As I said before, and I have no problem saying it again, I would rather slam my wedding tackle in a car door than buy California municipal bonds... California will absolutely, positively default in some shape or form... and a Federal bailout is not going to be forthcoming.
Well, MarketWatch's Brett Arrends took Mr. Whalen to task in this fantastic piece of statistical Horse Sh*#.
This is a prime example of why you cannot believe one f*&%ing word on the web, media, print media... without scrubbing the living h*ll out of it. Let's take it to task, shall we?
California’s a basket case? The state has one of the highest living standards in the country, yet over the past 10 years the economy has still grown much faster, per person, than the national average. According to the U.S. Bureau of Economic Analysis, it’s up 15% — compared to 8.9% for the U.S. overall.
It’s grown faster than low tax neighbors like Arizona, Utah or New Mexico. It’s grown three times faster than Texas.
And this was from 1999 through 2009: In other words from the peak of the dot-com years through the depths of the recession. It managed this growth despite the double blows of the tech and housing busts.
Most of the states that have grown faster than California during that time are farm states, riding an incredible boom in agriculture prices.
Fact.
Fact? Well, sort of.
Economic growth in Cal this decade was entirely population growth plus uncounted inflation.
Cal's 2000 population? 33,872,000. And in 2009? 36,662,000. Anybody care to guess at the population of illegal immigrants that WERE NOT COUNTED? Wanna bet it exceeds 10% of the population? And as we all know, most of that growth came in the past 10 years.
Hmmmm....
Population growth accounted for 9% of the "economic growth"Mr. Arrends speaks of.... more like 12% if I include my GUESS of the illegal population.
There were states, Connecticut and Rhode Island come to mind, that LOST population during the decade, and still showed "economic growth" (though it was entirely inflation and price appreciation of financial assets in NYC's financial services industry).
Sorry, Mr. Arrends, your assertions are FUBAR. Cal is in terrible shape, and it will eventually default (though they might call it something else), either on their bond OR on their pension and benefit liabilities.
All of your Leftist propaganda does not change the laws of mathematics, irrespective of how little work Chris Whalen did to back up his assertions. That California is in this position despite all of its natural advantages of weather AND geography is testament to how badly Liberal economic policies served the people.
48 comments:
For most states and many towns and cities, it's just a question of how bad the financial picture is, and not whether they have a fiscal problem. In reality, this is true for most OECD countries. It's really a race to the fiscal edge of the cliff for most local, regional and national governments.
I think that the most interesting case history may be Texas. We are looking at something like a 25% gap between projected spending and revenue for the next two years. The legislature will be forced to tackle the budget in January.
What is interesting about the Texas situation is that the GOP is in full control of state government, especially after the 2010 election, and most GOP officials, from Perry on down, say that they are determined to balance the budget through spending cuts (note that Texas already spends the least amount of money per capita of any state in the union).
Texas Monthly described it as "The most conservative legislature ever meets the worst budget deficit ever." It will be interesting to see how legislators respond to the primal screams from adversely affected constituents, as the budget cuts take effect.
Texas Monthly column on state government & the budget mess. Registration required for full article, but I think that it is free.
http://www.texasmonthly.com/2010-12-01/btl.php
Let There Be Right
"After obliterating the Democrats in November, Republicans will swagger into the state house next month with what could be the most conservative legislature, well, ever. Now comes the hard part."
eventually default (though they might call it something else)
I prefer the term debt decoupling.
Registration required for full article, but I think that it is free.
http://www.bugmenot.com/view/texasmonthly.com
Lets keep in mind, also, that much of what state governments do don't affect people all that much. I think the Federal spending (Social Security, Medicare and Defense in particular) affects the average person more. State spending is for education, helping the disabled, health care for the poor, and pensions for state-county-city workers. Lots of people are untouched by this spending. So when we say that ANY state is having financial problems -- we are not a communist system, and many people could not give a damn about most state spending.
WesternTexas has just described the "Tea Party Empty Shell" to a "T." Libertarianism and Republicanism, with their "less, government, low taxes, low spending" mantra, is the biggest pile of unrealistic, cowpucky ever. People want, need and demand their benefits, and it is time for the rich to finally pay up. Buffett even says so.
