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Why I’m Overthrowing the Government
I finished my indoctrination on how to overthrow the government last weekend. Specifically, I attended a grass roots meeting of activists in Berkeley, California planning to collect 450,000 signatures by April to put the “California Democracy Act of 2010” on the November ballot.
The measure seeks to amend California’s broken constitution by permitting passage of budget and tax measures with a simple majority. The current two thirds requirement, which California shares only with the miniature states of Rhode Island and Delaware, is widely blamed for the legislative impasse in Sacramento that has driven the state to financial ruin.
Overdependence on capital gains—up to 40% of revenues in good years—enabled the state to just barely balance the budget at stock and real estate market tops, but to death spiral into hemorrhaging deficits during the inevitable busts that followed. Furthermore, since proposition 13 capped real estate taxes at 1.25% in 1978, the state’s population has grown by 16 million to 38 million, placing a backbreaking strain on all services.
Our hulking, language mangling, steroid injecting governator, viewed by both parties as a complete failure in his seven years in office, blames it all on Washington. There is some merit to what Arnold claims. The Internal Revenue Service is basically a giant machine devilishly designed to suck money out of California and spend it everywhere else. The Golden State is far and away the largest revenue generator for the federal government, but only gets back 78 cents out of every dollar it forks over. The rest is blown in the Midwest, the South, and Alaska—huge net recipients of tax dollars—and usually the first and loudest to complain about free government handouts. The second biggest net payer into the system is, surprise, surprise, New York. This has been going on for decades.
Only six obstinate legislators from the farm belt and the Deep South (Orange County) are holding hostage the world’s sixth largest economy, right after France. During the frequent 24 hour debates over the budget, they show up with Costco sized bags of Cheetos, soggy baloney sandwiches, and six packs of Diet coke so they can camp out, and if necessary, sleep at their desks in order to cast a “no” vote at every opportunity.
Decades of relentless gerrymandering have made virtually every seat in the state safe, so elections offer no solutions. Daryl Steinberg, president of the California Senate, told me that voters of all political stripes are fed up to the gills. Once boasting the best public education system in the country, California now ranks 47th in spending/pupil and 49th in pupils/teacher. The University of California, the top public university in the world, and a veritable PhD and Nobel Prize factory, has endured two 20% back to back budget cuts. Students are rioting, and for good cause. Schools, police and fire departments, parks and aid agencies are closing throughout the state. My local high school had to cancel its sports and music programs to keep class sizes from rising above 40.
Antiquated infrastructure is falling apart, with the San Francisco Bay Bridge closed for five days in November, forcing the local economy to take a huge hit. The barbaric prison system, which has been ruled by a federal judge as inflicting “cruel and unusual punishment,” is letting 24,000 prisoners out early, since it can’t afford to house or feed them. The public outrage is so violent the initiative will almost certainly pass.
When it does, taxes are going to go up a lot. Target numero uno: property taxes and the top 5% of income earners. Expect a battle royal, as the top 1% of taxpayers already pay a marginal state tax rate of 10.3%, the second highest in the country after Vermont, generating 50% of state revenues. This will make our sunshine the world’s most expensive.
That will be great news for the Golden State’s beleaguered bond holders, who will love to see new sustainable sources of revenue. Take a look at the California municipal bond funds (VCV), (NCP), and the (NVX). Any hint that the Land of Fruits and Nuts is about to make a major dent in this year’s anticipated $21 billion budget deficit will cause the yields on its long dated tax free paper to shed its distressed premium very quickly, sending prices soaring.
If California were a stock, I’d be buying it now, but you can do the next best thing with bonds. If you want to join the revolution, or just learn more about the issue, go to www.CAMajorityRule.com
For more iconoclastic and out of consensus analysis, please visit my website at www.madhedgefundtrader.com
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+1.
The super majority requirement is the only thing that's kept the state from imploding (since our money's being stolen by Alaska).
Yes, that's the answer...raise taxes and increase the wages and benefits of the unionized state and local government employees. Honestly, does anyone think the increased revenue would be used for infrastructure?? Higher property taxes means lower property values, more defaults and higher rents for the masses.
