Bailout California Now! -- The Top 10 Reasons

1. CALIFORNIA PROVIDES CRITICAL SERVICES:
The recent State budget is deeply flawed. It relies upon questionable income assumptions and possibly illegal raids of county and city funds. But, to our thinking, the worst problem is that California has balanced its budget on the backs of those least able to pay: the poor, children, senior citizens, the disabled... California is cutting critical services to the least fortunate in a time when services are the most needed.

2. GET STIMULUS MONEY TO MARKET:
No matter how serious California's governance problems may be, the TARP banks are worse. Money to California would more quickly and efficiently reach the general economy than has money to the TARP banks. Of the $17.8 billion of stimulus money provided by the federal government, California has already spent $8.6 billion dollars on maintaining jobs and keeping basic services going. The same cannot be said of the original TARP banks who paid over $32 billion in bonuses last year. Also, regardless of what you may think of Governor Schwarzenegger and other top elected officials, they are not awarding themselves astronomical non-performance based bonuses.

3. NO MORE MIDNIGHT GOVERNMENT:
Vice President Joe Biden has made sure that California moves its stimulus money to market. If we do bailout California, we want Biden not Treasury Secretary Timothy Geithner, at the helm. Putting the state's restructuring in Biden's office rather than the backrooms of Sacramento is a better way of restructuring California. A little sunlight will surely disinfect many questionable practices and decisions made in Sacramento so far.

4. MORAL HAZARD/HAZARDOUS MORALS:
Failure to bailout California puts the weight of the financial crisis on the backs of those least able to shoulder the cost. We have given TARP money to pay lavish bonuses to the fat cats who caused the financial crisis but draw a hard moral hazard line and refuse to continue children's health insurance in California. The $32.6 Billion in bonuses paid by the original TARP banks is over twice the $16.1 Billion in spending cuts used to balance the California budget (includes $8.7 Billion in cuts to education and $3.4 Billion in cuts to health and human services). By not bailing out California, by not stitching up the safety net, what sort of hazards are we creating, what sort of morals do we reinforce?

5. THE STATE OF CALIFORNIA IS A MAJOR EMPLOYER:
According to the Census in a report published in early 2009, California employs the equivalent of 387,168 full-time positions. The largest employer of the top 10 TARP bailout recipients, CitiGroup, employed 323,000 in 2008 and the top 10 TARP recipients (including General Motors and Chrysler) employ an average 142,000.

6. CALIFORNIA HAS A LEAN GOVERNMENT:
And before you say that the problem with California is that it has too big a payroll and that bloat should be no justification for bailout, consider that, on a per capita basis, California is the fourth smallest employer of any of the states. The myth is that California is big and bloated, the reality is that California is lean relative to the population of the state.

7. CALIFORNIA'S DEBT AIN'T THAT BIG:
Secretary of Treasury Geithner is now going to Congress to ask to increase the federal debt limits. The federal government now owes, $11.7 trillion. That's about $38,000 per individual. California is in debt on the order of $60+ billion. This amounts to less than $2,000 per Californian.

8. SAVE CALIFORNIA'S NONPROFIT ORGANIZATIONS:
At a time when foundations have lost an average 20 percent + in asset value and when corporate and individual giving have ebbed, California nonprofits are in an especially tough spot. When California shirked its contractual obligations to pay for services during the last couple rounds of budget negotiations, many small organizations, organizations with small cash reserves, single purpose nonprofits (e.g., childcare providers with State contracts) were forced to close their doors. With the current budget cuts, more organizations -- including many long-standing, well-managed and well-respected organizations -- will be pushed to the brink. Many will not survive. Not only is the public safety net being lost in California (point number one, above), the private safety net is also being unraveled.

9. STOP THE FIRE SALE OF PUBLIC ASSETS:
In the midst of the budget crisis, the State prepared a list of some 30,000 publicly owned assets (parks, government facilities, etc.) that could be sold to balance the budget. Even if you think this is a good idea for the State, this is a dumb time to be doing it. For the State to get the best return on these public investments, it should NOT be selling them at a time when everybody knows the seller is desperate and at a time when the real estate market is depressed. The rich people/companies with the money to buy right now will be getting California assets at bargain basement prices -- California taxpayers will be getting pennies on the dollar. That said, the logic driving California's Investment Commission seems to say that it's worth selling the Golden Gates for scrap given the price of gold.

10. DON'T UNDERMINE THE STIMULUS:
Under the first round of the stimulus package, California entities have received over $25 Billion in funding commitments for a variety of projects designed to create new jobs, improve California infrastructure and give a boost to the California economy. But if the State's house is not in order, the impact of the stimulus will be offset by the problems of the State.