Bur,
How much money do the rich have? Is it enough to cover all the spending we are doing? Buffet is only worth $50B. That's not very much if you took it all.
I'm assuming you actually have figures to back up your ideas instead of just spewing 'cowpucky'.
It is axiomatic that the demand for anything "free" is unlimited... of course people demand these services... they do not pay for them!
The larger point was the level of disinformation, propaganda, and out-right lies promulgated in the media for the purpose of influencing the masses is simply outrageous... and it must work... or the various special interest groups wouldn't do it.
bur,
According to the Congressional Budget Office (CBO), the top 20% paid 86.3% of all Federal income taxes, 43.6% of Social Security, 87.8% of corporate taxes and 34.1% of Federal excise taxes. After including earned-income tax credits, the bottom 60% of households paid less than 1% of all Federal income taxes, and the households between 60% and 80% paid 13%.
Point being that you are not going to raise much more revenue through the tax rate, probably less. You would be better off raising the capital gains but that will just destroy the markets. You in no way are a pragmatist. You of all people should want to go to a national sales tax system to stop the tax evasion by the ultra rich and the also the drug dealers at the low end. Jeffers makes a great point that of course people want free crap, that is why it is so important that everyone pays to keep the notion in their heads that nothing is free in the real world. Although I would definitely like to see a restructuring of trusts so the ultra rich can’t hide income.
And yet all around the world, in many nations called "socialist," many nations whose taxes are higher than ours but not oppressively higher, they manage to have single-payer health care and smart transportation policies, etc. There are countries with 28-32 days of vacation a year for their people, compared to our measly 12. They are laughing at us, while we work like dogs to "socialize the losses." We don't have the money? Like hell we don't. Buffett is worth 50 billion, he says he isnt taxed enough, and he's not alone. The billionaires have figured out that if you don't take care of the people, the people tend to vote for scoundrels, and thats bad for business. Yeah, the rich pay a lot of tax. They can pay more.
There are interesting parallels between Euro-zone Europe and the US. Both have single currency and interest rates, but both have partly-independant local fiscal policies and local economies. Where states have been profligate, they can't devalue their currency to get out of trouble so the two choices are central rescue or state bankruptcy.
However all of this is really just to rescue the banks and mortgage/property markets; if the states (US or European) dumped the banks and let them go bankrupt, the crap would all be over in a couple of years; house prices would fall maybe 60% (making houses affordable again), casino banking would be over (yippee!), and globalisation would squeal to a halt, but after the dust has settled we'd be back to a real economy for real people rather than bankers.
The path we're all on is exactly that followed by the Japanese, which led to the 'lost decade' which is now heading for 'lost 2 decades'! Deflation, stagflation, the long, slow, interminable decline.
Big difference is; a/ they have savings, and, b/ they make and sell stuff.
What are we all going to do for the next 20 years?
There are interesting parallels between Euro-zone Europe and the US. Both have single currency and interest rates, but both have partly-independant local fiscal policies and local economies. Where states have been profligate, they can't devalue their currency to get out of trouble so the two choices are central rescue or state bankruptcy.
However all of this is really just to rescue the banks and mortgage/property markets; if the states (US or European) dumped the banks and let them go bankrupt, the crap would all be over in a couple of years; house prices would fall maybe 60% (making houses affordable again), casino banking would be over (yippee!), and globalisation would squeal to a halt, but after the dust has settled we'd be back to a real economy for real people rather than bankers.
The path we're all on is exactly that followed by the Japanese, which led to the 'lost decade' which is now heading for 'lost 2 decades'! Deflation, stagflation, the long, slow, interminable decline.
Big difference is; a/ they have savings, and, b/ they make and sell stuff.
What are we all going to do for the next 20 years?
Well your correct Greg that article is the very model of twisting nether propaganda.
