipher all of the nonsense that these incomprehensible propositions represent. Just take that number two pencil and vote no on each one of them.

These propositions are only stop-gap measures to temporarily fix California's budget crisis, but in reality they will fix nothing.

Of course, you have to love the names given to the propositions.

1A – "Rainy Day" Budget Stabilization Fund

1B - Education Funding. Payment Plan

1C – Lottery Modernization Act

1D – Children's Services Funding

1E – Mental Health Funding, Temporary Reallocation

1F – Elected Officials Salaries. Prevents pay increases during budget deficit years.

Proposition 1A keenly disguised as a "Rainy day" fund is nothing more than an extension of the huge tax increase that the California legislature already passed. It increases taxes by another 16 billion dollars. When the economy does come back, will California even be poised to benefit? This proposition continues the tax increase already passed by the legislature for another two years. The San José Mercury says this:

Proposition 1A is a convoluted combination of higher taxes and spending restraints. The effects are so uncertain that the legislative analyst's opinion concludes, "The fiscal effects of Proposition 1A are particularly difficult to assess. This is because the measure's effects would depend on a variety of factors that will change over time and cannot be accurately predicted." Why voters should approve a measure that even the legislative analyst cannot decipher is a mystery.

When the San Jose Mercury is against the propositions, then something must really be wrong.

The blurb in the ballot on Proposition 1C, the so-called lottery modernization act says it will allow the state to be modernized to improve its performance with increased payouts, improved marketing, and effective management. Are you convinced yet? What it really does is borrow on future lottery profits to help balance the 2009-2010 state budget. The California lottery was created in November 1984 by proposition 37. It passed because of the help it was suppose to provide to schools. It is currently mandated to provide at least 34% of its revenues to public education. With proposition 1C, schools will no longer receive funds from the lottery winnings, but lottery winnings will be diverted to the General Fund, and public education will be paid from that fund.

According to the ballot, Each Californian currently squanders about 83 dollars per year in the lottery but It is common knowledge that the poor and uneducated spend much more per capita on the lottery than the average Californian. There is even a graph on the ballot showing that California is the third from the bottom as to lottery sales per resident. And, that is a bad thing? How? The proposition states "Higher prize payouts can attract more spending for lottery tickets and increase lottery profits." Proposition 1C intends to increase lottery revenues by revamping the lottery and increasing marketing efforts. This means the poor will be induced to purchase even more lottery tickets. I thought liberals were for the indigent and the destitute.

Since the economic crisis, lottery winnings have actually fallen off 10% during the first four months of the current fiscal year. California put its hopes on imaginary growth, which caused its current budget crisis, and now it is putting its hopes on future lottery winnings that may or may not materialize, but that will assuredly be paid from the backs of the poor.

The San Jose Mercury states the following on propositions 1D through 1E:

    Propositions 1D and 1E would break open dedicated tax funds for use by the general fund. Proposition 1D would allow the state to grab tobacco tax money that is currently dedicated to children's services. Proposition 1E would allow the state to raid the so-called millionaire's tax that is dedicated to mental health services.

    These two propositions highlight the folly of dedicated spending accounts. Income tax rates and tobacco tax rates are so high that raising them further would be counterproductive. Yet, without a statewide vote, the money generated by these taxes cannot be used to ameliorate crisis level deficits.


These six propositions do nothing to alleviate the ills of California. California is like the typical highly-leveraged individual who borrows from Peter to pay Paul. He maxes out his credit cards, and when the MasterCard bill is due, he uses the American Express card to pay off the MasterCard. He takes out home equity loans, maintains a high amount of leverage and continues to play this shell game until everything implodes. He plays this game more if he is unemployed. This is California. California is engaged in a massive shell-game and wants voters to now approve the continuation of the shell game to see how long California can continue without bursting at the seams. Companies and individuals who earn the salaries leave. Tax revenues do not materialize, but California continues its spending spree, and uses one fund to pay another fund. The hope is that some time growth will begin again in California, and all this debt can be paid back.

There is an answer to California's woes. Vote the incumbent legislators out of office. Get rid of the terminator, and get someone who knows how to grow an economy. Become a business friendly environment. Go to the polls and vote "no" on every one of these incomprehensible and idiotic propositions.

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