Comments

[WASanford]

Year after year California taxpayers have sent 50 billion dollars (or more) more to the federal government than we've received in return in the form of services or subsidies. In short, in regards to taxes, California has been a "donor" state. Common sense should dictate that the feds be willing to prime a pump that affords so much "profit" in return. California's problem could be solved with just half of the surplus paid by its taxpayers for one year.

Commenters like nee should realize that income has rapidly fallen for all states and that adjusting to that new reality is not as easily done as they might like to think.

[nee]

CA income has not "fallen". We SPEND more than we TAKE IN. Simple math.

[bannorhill]

I don't live within 1000 miles of California now. I did live there but I moved.

What happened to "no taxation without representation"?

Why should I pay because of their irresponsible budget?

Why should I pay because they voted down new taxes to balance the budget?
Just because they won't pay why should I?

Why should I pay because they provide services that my state does not?

California can fix California.

[Tyler-Durden]

sorry man, i cannot agree with bailing out CA or any state. The problems with the economy were caused by the rich. CEOs make the decisions to cut or outsource jobs, reduce pay for jobs that remain, and raise the cost of living. The elite continue to hire illegals while doing nothing to stop the flow into the country. They refuse to pay their share of taxes, using off shore accts, loopholes, and republican tax cuts.

The only way the economy is going to recover is if the rich open their greedy fists and let go of the money. Instead they prefer to cut spending on programs for the poor.

CA is full of Hollywood elite, silicon valley elite, etc. that have plenty of money. I don't care if they spent it all on yachts when they should have been paying their share of taxes. The rich get this sense of entitlement, like somehow they deserve to be rich while the rest of us deserve to be poor. it's disgusting.

sorry, CA. look within and save yourselves.

[wrightthewrong]

This has been my feeling all along about California. Ever since Prop 13, the state has suffered the fate of its own folly. The rule that taxes cannot be increased without a two-thirds majority vote will condemn them to become the equivalent of a third-world nation. They have only their grandparents and Republicans to blame, but they will always blame the "illegal aliens" that have brought industry such large untaxed profits. I am what one might call "fortunate" and also very liberal, and I pay my share of taxes gladly. I would not, however, be willing to pay California's share when that state's wealthy do not wish to pay their fair share.

[nee]

CA is #1 in the nation in sales and income tax and #6 overall. We pay property taxes too. We have enough revenue - our elected officials are SPENDING TOO MUCH!

[JayDubs]

Insane. If we bail out California, other states will find out it's okay to overspend because they'll just get bailed out too. Where's the money gonna come from when every state needs a bailout? Wake up America! It's time to live WITHIN YOUR MEANS.

[nee]

So true Jay Dubs!

[jdhaskell]

In my mind, this position behind these comments is unfortunate. First, the article is not arguing as I understand it simply for spending more money, but rather to strategically spend money on some things and not on other things - in other words, spend money on public infrastructure and actual economic stimulus, and not on the 'health' of banks which will end up just being siphoned off in bonuses and extraneous costs. In other words, we are all against bureaucratic inefficiency and people taking money they don't deserve, but this animus is somehow deflected from those who are doing the biggest stealing, which is within the private sectors. Second, there is no such thing as 'you in California, and us in Illinois', or alternatively, 'the federal government versus the free market' - US states are completely interlaced and the so called 'private market' and the distribution of privileges that stem from it rely on an already heavy amount of regulation, laws, and so on (in other words, political choices). The question is not then, if there will be 're'-distribution, since it has already happened (aka, prop 13) and continues to happen, but how we want that distribution to play out.

[jdhaskell]

It is in interesting to see the backlash to this article in many of the comments.

What I got from the article, and which I agree with, is 1) the current financial situation in California is being dealt with by cutting social safety nets from the very people who will need them the most, 2) a more responsible plan will require ideological and pragmatic realignment that moves away from the prevailing thinking (that have governed much of the bailout spending to date) that there is a necessary link between 'private' market needs and the the needs of the American public and the economy, and 3) that there a number of immediate directions we should get going on asap.

What is strange is that the comments against these points tend to reiterate one pseudo pragmatic argument and one ideological position, 1) the idea that 'we need to spend less, not more', and 2) the reason we are in this mess is due to 'welfare', 'medicare', and 'it's not my problem'. These two streams collapse into each other - basically into some sort of critique of what is imagined against a 'liberal socialism' that is bent on irresponsible government spending that will benefit those who don't deserve it on the backs of hardworking Americans who earn what they make. In other words, just the classic mainstream political rhetoric of has become almost an orthodoxy for many over the last 20-30 years.