For one thing I really liked the tax base "fact" which didn't mention a thing about the actual tax burden due to regulatory and additional sales tax. Some estimates put the actual tax burden of Kalifornia as high as 2% over the national average. Some claim it is actually higher since Kali taxes energy and daily use items/services even higher.
The other "fact" was his claim that Kali got a larger share of the venture capital this year. That maybe true but what has the overall venture capital been lately? Something like a 50% or more decline in 2009 alone I believe? Last I read Kalifornia has lost more than a third of it's manufacturing base since 2000 as well.
Housing-wise the Kali base was so inflated it needs to fall another 15% or more just to begin to even out with the rest of the country.
Second worst rated educational system in America with one of the largest yearly budgets. Thanks but no thanks.
Yep tax the rich I hear Colorado, Oregon and Arizona love it when Kalifornia raises the taxes on the rich.
Just an addition - the average tax take out of wages in Europe is around 40%! On top of that, Value Addd Tax (national sales tax) is around 20% and fuel taxes are typically 100% - a gallon of petrol is around $7.10c here now.
Easier to balance a budget with that kind of tax income!
Bur,
Europe is falling apart and it's becoming almost impossible for them to maintain the benefits they have been.
I don't think I'd use Europe as an example right now.
As I noted at the top of the thread, I think that most local, regional and national OECD governments are in trouble. The truth is that most OECD countries cannot afford the current level of spending, and given the reality of Peak Oil/Peak Exports, hoping that the Good Times return is an exercise in futility.
It's just a question of when, not if, that most governments are going to be forced to implement drastic spending cuts.
I think that we are going to see increasingly acrimonious relations between current/retired government employees--trying desperately to hold on to rich pension benefits--and suffering taxpayers. Many government entities are going to end up defaulting on these pension obligations, simply because they run out of money.
The current bankruptcy code in the US does not have a provision for states to declare bankruptcy. However, this will likely go to the Supreme court in the next several years, and they will be able to change the bankruptcy code such that a state can refinance its debt and renegotiate the terms of its obligations with its creditors, ie state pensioneers. It won't be very pleasant for the people who expect to get lavish pensions from the states, but it will solve the issue of state insolvency in a similar manner to which the GM bankruptcy did.
Donal,
I agree with you. In Ireland and Greece they created more debt to plaster over the bad debt that is already there. Same in the US and the UK. And who is that for? The banks, the bureaucrats and the very rich. Indebt the taxpayers to bail the rich has been the mantra across the West for the last three years. They just don't spin it that way. This needs stop. Feeding the tax collector or the banks is six of one and half a dozen of the other as far as I can see. Both serve to keep the liberal/fascist elite in power.
Regards,
Coal Guy
CG; I heard a speaker on the BBC the other day say that 93% of the bail-out money ends up supporting a bank, one way or another. The Irish bailout (last week) by German banks effectively supports German banks who lent to Irish banks! Etc, etc.
Whatever happened to 'Assets' with that thing called 'Value'?? Aaah, those were the days!
(Federal) government retirement benefits are not un-generous (for now), but the idea is not to knock everyone down to minimum wage like Shedlock wants, but to raise everyone back up to where government workers are. The (Federal) benefits are nice but not THAT generous.
When some government statistic somewhere says even the real rich are hurting (some millionaires actually LOST fortunes in the Great Depression -- can you believe it?), I'll be willing to forego tax increases on the richest of the rich. Until then, who are they kidding? "Privatize the profits, and socialize the losses" is the scam of the day.
Donal,
That is the crux of the problem. The assets have lost value or have been moved to the East. The debt remains. The collateral is gone. The productive capacity to pay the debt down is gone too. The bailouts just throw good money after bad.
Regards,
Coal Guy
Bur,
You keep jumping around. You mention the 'other' countries who can afford it. We mention how they are cutting benefits and are being bailed out. Instead of responding to that you keep saying "Tax the rich" like that will save us.
My questions for you is this. I don't have an issue raising taxes on the million/billion crowd. However, even if we do, how long will that save us with our current debt load? You want to add benefits to what we're already doing. That doesn't even address our current debt and liabilities. How do you justify (with numbers please) piling on more debt without paying the other off first?
