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Introducing: Strategic Secessionary Default
Saber rattling about seceding from the Union for this reason or that (we are looking at you, Texas) has heretofore been a cheap political maneuver often motivated by the desire to shine the dim witted light of the mainstream media on some states' rights issue long since stripped away by the Supreme Court. This fact has permitted us to mostly ignore these sorts of pronouncements as casual. That might be a luxury of the past given the emergence of a new and severe phenomenon: crushing state deficits and an already beleaguered lender of last resort. (Read: The Federal Government). California is up first, followed hard-upon by three or four other fiscal cesspools of municipal origin. Facing a $21 billion dollar shortfall for the remainder of this fiscal year (assuming no population outflows and stable tax collection over the period- try to contain your snickering) with another $14.5 or so billion in 2010-2011, California is getting few headlines on this issue simply because it has become so rote. Just for perspective, as recently as August, the Department of Finance figured this latter number at $7.4 billion. Whoops.
The Los Angeles Times manages, after twenty paragraphs, to accidentally trip over the central issue:
The state's financial problems predate the current recession and the gimmicks used to paper over the deficit, experts say. Year in and year out, state government spends roughly $10 billion more than it collects in tax revenue.
Thank heaven for experts.
California, having somehow already carved out from what used to be a federal republic the ability to print its own currency, seems to have considered some additional and very drastic measures to avoid paying its debts. The Governator's own finance director apparently considered actual secession to short-circuit the state's obligations and continue enjoying the long established pattern of deficit spending they have hitherto established.
California's finances have been so bad that the governor's finance director, Mike Genest, told a budget forum in Washington last week that back in February he had combed through the U.S. Constitution to research whether California could legally declare bankruptcy -- or revert to some kind of territorial status. (Neither was realistic, he determined.)1
The budget forum the Los Angeles Times is referring to was titled "Perspectives: Beyond California - States in Fiscal Peril," held November 13th at the Pew Center on the States. You can listen to the entire thing here (92:32 minutes, 47MB .mp3), or read the forum's report which Zero Hedge has thoughtfully attached to this post. What emerges are the haunting sounds announcing the first death rattles of bloated state budgets and a glimpse of the eventual fate of tax-and-spend economies.
In the end, California's problems probably boil down to a lack of imagination. After all, with the right kind of government lawyers, it should be easy to pen an opinion letter authorizing a quick departure from the Union followed by a hasty (and debt free) re-annexation. Presto-chang-o! Debt-be-gone.
Or you can stop pouring cash into cushy social programs, stop paying your civil servants $200,000 per year and quit giving out 90% lifetime pensions at age 50-55.
Just sayin' is all.
- 1. "California Faces a Projected Deficit of $21 Billion," The Los Angeles Times, November 18, 2009.
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Texas has a rainy day fund saved up of roughly $10 billion. if obama care is passed the accountants calculate it will be depleted in 18 months. that's one reason why some states are threatening nullification. and since Texas has to balance its budget each year not only will the `consumers' of said state get hammered with obama care but they'll also get slammed from higher state taxes to balance the budget.
that's one reason why there's talk of secession, although many Texans would only be too happy if only they were kicked out of the club.
"if obama care is passed the accountants calculate it will be depleted in 18 months"
Blah blah blah. No one on either side has any idea what the bill even says or what the effects will be. And neither do you.
Awesome! Let's pass it RIGHT NOW!
Get this shit over with. What do you all say about "On a long enough timeline...."
I'm definitely not saying we should pass it. It's ridiculous/dangerous that no one knows what it says.
I just think that
"Obamacare will drain rainy day fund in 18 months!!1!"
sounds like a headline scrawled on a myspace page from some Texan's Y2K bunker.
If the poster would like to share his "accountant" analysis that the national health care bill will somehow drain Texas' rainy day fund, I would be happy to consider such analysis.
your're right chet. my mistake for repeating what the accountants said, and sharing it with the board. as a tax payer i ought to let the washington bureaucrats do my thinking for me. and as a Texan i ought not care.
so just for you chet, more than likely the rainy day fund will actually increase in money since we all know that when government gets involved things improve a lot.
once again thanks for pointing out my stupidity. i bow before your brilliance.
Whatsamatter John, don't you appreciate the inherit sophistication found in the argument "Blah blah blah"? I suggest in the future you utilize it yourself, especially when you're conversing with Chet. Then it will be his turn to bow to you.