[nee]

CA is #1 in the nation in sales and income tax and #6 overall. We have plenty of revenue but we are SPENDING TOO MUCH! We also have 17% of the nation's population and 30% of the people who are on welfare live in CA. We don't need to be bailed out we need to make CUTS - there is WAY TOO MUCH WASTE and OVERSPENDING.

[KipFromCalif]

What CA needs is a Constitutional Convention & wholesale change. First, the amendment process has to be altered since its too easy to amend the CA Constitution (amended 500 times vs only 17 time for the US). Once approved (only takes 50%), it becomes nearly impossible to remove. Its also too easy to budget by the ballot box & get locked into too many mandates. Voters are always willing to approve new programs, but not pay for them. Which leads to the ridiculous requirement that it takes 2/3 approval for either raising taxes or passing the budget basically means minority rules. No wonder nothing ever gets done & CA goes from one crisis to the next.

I know this is heresy, but Prop. 13 needs to be revisited as well. Good start would be to repeal the protections for commercial property since they tend to change hands less often & not subject to reassessment as much as homes (as a result, the property tax burden has shifted more to residential owners). State revenue has become too dependent on income taxes which are too volatile. Incomes taxes now make up over 50% of the state revenues & need to get back to the pre-Prop. 13 levels: roughly 1/3 from income taxes, 1/3 from property taxes, & 1/3 from the sales tax. CA should also have a budget reserve during good times (not new spending) that would help lessen the effects of a downturn & the dependency on borrowing & gimmicks to

[AnotherMcIntosh]

"I know this is heresy, but Prop. 13 needs to be revisited as well."

All you need to do is get the signatures to put your proposition on the ballot.

[KipFromCalif]

It would never pass and most propositions are put on the ballot by being funded by a special interest group (pay for signatures­....real democratic). For that reason, I almost always vote "no" on all CA propositions. It should be much harder to make amendments to the CA Constitution with higher signature requirements and a 2/3 threshold for approval (look at the lengths you have to go through to amend the US Constitution). Like I said, its too easy to pass an amendment now (only 50%+1 of the vote) and, once an amendment is on the books, its nearly impossible to take off. For example, to pass a proposition overturning or modifying Prop.13, it would take a 2/3 majority since it involves taxes (but it didn't take 2/3 to pass Prop.13). Not very likely to pass, even one limited to just changing commercial property valuation (special interests would flood the airwaves with negative ads). That's why the only way to truly tame this beast is with a Constitutional Convention which would make a series of recommendations to be voted for in a statewide referendum.

[jcavaliere]

This is the most ridiculous thing I’ve ever heard. We left California because we saw this coming 5 years ago, and didn’t want to be around when the horrible policies caused this implosion. Now you’re saying that I should go ahead and pay for it anyway? This is why ultimately I think that the US is destined for a major split.

[AnotherMcIntosh]

Here's one solution that doesn't require federal help.

Impose an estate tax of at a rate of 50% on estates in excess of $5,000,000 unless the decedent was an employer.

If the decedent was an employer or a stockholder in a corporation that was an employer, use a sliding scale to walk back the rate of the tax. The rate could be adjusted downward depending upon the total value of the estate and the number of Americans hired as employees.

On the other hand, if the decedent or the decedent's company hired illegal aliens, increase the rate of the tax to 100%.

[Pablo175]

Who are you guys? You are confusing Tarp with Stimulus with Governance. California has well documented problems with a bad tax system, out of control spending in areas like prisons, education and Medicaid. Fix your problems that you created. Leave the rest of us alone.

[itsjustanillusion]

California needs to their property taxes. The problem with CA is that the rich want to stay rich and keep the poor poor. If you raise the taxes of the rich guess what, they will still be rich. Greed is a hell of a drug!!

[Pablo175]

One of Californias problems is that they depend too much on taxing the rich. When incomes of the top 1% go down tax receipts go down fast.

[martinfrosa]

This is a joke - right? Why should those of us who live in Illinois bail out California? We have our own budget problems which will require our own service cuts and tax increases. We had a saying in my home while we were growing up, "If you make a mess, you clean it up."

California made its own mess and now needs to clean it up.

[Michael Likosky - Huffpost Blogger]

We think it makes sense to bailout states and municipalities in trouble beyond CA. If the argument for bailing out banks, auto industry, etc. is that consequences are too great if we fail to act, then states and municipalities are at least equally worthy of federal support.

[nee]

CA needs to stop spending more than it takes in!

[bannorhill]

If we bail them out do we get to run them too like the auto industry and banks?

Can we go in and cut costs as required?
Can we end nonfunctioning programs?
Can we close 1000 government offices like GM dealers?
Can we outsorce jobs to cut costs and benefits?
Can we cut the pensions of retirees?
Do we get 60% ownership of the state?

If you want to handle it like the GM bailout we can and I would support it.