Claiming that taxing the rich will save us is different than proving it. It's not working in Europe, why will it work here?
What a laugh! I am a 4th generation Californian who along with all my relatives, have escaped the wonderful peoples republic. What can you say bad about a place that has the nations worst school system, 25% unemployment, brand new abandoned multi-story buildings( in the Silicon valley no less), leftist ideologues running every facet of government, police and fireman averaging over a 100,000/year salaries, higher than average crime rates, and as if that isnt enough fabulousness, YOU get to feel like a tourist in the town you grew up in, and they dont speak your language! Yes, California is definitely better than Arizona, the midwest, and any other state where the insane don't run things. God Bless socialism, government paternalism, and the destruction of rugged individualism, not to mention the destruction of that outdated U.S. constitution.
Who says it isn't working in Europe? All the countries that matter have single-payer care: UK and France to name two (I don't know about Germany). It isn't perfect, but nothing is. What it DOESNT have is people like my well-off mom who doesn't want to talk about single-payer because she is used to seeing whatever doctor she wants to see immediately anything. Single-payer has preventive care and economies of scale. It is going to save money. And no, I have no numbers for you, Bill. You have no numbers either. It's just a hunch, based on some observation, oh, and survey popularity. :)
Bur,
When some bureaucrat for the single payer monopoly leaves you to die, I won't feel the least bit sorry for you. As in all things, you get what you pay for.
Someone does a cost / benefit analysis on you and decides whether or not your ass is worth saving. No thanks!
And GOOD FOR YOUR MOTHER!
Regards,
Coal Guy
As has been pointed out many times on here if the U.S. was the size of a European country with another country around to sponge medical and pharma research off of then perhaps European style health care would work here.
Whether European style health care actually works in Europe, since patients like Bur's MOM just fly to the U.S. for treatment, is debatable as well.
I doubt we are ever going to find out either way.
Carbon,
Now you know around $60 billion in Medicare dollars is wasted on the last 3 months of care for people who are going to die anyway. The "cost-benefit" panel is going to be doctors and family members, who have to make the ultimate decision, just like they do now. Now, if there is a way to emphasize to the family that, if they truly believe their old mom or dad has a year or two left in them, costing tens of thousands of dollars, the family should pay in some of that cost. When someone else is paying (like the young people of this country), the sickest of the sick get long-shot, pointless, expensive care like we do now. It is insane. We all die. Get used to it.
The facts and statistics are available on the World Health organization's web site if anyone is interested. The United States pays twice per capital what other countries with single payer systems pay for healthcare (an average of $6000 per year vs. $3000 per year) and receives overall worse quality of car. Quality of care is rated by many factors,including lifespan, death from preventable illness, infant mortality, hospital acquired infections and other factors. The US consistently rates lower than Canada and European and Asian countries even taking into consideration the prevalence of obesity and drug abuse in the US.
So if you want to pay more for higher quality care that is your business. But if you have to pay more for lower quality care that is called being ripped off.
It's simple really.
Remove the huge amounts of tax payer funding for over the top health care plans available to government employees. Allow hospitals to refuse service to those who do not or cannot pay and get government out of insurance company rules and regs.
Place a dash of legal reform on top and then a bit of getting rid of medicare/medicaid or restricting them to those who paid in and watch the overall costs dwindle.
Or let it grow. All the same in the end. The New World Order UN types can make up whatever they wish. The Canadians and Europeans still come to the US for medical care, along with the Saudi Royalty too I guess.
I can't believe I am taking the time to rehash this.
Bur,
I'm not making claims that the rich have enough money to save us. You are. I'm asking you to show me the money.
Those countries you named are all cutting their spending because they can't keep it up. Not good choices for examples.
We have hit the downhill slope on pharmaceutical productivity and the law of diminishing marginal returns is in full force. I’m not so sure at this point pharmaceutical research is worth saving. After another breakthrough that may change for awhile; but- the next revolutionary breakthrough is extremely to be a result of directed research, we have just about squeezed all we can out of our current theories, knowledge base, models, etc. After we discover something truly new, then we can focus our efforts around it and reap a windfall but until then drugs worth bringing to market will be fewer and further in between. The next big breakthrough may be weeks away but it could just as easily be decades or centuries away. Moreover, it will probably be ridiculed for decades after it’s made.