I'd also suggest not using the California Teachers Association as a source for information on per pupil spending. California is ranked24th in 2006–07, according to the National Education Association's (NEA) Rankings and Estimates 2008–09. At $9,124 per pupil, California was at 95% of the national average of $9,565. The District of Columbia, which ranked at the top of all states, spent $16,540. Arizona, ranked last, spent $5,255.
The average teacher salary in California was $63,640 in 2006–07, according to the NEA, higher than any other state. The U.S. average was $50,758.
67.6 percent of public school students in California graduated, the adjusted four-year derived dropout rate is 24.2 percent, and 8.2 percent completed or withdrew from school and are considered neither dropouts nor graduates.
Just to add more fuel to the fire, roughly 2.2 billion per year is spent on educating illegal immigrant children. That's a pretty sizable chunk of change given the states fiscal woes.
You are insane. More taxation isn't going to fix our problems. You are insane. Insane.
Here's how this works:
We are ~21 billion in the hole right now so we would raise taxes for ~14 billion to "show" that we are serious about the budget to the bond market so that we can cover the rest of the shortfall with bonds. Problem solved! (this is where your feeble thinking stops)
One year from now the economy in CA begins to crawl out of its crater and the increased tax rates start to bring in more revenue.
Seeing the additional revenue the state workers unions immediately put pressure on the Democrats in the legislature for raises that are granted. This process is repeated every year when there is a revenue increase.
When the next economic downturn occurs we find ourselves with an even larger budget problem because the budget has by this point assumed high revenue from high earners (and they suffer when the economy turns). Solution? More taxes!
Repeat this until CA is MI, until Los Angeles is Detroit.
See the problem is just that we can't tax people more. The problem is *never* that the gov spends too much money or that its pensions are too generous or that Democratic legislators are whored out to the unions.
California may have once been the Land of Fruits and Nuts, but many now see it as the Land of Unfunded Entitlements, Overpaid Municipal Workers, and Unpoliced Borders...have fun with your 12% State Rate, and effective all-in marginal rate of 60%.
You could always move.
P.S. Wait until healthcare passes, and illegals break your hospital system. The day that passes, the loud cheer from Mexico City, Mexico will be heard all the way to San Diego. Bags are being packed as we speak.
You could always move.
Just not to Texas...unless you leave all the progressive, liberal, socialist baggage behind.
You've obviously never been to Austin.
Truth.
CrazyCooter
the broken healthcare system already exists in California. Pray you never need actual emergency services, you will hop in line behind all the illegals sitting there with cold/flu
I live in Diego town and the illegals have already broken our hospital system. Break a leg and you're 12 hours in the emergency room to see a doc.
Could that health care be for work-related injuries? You know, work that all the xenophobic white folks don't do? (because they all wanna be banksters?)
What irony... the "illegals" amongst the land that was taken from them...
As for Texas, if it were to cede would that mean that the US government could invade and bomb it because it's housing a war criminal (Bush)?
snap!
Just because fractional reserve systems are designed to "inflate" everyone into higher tax brackets and make everyone "rich" is no cause to complain. Quit bitching about the midwest and how it relates to New York and California. If it was all divided up into a midwest dollar you guys would get screwed on the exchange rate. Internalizing that external dynamic makes things confusing but doesn't get around the fact that the midwest runs this country with goods even if it doesn't get credit for it on the "books" because of accounting and pricing illusions.
"I finished my indoctrination on how to overthrow the government last weekend. Specifically, I attended a grass roots meeting of activists in Berkeley, California planning to collect 450,000 signatures by April to put the “California Democracy Act of 2010” on the November ballot."
And yet you also had a face to face meeting with Leon Panetta, who just happens to head the CIA? This brings to mind all kinds of interesting questions, which I will leave for others to ask and explore.
I get the feeling this madhedgefundtrader is just some attempt at satire from someone with a sense of humor that is over my head.
Berkeley is going to save CA?
Honestly, I just don't get it.
Speaking of which, haven't seen Benjamin Dover III post in a while.
Or Cheeky Bastard. He wasn't Extraordinarily Renditioned by the Obama boys, was he? Being tortured in some black hole in Zurich?