Far out man, you really are G. Marx.
I like Texas, see video of recant road trip: http://www.youtube.com/watch?v=YfgtcZ0e0Fc
Skippy...they sent me to the farm, tongue in cheek right?
I also wish Alberta (i.e. Western Canada, if those hippies in Vancouver BC would get on board) would separate (separate not secede as we are a federation of provinces). Unlike the the USA, Canada has an unelected, unequal and powerless senate so all the power is concentrated in the east (house of commons run by Ontario and Quebec) and there is a major western alienation.
Alberta and the upper rockies/inland empire of the northwest could be a happy combination.
God Bless The Republic of Texas! Port, check. Energy, check. Manufacturing, check. Technology, check. Astronauts, check. Mexican food, check.
What the hell are we waiting for?
No real mountains 'cept near El Paso. I'll pass.
Ditto for Virginia; deep water port, abundant energy (coal), manufacturing, farming, tech, no astronauts though. Hmmm, lend us some?
Richmond: the once and future capital of the ???
I'll pack a crate full of astronauts and mexican food and send it to Virginia, though I don't know if either will make it there....
Skippy...great place to visit, just don't get a cut in your MOP4 gear. Ohh would you like a nice tall cool drink of our fresh water.
Thank you for agreeing with me, we have an active manufacturing center. :)
Not all of those are bad things, and a lot of them are due to refineries. Plus we have MD Anderson Hospital, which is one of the foremost experts in cancer treatment.
Texas will never secede as long as Perry and his ilk are in charge. Hutchinson, same thing.
They are uniters, after all, not dividers.
;?
Ringmasters.
That's good Marla, but think bigger: If the Feds transfer slices of the national debt to the States and then play this game, then the whole thing is gone without "the Government of the United States" ever defaulting on anything.
wipe hands on pants, etc.
*THAT* was thinking big? Pish tosh...
A newly-liberated California is approached by China (who let's say already owns about 50% of the States debt) and offered the same deal they offered Hong Kong; you do as we tell you, we let you piss how you like to piss, and you send all profits back to the mothership.
The President (of California) bows like a proper vassal and kisses the imperial toe.
Next up ; Oregon!
cougar
The Governator can't be president of the USA, but he sure could be ruler of California.
I've always wished he would become El Presidente for Life of the Western District.
Interesting observation. Machiavelli would be most pleased.
My first comment here. There is no need for all this hoop-jumping. A state is sovereign under the Constitution; it can simply repudiate its debts. It has happened before. No one can sue in federal courts or SCOTUS to collect against it. States also have the right to coin, but not issue currency or bills of credit.
States do not have the right to coin money. The Constitution states they are not to "...make anything but gold and silver coin a tender in payment of debts."
If only!
"Saber rattling about seceding from the Union for this reason or that (we are looking at you, Texas) has heretofore been a cheap political maneuver often motivated by the desire to shine the dim witted light of the mainstream media on some states' rights issue long since stripped away by the Supreme Court."
Marla, your prose makes my heart twitter. But I would be on the lookout for seriously armed tall dark and extremely handsome (so the myth goes) Texas Rangers popping by the office any day, now that you've used the word "Texas" without bright lights, a marching band and serious and humble groveling.
From what some Texas residents tell me, Texas is a country that just happens to have favored nation trading status with the US, rather than actually being a part of the US of A.
Little filly, don't even consider saying anything like that in, or within 10,000 miles, of Texas .
speaking for myself i would prefer a Texan talking bold smack about their soil than one (obama) talking down his country at every opportunity.
Personally I admire Texas spunk. Or as a close friend would say, their "vin and vinegar". Texans at least think of themselves as free, as opposed to the average Joe, who doesn't even make the effort to maintain that fantasy any more.
I think what Marla is pointing out (correctly IMHO) is that Texas says these sort of things so often it's taken on a "boy cries wolf again" dimension in the Twilight Zone we call America.
And you must admit that everything is bigger in Texas, as least from a Texas point of view. I was making fun of Texas smack. I'm a self centered naval gazing narcissistic idiot, but at least I know it. I suspect some of those who live in Texas actually believe at lot of their "smack", which is fine if it's backed up once in a while with more than just talk.
