California Scheming

California and Vermont are vastly dissimilar ... except where they are not.  Where the two states do resemble each other can be summed up in this description of how, in California, an 

" ... interlocking directorate of government employee unions, issue activists, careerists and campaign contributors has become increasingly aggressive and adept at using rhetoric extolling public benefits for all to deliver targeted advantages to itself. As a result, the political reality of the high-benefit/high-tax model is that its public goods are, increasingly, neither public nor good. Instead, the beneficiaries are the providers of the public services, and certain favored or connected constituencies, rather than the general population."

California, as we all know, always cruises ahead of the curve.  For this reason, it is interesting and instructive to study how it deals with the challenge of sustaining its bloated and corrupt public sector at a time when voters have had it with higher taxes, increased spending, and general incompetence of the political class.

Well, count on the Golden State.  The latest California solution to state insolvency is inspired and sure to start a trend.  Raising taxes is way out, cutting spending is a bummer and federal stimulus is, like, so last year.  The new thing is ... increase withholding.

Brilliant.

The state just takes more money from your paycheck than it had previously.  It will pay you back once you've filed your taxes ... if, that is, you are due a refund.  In short, you get to loan the state more money so it can keep the myriad slush funds topped up in return for a promise that you'll get it back (hey, would we lie to you?) without interest.  The state can't afford to borrow at interest because ... well, it doesn't have any money.  That's the whole justification for the new plan.  The state will no doubt charge you interest on your unpaid taxes.  If you've had a tough year, then you deserve to be punished.  If the state has had a bad year – indeed, several of them – then it is up to you to help it out.  Interest free.

And, of course, one does wonder what the state will do if it doesn't have any money to pay back those interest-free loans.  It wasn't that long ago that California couldn't pay its bills and was giving out IOUs. 

Still, what we have here is a perfect, painless California solution.  How soon before it becomes a fad and sweeps the country, to include Vermont?

Comments

[Vermont Woodchuck]

Increase your deductions and hire a moving company. Why anyone is still in California (except for the Hollyweird Liberals) isn't fathomable.

Why is it all the states considered "Socialist Paradises" the ones in fiscal trouble? MA, VT, MI, CA, NY, CT, RI, MD, NJ, NC want more?

[Tom Licata]

As the insular nature of Montpelier’s political class becomes evermore shrill, its arrogance becomes evermore apparent.

Witness the “interlocking directorate of government employee unions, issue activists, careerists and campaign contributors…” of those involved in Montpelier’s latest environmental McCarthyite tactics.

Yesterday, Rep. Tony Klein, Vermont’s chairmen of the House and Senate Natural Resources committee had this to say: “As far as I’m concerned, there will be no ATVs on state land, and if that requires legislative action this session, that’s what we’ll do. If nobody else introduces it (an ATV ban), I will.” Well, that settles that.

Also, yesterday, do you think any of Montpelier’s astute political class noticed that India’s central bank bought some 200 tons of gold from the IMF, swapping dollars for bullion, as India's finance minister warned "the economies of the US and Europe had ‘collapsed’?”

Today’s Burlington Free Press business headline read “Buffett sees future in rail,” as Warren Buffett’s Berkshire Hathaway purchased Burlington Northern Santa Fe railroad for $34 billion. Some - as I - don’t see this as a sign of the Oracle of Omaha’s confidence in the U.S. economy but, as a way of dumping a declining U.S. currency for hard assets (see India’s purchase of gold, above, as well).

Do you think it is possible that any of Montpelier’s political class might make a connection of voting to close Vermont Yankee with the events I have outlined here? Don’t bet on it.

Like California, Vermont’s environmental and ideological narcissism is coming to an apex.

And, like California, “the political reality of the high-benefit/high tax model is that its public goods are, increasingly, neither public nor good. Instead, the beneficiaries are the providers of the public services, and certain favored or connected constituencies, rather than the general population.”

[greenmtnpunter]

Excellent post, all Vermonters need to wake up and finally recognize that the state has been on the wrong track for far too long. Democrats are on the run everywhere else, why should Vermont be left out?

[Chris Campion]

Tom, that's well said. CA's problems are VT's problems, they are just exponentially bigger. It's long been true that revenues gained from taxation from not been spent on public goods; rather, they have been spent on those things that get politicians re-elected. There's no downside to spending other peoples' money, when spending it increases your chances of getting re-elected.

Our patronage system is starting to collapse under its own weight. I think the Obama policies are harbingers of a failed electoral system that rewards profligate spending with no negative consequence for the spender.

[Daniel Foty]

There indeed have been - despite the differences in scale - many parallels and similarities in recent years between California and Vermont.

This extends right down to the exclamation of astonishment along the lines of, "You're leaving?! Are you out of your mind? Just look around you - this is paradise! You have to be clinically insane to even *think* about leaving, let alone actually leave!" (The California version usually then continues with something along the lines of, "It's December and it's in the low-70s today!")

But on the other hand, a major difference is that California possesses some great reservoirs that it can tap if (or when) the will to get out of the present mess appears.

California is still a wealthy state, it has a long tradition and history of commercially-driven (and economically-beneficial) technological innovation, and it has a great talent pool that can be tapped to actually get things done.

Those last two in particular having given California a great "bench" of accomplished business leaders who can be put to good use in bringing some numerical sanity to Sacramento.

Along those lines.... last Wednesday I was motoring up I-280 (on the way from a meeting in San Jose to a meeting in Palo Alto), and happened to hear one of Meg Whitman's radio spots for next year's gubernatorial race. One question that she posed really stood out; as best as I can recreate from memory, it went something like this:

"Today, California's state spending is 81% higher than it was a decade ago. Is California 81% better now than it was back then?"

That's a good question - and one that should be asked in jurisdictions other than California....

[Tom Licata]

"The problem here is more than just too-large government; it lies in how states spend their money.

Massive public spending increases over the past decade in California, New Jersey, Illinois and New York have gone overwhelmingly into the pockets and pensions of public employees.

It certainly has not flowed into such basic infrastructure as roads, bridges and ports that are needed to keep key industries competitive."

Interesting article, to read more:

http://www.forbes.com/2009/11/02/blue-state-middle-class-exodus-opinions-columnists-joel-kotkin.html

[Dennis Lukas]

The states in the deepest red $, were manufacturing states that simply taxed their businesses out of the state and then when third world countries came of age they moved their production out of the U.S.Like it or not the business of busniness is to make a healthy profit.With state spending out of control and faced with the U.S. corporate tax 2nd highest in the world.You have the perfect storm.What has been interesting to watch,is the banks who received trillions from us the U.S. government, lay off U.S. workers, out source jobs over seas, and then opening branches over seas.A good move to cut costs and increase profits. What the state governments fail to get a grip on is that these jobs in manufacturing and service are never coming back to the U.S.
The states are waiting for the resession to be over and every thing will be all right.Do not believe it, unless a friendly low tax base for business comes about in the whole United States. Adding insult to injury to the working class"not government employees who are set till the crash" the states keep increasing, fees and taxes on small business that accounts for a very large percentage of our job market,and now they are cutting back so they can stay in business.Yes VT and many U.S. states are like CA.They just do'nt get.
P.S. Where is our czar Mr. Evslin with the smart grid business plan, its been afew days, did the dog eat it?

[Tom Licata]

Connecting the dots...

Buffet And India See A Dim Dollar Future:

http://www.forbes.com/2009/11/03/buffett-dollar-india-personal-finance-investing-ideas-gold-china.html