The Fiscal Disaster Of California: Another Canary In the Debt Coal Mine For The Rest of The Country

We have spent the past three posts examining how the American political class, at both the Federal level and state government levels, has totally screwed up the government fiscal situation at all levels. Trillions of dollars in unfunded liabilities, cash shortfalls to cover short term expenses, tax revenue long term and short term revenue flows, and ominous signs of financial and economic collapse becoming more and more evident every day.

And these huge debt problems have happened in the midst of high levels of taxation. But the high taxes never got used to improve our infrastructure, better educate our kids, improve the environment and our energy usage, etc. So we have nothing to show for those high taxes except a huge debt hole.

Sadly, despite the dire numbers we have discussed previously and will discuss today, current politicians apparently either do not understand the current debt crisis, do not want to address it, or do not have the brain power to fix it. Hopefully, by discussing these numbers during these posts we can finally understand what they have done to us and finally force them to address the financial mess they created.

Our previous posts covered the following debt holes:

Federal government debt hole: https://loathemygovernment.blogspot.com/2018/10/dont-worry-be-happy-any-short-term.html

Illinois government debt hole: https://loathemygovernment.blogspot.com/2018/10/the-fiscal-disaster-of-illinois-canary.html

Connecticut debt hole: https://loathemygovernment.blogspot.com/2018/10/the-fiscal-disaster-of-connecticut.html

And today we review the financial crisis in California, one of the three states (Illinois and New Jersey) we have long predicted would be the first states to enter bankruptcy:

• The overall poverty rate in California is 14% despite having the high income areas of Hollywood and Silicon Valley.
• The poverty rate is the highest in the country likely because it has the highest cost of living in the country.
• At one time the state had the lowest poverty rate in the country.
• Children in California are more likely to live in poverty than any other state.
• One in five California are not making ends meet in their daily lives.
• The state’s income tax is the highest in the country at 13.3% and it also has the highest sales tax rate in the country at 7.25%.
• The 7.25% does not include local sales tax levies which often pushes the total sales tax cost over 10%.
• The state’s overwhelming environmental laws force state residents to pay almost twice as much for electricity than in most other states.
• The state’s overwhelming housing policies result in state average rental costs to be $400 higher than the national average.
• The USA Today reported that a movie date and dinner for two will likely cost close to $100 in San Francisco.
• The state has the highest number of illegal immigrants in the whole country with anywhere from 10 to 20% living in the state.
• And many of these illegal immigrants draw on the very generous welfare programs in the state, causing California to spend an amazing $1 trillion in welfare from 1992 to 2015.
• A U.S. News and World Report analysis found that in total, California has the worst quality of life in the entire country.
• Most of those migrating out of the state are in the middle class since middle class families do not have tax shelters like the rich, they do not get bailouts like big companies, and they do not get generous welfare benefits like the poor and illegal immigrants, they just get the check with high taxes and overwhelming government regulations.

The above dismal view comes from Frank Holmes, writing for the Horn News website. But the Mercatus Center analysis of each state’s financial situation verifies this bad state of affairs:

• California rates as the 42nd worst state from a financial viability perspective.
• Its cash flow situation is well below the national average when it comes to covering short term expenses and costs.
• Long term liabilities are higher than average.
• Unfunded pensions liabilities are almost a whopping $1.2 TRILLION.
• There is another $100 billion in unfunded non-pension liabilities.
• The state can only cover 92% of future obligations.

Not a pretty sight. High and higher taxes and yet the state’s politicians have still managed to bury the state government in a mountain of debt and unfunded liabilities. Over regulations and intrusive state government policies result in very high living costs, be it electricity, housing, or a simple date and dinner.

And in previous posts we have reported on other depressing aspects of California life. About 40% of Los Angeles’ population earn so little that they qualify for Medicaid. Homelessness is rampant throughout the state with large homeless settlements springing up in the middle of big cities and under freeway overpasses outside of the cities. The state’s schools generally under educate the kids in the state and the state’s infrastructure is in dire need of repair.

Thus, another state and another large state government debt hole. The sooner we address these debt obligations the less arduous and painful it will be to get the country fiscally sound. The longer we wait, the more difficult and more dire situations millions of Americans will find themselves in as taxes go up, economic growth goes, down, and promised retirement benefits shrink significantly. While politicians may lie these debt numbers do not.

We need to respect and live according to the old adage: “When stuck in a hole, stop digging.” When stuck in a debt hole, stop spending money that you do not have and will likely never have.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

www.loathemygovernment.com

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:


http://www.reason.com
http://www.cato.org
http://www.bankruptingamerica.org
http://www.conventionofstates.com
http://www.youtube.com/watch?v=08j0sYUOb5w