Get a succession bill through your Congress but then let it be vetoed by the Governor at the very least. That would get the hearts pounding in DC and some credibility into your smack.
the timing of a secession amendment whether in california or texas is the critical factor. rahm's don't let a crisis go to waste has merit in this regard. in other words, before a secession movement could build a groundswell of popular nationwide support there has to be a catalyst - maybe a currency crisis of epic proportions, or some wild out of the blue scheme like a gun grab or a gold recall from dc. or even a tax revolt.
there are any number of events that could spark a secession movement.
washington would have to be so discredited that a concensus develops that the usa is too big and diverse to manage from afar, and that a loose confederation is best. that way new englanders could go their way, and texans theirs.
and by the way, in a straight up vote i believe a majority of the country would vote to kick out texas from the union, which actually would be the preferred method of secession since it would be by concensus.
The problem with Texas secession is that there's too much oil there. We would have to re-invade you guys, take your oilfields, kill your men, and convert your women and children to Christianity. Or else I can't drive my spinner-rimmed yellow Hummer back to my McMansion in the suburbs.
Will take time for the CIA to manufacture the evidence of WMD production. Meantime, Texas could enjoy a taste of freedom for a short while.
I wonder if a blatant stance from Washington to NOT bail out any of the States, after having bailed out the entire financial oligarch class, would be enough to turn the worm?
When you have nothing left, you have nothing left to lose...
Tyler Durden: "It's only after we've lost everything that we're free to do anything."
I completely agree on a catalyst is needed. In the mean time this Texan-Canadian is becoming a Panamanian resident to protect himself from the pain of the catalyst to return when once again Texas is a Republic.
Side note (Texas Smack): What other state could summon a militia in the hundreds of thousands who bring their own rifles, ammo, armor and know how to use them. Just saying.
The catalyst will come. The pain is only starting. Any one of a number of possible catalysts; when the pain of revolution is widely perceived as being less than the pain of staying the course, the revolution will occur.
Oh, Michigan, Idaho, Montana, Utah, Kentucky, Tennessee, and maybe Wisconsin, just to name a few.
Did any of those states stage an open-carry protest of the state republican party love-in? We did.
Texas does not have to seceed from the Union. It was never annexed into the USA. It voluntary joined the USA via treaty. A treaty that is renewed every year.
Just don't renew the treaty next year. Voila!
Turbo
Here's the real issue: states' abilities to levy income taxes are severely limited by the fact that the federal government imposes much larger income taxes. A horribly high tax state might tax income at 11%. Depending on bracket 35% of that income might go to the feds, resulting in a 46% marginal income tax rate (not even counting payroll taxes). If a state needs more money and doesn't feel like it gets much from DC, why not secede, raise its state tax rate to 25% or 30% and tell the citizens they no longer have to pay federal taxes and are getting a great deal on the balance. California would probably be much happier free of federal laws (think marijuana and immigration) and think it could handle its own defense to the extent it needed to.
We jest but I wouldn't be surprised to see California and Texas starting to look more seriously at this idea. Both had brief periods (in the mists of time) as independent countries, and both are quite large, proud, and independent, as well as having multiple seaports.
It's really not a fantasy at all. ZH cannot have it both ways: the site is convinced that the U.S. $ will crash, and the nation repudiate its debt. Hard to argue with these ideas. Meanwhile, a state such as Calif., which admittedly picked up some terrible spending habits during the dot.con era (which cost Gray Davis his job), is in the position (as is Texas) of receiving a low ROI for federal taxes. It's one thing to be Mississippi, quite another to be the 8th largest economy in the world. California receives, by some estimates, about 68 cents on the (depreciating) buck. So secede, quit paying federal income and SS taxes, and the budget will be in balance. Sad to lose that ability to contribute to a $1 trillion defense budget, but a price must be paid. The kicker: water, of course. But hell, the Israelis desalinate. Now what large body of water might be near the Golden State?
The official budget submission to congress for defense was a mere $663.8 billion.
Well heck, Fannie Mae lost $600 Billion in only 6 quarters. The Defense Department better keep up.
that's the Defense (Pentagon) budget. Lot more defense/homeland security/department of energy (nuclear bombs, Livermore), 14 intelligence agencies, than just that basic number. Adds up to just short of a trillion fiatscos.
Oh! Brilliant! Even their water supply was based on cheap water always being available, forever! Think a coupla' desalinization plants are going to solve the problem?