Pioneer,
Those over the top cadillac plans are a scam. My current plan >S20K/Yr is not appreciable better than my brother in laws <$4K plan. I pay $20 for a copay and he pays $50, I pay $100 for an ER visit and he pays $250, my Rx are similarly cheaper. Wooptie Fu@#%#& do! I pay $15K more on the front end to save $1K to $2.5K on the back end. My maximum annual out of pocket is $2.5K less than his.
Even those of us with a government cadillac plan AND some basic numeracy think it is BS. Someone is getting paid because no one is this stupid.
Will GOP end the Fed?
One important indicator will be who is chosen to lead the House subcommittee that oversees the Fed when Republicans take control of the House of Representatives in January. First in line for the job is Representative Ron Paul of Texas, the libertarian renegade Republican, frequent presidential candidate, and outspoken critic of the Federal Reserve who wrote the best-selling polemic, “End the Fed.’’
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2010/12/02/will_gop_end_the_fed/
I personally don't think that the GOP has the nerve to put Ron Paul in charge of any financial committee, but we will see.
As for quality of care, I have a friend whom not too long ago flew to India for heart surgery. I can’t remember whether he said the procedure was $5K or $10K but regardless it was damn cheap by American standards. However, cost isn’t why he went to India, he has the same cadilac plan I do so it would have cost him a maximum of $5K out of pocket here and it paid nothing over there. Throw in the airfare for him and his wife and he lost money on the deal. What he did get there that he couldn’t get here was treatment in a hospital that specializes in heart surgery by a team that hyper-specializes in the exact procedure he was having with other hyper-specialists that specialize in common complications to his procedure standing by. To top it off the physician in charge of the floor he was on was trained and later taught medicine in the US before returning to India to be a managing physician there.
After the procedure he and his wife stayed in the hospital for a couple of weeks in a room that looked to me to be half standard hospital room and half business class hotel. It was just kind of split down the middle. Maybe we HAD the best care in the world, but somewhere along the line that has passed, at least if you are not flat broke.
Westexas,
Do you know of any professions in petroleum that still work in the field? From what I’m gathering geologists and geophysicists no longer do much fieldwork because everything is so far subsurface that there is nothing topside to see. Is petroleum engineering any better or has everything gone to cubical hell? Also, geologists and geophysicists aren’t doing primary data collection who is?
I produced the numbers earlier showing that confiscating all the wealth of every billionaire in the US would approximately equal the federal deficit for this year. That's assuming that you could get full market value for their assets (two-thirds is the realistic amount). Confiscate the wealth of the millionaires and you double that amount (half of their money is the most you'll get, a lot will be in overvalued US housing). This still leaves almost 10 trillion dollars to pay off, and the goose that lays the golden eggs would be killed, cooked and eaten.
Once again, Bureaucrat, put up or shut up.
We dont have to tax the rich at 80% again (I just saw "All About Eve" from 1950 last night where the one director/writer laments the high 80%? taxes on the "Hollywood Rich." Poor baby.)
I'll settle for a modest 60% (on income over $250,000 or whatever) and let's see what happens. :)
The people get any more pissed off than they are, and it's gonna happen, assuming they don't start lopping off heads first. Happened before (France 1800s).
Tweell, your ridiculous demand that I put up or shut up is right up there with your ridiculous argument that anyone is suggesting the confiscation of ALL rich peoples' wealth.
Let's just start with something at least, in addition to cuts in Social Security, Medicare, Medicaid and Defense payments. Attack from both sides. Hell, I already know my pay is frozen for the last 13 years of my Federal service, one way or another.
Ironically, it was Nixon, a Republican President who implemented the most confiscatory tax rate in US history. The highest income earners had to pay 80% of their income in taxes to pay for the Vietnam War. I have a better idea - impose a special tax on anyone who voted for George w Bush to make them pay for the Iraq war. 50 million people tax each one of them $2000 and you have your $1 trillion dollar war paid for.
