California on the Ropes

California is on the ropes. It is being hit harder than most states by the current recession. Its government is paralyzed. No one is steering; the ship of state has run aground.

Unraveling a disaster of this magnitude is going to be a lot harder than avoiding it in the first place would have been. After the budget crisis of 2001-2002, the government of California should have taken steps to build up a surplus during the relatively good years of 2003-2007. It should have made fundamental reforms in the way budgets are created. Instead it feasted on tax dollars blown in by the housing bubble.

The electorate should bear part of the blame for electing those who have been in the legislature lately. Mostly, though, the electorate has mainly be manipulated by the two major party political machines. The machines determine who will have the money to win their primaries. All most all of California's elections are basically won in the primary of the dominant political party in that district; the lines of the district are drawn to ensure that almost no incumbent that runs loses his or her seat. And even competent politicians are term limited out of the Assembly in just six yeas.

Even if better politicians were elected, they might be dazed and confused by the current budget system.

There is no central budgeting authority that makes sure budgets are balanced in the sense that in good years there is a surplus that can be used as a cushion in bad years. Nor is there an authority that makes sure public spending is balanced between the various needs of the people of California. The state Senate is not a central authority; nor is the state Assembly. The governor actually has little power over budgets except the power of persuasion. Nor is there any bureaucracy that keeps things in order so that politicians can do what they do best, posture and swill whatever lobbyists lay before them.

Every session of the legislature is a feeding frenzy. This is fought around a skeleton of laws enshrined in the state Constitution that determine where much taxpayer money can go. Can't get the legislature to throw you a bone? Sponsor a referendum. Bond measures are passed willy-nilly because voters consider each measure in and of itself, with little regard to how the bonds affect the state budget. Bonds take decades to pay off and effectively treble the cost of any project, once you include interest payments.

I think it is fair to argue about whether any specific tax in California is too high or too low, but I agree with those who think that taken as a whole, California taxes (with federal and local taxes) are about as much as a people can reasonably bear. When the economy revives there will be more tax revenue

I would also tend to agree that California's tax structure is ridiculously unfair. Two people living in houses of similar real value may be paying taxes that are an order of magnitude different. Some businesses pay little or no taxes, when businesses that are equally profitable pay much higher taxes. The Board of Equalization seems to be all about inequality these days.

The people of California have to look at the whole picture and come to a consensus about what a good budget process would look like. Once that is known, they need to elect politicians who will put it in place.

Perhaps what California needs is a California political party that is centrist in nature. It could put a damper on politicians who love to spend other peoples' money and don't mind raising taxes. And on those who won't allow taxes to be raised, but who in actuality also love to spend other peoples' money on their pet bureaucracies, or provide tax breaks for their friendly corporate sponsors. Those two groups of politicians have caused the current crisis, and they correspond fairly closely to the two major political parties.

Even if a centrist party were started today, it would take a while to implement. Be prepared for a couple of unpleasant years in California. It won't be the government that pulls us out of this mess. It will be the creative citizens who put their shoulders to the wheel and revive the economy with their sweat. While most unemployed citizens just bumble around, happy to get unemployment benefits while waiting for their next set of instructions.

Here are three suggestions for immediate use:

Have a ten year moratorium on new statewide bond issues. Don't make it a law; organize the citizens to vote down every bond for ten years.

Let 25% of state prisoners out of prison on early parole. That is the quickest way to cut the budget. They are going to get out eventually anyway, which is a risk society has decided to take. If they violate parole, they go back in. So the downside is not nearly as bad as bankrupting the state of California would be.

Create a state-owned credit union that is strictly for creating mortgages for residences. Loan only to those who have substantial downs, but keep interest rates on the loans as low as possible. Get the housing market stabilized, and the tax base will be stabilized. That will buy time to make the fundamental changes that are necessary for survival in the 21st century.