Hahahahackhackha!
Here's to LA looking like that apartheid over there! Riverside? Call it West Bank side-of-the-river in a decade. Oh, unless we "innovate" - that phantom of recovery most "informed" idiots blather on about because they really have no idea how ****** we are as a nation.
http://www.globalresearch.ca/index.php?context=va&aid=14491
Not to be spiteful, really. Just a little stirred up is all.
As Oregonians were once fond of saying, "Drain your swimming pools!"
If we De-Sal, maybe we could make a dent in those rising sea levels from "Climate Change"
I live in Dallas and have to hear this "lets secede" crap every day.
No state anywhere will ever secede. Any state capital would most likely be sacked without a single shot fired on footage of B52's taking off alone.
The only chance a state would have would be to get a hold of a nuclear weapon from a military installation but even then the state would just be labeled rogue by the world and slowly starve to death.
People talk of secession with having to actually fight and defend your borders with blood and guts as an afterthought.
What WOULD be interesting would be the moments when state reps visited federal military bases to serve notices to vacate.
Texas is a state of problem solvers, we should be able to figure it out. I agree with a previous post that Texans have to make it politically favorable to Washington to have Texas leave the Union.
What happens to the US army when you pay them with monopoly money? Though by that point we'll just use our military to rob someone else of their wealth. It's a win win, as you don't have to pay the dead. More for everyone else.
The truth is, and of course therefore hasn't a ghost of chance in hell, is that the disUnited States as presently Constituted,combined and convened is ungovernable in the slightest. Period. Over. And Out.
Texas has oil, natural gas, farms / food, lots of money, diverse businesses, and a militia. And we are not landlocked - a sea port.
Everything a state needs to be a country.
Not to mention the state capitol building is the tallest capitol building in the union, including D.C.
As the Dale Watson song goes, "We salute the red, white, and blue. and that other flag that y'all fly too."
After the civil war, the supreme court ruled that Texas had not had the right to secede from the union. That should have settled the case years ago.
Another misunderstanding centers around Texas not entering the union by treaty but by resolution of annexation. Interestingly, the resolution does not mention secession but does grant Texas the right to subdivide into a total of five states (more senators would affect politics), and required that if any new states were formed out of Texas’ lands, those north of the Missouri Compromise line would become free states and those south of the line could choose whether or not to permit slavery. On the other hand, Article Four of the U.S. Constitution prohibits the creation of new states out of existing ones without the consent of both the legislature of that state and of Congress, and the division of Texas into multiple states has never been attempted. However, after Bush II's first election and appointment by the supreme court, the constitution is apparently not that important.
In conclusion, discussion of a Texas Secession by Governor Perry is the talk of an ignoramus.
The Civil War itself sort of took the same position as the Supreme Court.
The Constitution, Supreme Court precedents and well-settled law all have a way of not being observed much when they stand in the way of political will, especially when there's a "crisis" going on. Most of the New Deal blatantly violated the Constitution, well-settled law and a number of solid Supreme Court precedents. Who won that one?
Andrew Jackson, LBJ, Nixon, and Ronald Reagan arguably were also law violators (war criminals)...
Exactly.
Laws are in the way when inconvenient to those in power and are fiercely defended when that serves the purpose of the powerful.
I pledge allegiance to the Banana Republic of the United States of America.
"After the civil war, the supreme court ruled that Texas had not had the right to secede from the union. That should have settled the case years ago."
So the government-run, government-appointed court ruled that the government's authority was not to be questioned? Shocked; I place a lot of value on that ruling, thanks for pointing it out.
There are no absolutes here. There are many intangibles. The SCOTUS = just words and defies the logic of many of the founders and more importantly, nature. Might makes right.
It is entirely possible for this scale to tip in favor of David rather than Goliath. Even rivers can change course.
That said nullification seems to make the most sense in altering course peacefully within the current framework. However, a lack of awareness, required scale of events, pwnt SCOTUS, and complete lack the balls under peer pressure, do not bode well for this method.
Do it! Just do it! The experiment called America way past its sale-by-date. It's too big, too corrupt, too far gone to be redeemed.
...that whenever any form of government becomes
destructive of these ends, it is the right of the people to alter or abolish it, and to institute new government... --Declaration of Independence as originally written by
Thomas Jefferson, 1776.