Sadly, we are all going to have to pay higher taxes and probably get less in return. people are going to have to work harder for a longer period of time and live more frugal lifestyles. Delaying the austerity that is needed in terms of spending cuts and tax increases is just going to make it worse in the long run. Obama should say "F... you" to John Bonehead and the other Republicans and do what he needs to do, even if it costs him his re-election
Bur,
We do need to cut spending across the board. We also need to raise revenue to pay off the debt and the rich seem like a good place to raise it from.
My issue with most of your statements is that you seem to think we can tax the rich and have all these new programs. We can't. We have to get out from under this massive debt before my kids and grandkids are crushed by it.
Crybaby,
What the hell is Obama going to Do? Pass cap & trade in a declining energy era, we will reach carbon reduction goals just from reduction of oil usage. What are you even talking about. Where does Obama want to cut? Open your damn eyes. You make a semi rational argument and then pull that crap. What items is the messiah going to pass to help? The markets need to self correct. The more intervention the government does the more distorted the indicators get and the more crazy shit happens. This infantile, narcissi, duplicitous toolbox we have for president could not govern himself out of a wet bag!!!!!!!!!!!
While I am on this rant, why the hell has he done the same damn thing in the middle east that Bush did, explain to me what the difference in the strategy was. I will give you a hint there was none. We are there for one reason and you and I and everyone knows it. They supply OIL. 56% percent of the worlds OIL. The oil markets are the most important cog in the world economy and any interruption sends gas to 4$-6$ a gallon really quick. Then the real collapse can begin.
Bur,
I'd very much like to know how one determines that it 18 months or three months before someone is to die. My father had a massive heart attack at 73. He was expected to die, but lived 6 more years. Your plan would have pulled the plug. Of course money is spent shortly before people die. That is because they are ILL. I do realize that money does get spent on hopeless causes and life support for the brain-dead etc. But that does not convince me to hand my future to some bunch of bureaucrats that Ive never met to determine if I'm worth it. It puts me in the same class as my dog when I take him to the vet. No F&*&$ing thanks. If you want to give up your freedom, you are entitled to desire submission. Decisions like that are between me and my family. There are better ways to restructure health care that don't reduce us to farm animals, accepting the care that our masters give us, or don't.
Regards,
Coal Guy
To all you taxers out there: Even though most countries in the EU have considerably higher income tax rates than we do, and VATs besides, they have managed to rack up 50% more debt as a percentage of GDP than we have. Taxing is not the answer.
Regards,
Coal Guy.
Carbon,
Even the doctors will admit there are a few cases where people beat the odds. But the overwhelming majority do not. We'll die anyway.
If you want to go the long-shot, hugely-expensive route to save an old person, don't ask me to pay for it. Pay for it yourself.
Bur!
I feel that way about everything! Pay for it yourself!
My point has always been that the rich don't have the money to fix the deficit. I have proved that you are incorrect in claiming that all that is needed is to tax the rich more. If taking everything would just balance the budget for this year, then obviously (to all but great Bureaucrat minds) more taxes isn't the solution. There simply isn't enough there, even if the rich just stood there and let it happen (ha!).
Nice goalpost moving, by the way. Unfortunately you can't delete prior posts.
Tweell,
It's simple.
People want their major benefits and will vote out of office anyone who threatens those benefits.
So you have to pay for those benefits, or you borrow to cover the difference.
We've already done the borrowing. So now we have to move toward tax increases and benefit "trims."
This will include taxing the people who actually have the money (the top 20%), and people who have been given the biggest pass on taxes the last 10 years (top 1%). If they don't have enough to cover it, that doesn't excuse them from paying something.
Unfortunately, the kids will also have to live with smaller benefits.
The baby boomers sat on their hands, did nothing politically, and squandered their opportunity to prepare for this.
It's gonna happen, as soon as the worldwide bondholders demand it. Interest rates are already rising ... up to 3% for 10-year bond today.
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