And you can stick that debt where the sun don't shine!
Kindly comment on the existence of California's and Texas's "second set of books" called the Comprehensive Annual Financial Report (CAFR) (mandated by GFOA.org) that shows they are in excellent financial health.
http://www.iff-ifoundfreedom.com/freedom/cafr.html
http://gfoa.org/
California's is here:
http://www.sco.ca.gov/ard_state_cafr.html
but I can't tell that it shows excellent financial health. Then again I'm not an accountant.
Can we sell California to China for debt forgiveness? Maybe some Arizona warrants to sweeten the pot?
I live in Texas and it IS only cheap Saber rattling. Texans are not too bright & it doesn't take too much to get them fired up. Apologies to any intelligent Texans reading this.
That might be fair, but at least we're paying attention.
http://www.theonion.com/content/video/u_s_government_stages_fake_coup
I think this is the best solution for the debt crisis, that or we break up into 6 regionals and then remerge a la att
All hail Octavia!
If Cali seceded, there would be a western hemisphere currency weaker then the good ole $...does that mean the S&P 500 would rally?
Cali is too big to succede.
+1,000
Texas secede? Give it a shot.
You'd all be Mexicans in a week.
Ever been to Texas? I'd give Texas 1000:1 odds...
My dear old mother was born and raised in Texas. I once asked her why she married my father, and she replied, "that's simple - he wasn't from Texas".
If Texas secedes from the Union, within a year it will face a referendum forced on the ballot by its Mexican majority who will vote to join Mexico. Texan independence would last for 2 years max.
Mexicans come to Texas because they want to be Texans. Mexicans go to California to milk the system and remain Mexicans. Big difference.
The Republic of Texas was founded by both whites and Tejanos (Natives) who were both Mexicans, but declared independence after the central gov't in Mexico City violated the constitution and centralized power in the capital.
Remember the Alamo.
Remember Rhodesia... or is it Zimbabwe?
Civil War II:
http://www.timebomb2000.com/misc/CWII.pdf
Seriously, I've been reading this blog for a long time; and this is the dumbest "conversation" to date. No State is seceding in our lifetime. A President that allowed such an event would go down as the biggest failure in U.S. history; and since all they really care about is their library and how history professors will view them - no State will be allowed to secede - ever.
I'm sure Gorbachev had similar views circa 1986.
"A President that allowed such an event would go down as the biggest failure in U.S. history; and since all they really care about is their library and how history professors will view them..."
Which IMO is the real reason why Lincoln invaded the Confederacy: vanity.
This is a smart presentation,
http://www.poptech.org/popcasts/juan_enriquez__poptech_2006
but it misses the fact that the Civil War was the last war between France and Britain. And from the National Security Act of 1947 on it's the secret government transplanted from England that has been running the show. There will not be secessions under this system.
Marla, CA problems are a lack of imagination? Fantasy land is imagination. The problem with California is too much imagination. Imagine you could save the world from itself; flowers in every yard, Simon and Garfunkle drifting in the wind, solar panels providing all energy needs. Lack of imagination?
But all of this mess only because no living soul in the entire United States is able to comprehend some basics like:
1) You spend only as much as you are earning (spend means including servicing of debt, legitimate ONLY for capital expenses outlays that depreciate in years, therefore make sense paying in years...)
2) Debt does not disappear, it is either paid back or forgiven. Or collected bankrupting the non paying entity to the bone and selling off everything...with the left overs carried off the books as losses...not kept as "assets".
Something has gone horribly wrong in the collective mind of this nation..
The only prior resolution of the secession issue I'm aware of is the invasion and conquest of the seceding states by the US under Abraham Lincoln.
Isn't it amazing the near violence that mere mention of Texas seems to inspire, especially amongst the uber-hip, cool kids from the over-priced, over-indebted metro areas? As a diehard contrarian, I have found the predictable hostile reaction very interesting.
My wife and I were so intrigued, in fact, that we chose to relocate from NYC's upper east side to Uptown Dallas this summer. Just wish we had chosen an apartment facing north, so we could watch the fireworks begin next year. Now there's change I can believe in...yee haw!
California has been impacted badly by the housing crisis and it shows in its finances. Homes were overpriced and now they have declined much more than several other states.
But it will turn around when unemployment starts dropping again (may be starting in 2011?).
time123
http://invetrics.com