I just saw a few short posts from Cheeky yesterday. But they are far and few between. There is a persistent meme on the ZH boards that he was arrested, which doesn't explain why he's posting now. Unless he has limited access to a computer while in jail, thus his infrequent and short posts.
Every time he's asked what up, the question isn't really answered by Cheeky. Who knows but he did add some spice to ZH, that's for sure. Here is a post he made yesterday, about half way down.
http://www.zerohedge.com/article/order-make-ponzi-market-keep-going-ever-higher-barney-frank-tries-make-shorting-virtually-im
Thanks for the tip, CD!
I've wondered myself but this guy (gal?) looks to be a real business.
http://www.madhedgefundtrader.com/Home_Page.html
On the other side of the coin, the web site is not very "professional" and looks a little home made. But there are real links to the blog, radio and archives. It looks (and sounds) real.
Of course, the CIA did (still does?) run real honest-to-goodness small regional airlines in order to have jets available for nefarious means so who knows. I trust no one and nothing anymore, which makes for some solitude along with my serenity.
I got one: "Who does #2 work for?"
agree with greatsatan 110% .... U R Clueless ....... buy CA munis now ? first we need NY and CA and MI to go BK and have forced restructuring . Dear Leader's " Obamacare "
is final nail in coffin for NY and CA budgets and why their governor's throwing public hissyfits .
Wake me up when VCV is at $5
I usually don't expect this level of ignorance from a poster at Zerohedge, but you have no idea what you are talking about.
16 states require a supermajority to raise taxes. http://www.fiscalaccountability.org/index.php?content=supersub1
California's problem's are primarily threefold:
1. Reckless spending by the legislature on programs that are not needed, are duplicates of federal programs, or are wracked with corruption, fraud and abuse.
2. Bloated government worker payrolls, pension benefits and allegiance to the public sector unions.
3. Over regulation that ranks the state near the bottom for business friendly environments which cost the state around 492 billion dollars a year and 3.8 million jobs.
The state has plenty of revenue, it just chooses not to spend it wisely. Now you want to give the people who have year after year overspent, wasted, or simply blown billions in budget money on pet projects, unworkable programs and handouts to the unions more money to waste?
California ranks I believe second in overall taxation in the country and you think this legislature needs the power to pass more taxes? The highest level of income tax starts with workers who make 48,000 per year, so they are pretty much soaking most of the lower middle class and above in taxation. The State's middle class is fleeing in droves and is being replaced by a poor, unskilled, illiterate workforce that for the most part does not pay taxes.
If anything, you should be supporting the move to a part time legislature, not the move to give possibly one of the most corrupt and incompetent legislatures in the country the power to pass taxes on a simple majority vote.
Look at Texas, they don't have budget deficits year after year, they don't have an income tax, and they don't tax the fuck out of every single person that lives there. They are eating California's lunch when it comes to business climate, innovation, and quality of life.
+a gazillion.
No other change will matter if we don't cut the waste, fraud and overspending.
Since the subject of Texas' balanced budget amendment was brought up and Cali vs Texas subject (at least in business/economic terms) got broached a few different ways, I decided to cut and paste some content I sent/posted to some other blogs regarding some potential subject matter to explore. One moderated the full body of the post (it never went public) and the other author generally dismissed the notion.
Because of the problems in Cali (and elsewhere), its gotten a lot of attention (housing bubble/etc). However, the notion I had (reposted below), is where are the places that were contrary to the bubble (e.g. RE didnt bubble, muni/state debt didnt go apeshit, etc)? I kind of pitched Texas as a possible profile and thought it would be an interesting analysis (at least I havent seen anything that focused on the areas that came out of hte bubble in reasonably good shape).
Just some forum fodder that is tangent of the tangent of the ...
CrazyCooter
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I ran across an article on the web recently (http://texasweekly.com/node/4370) and it got me thinking about something. I will wander a bit, but I think this could prove to be a few interesting angles for your blog to explore if you think they have merit.
First, a bit of background. I live in Dallas/FtWorth, specifically East Dallas and Grand Prairie (I am divorcing, so staying with family the last few months). I have been reading your blog and others for a couple years, and I have a pretty good sense of how incredibly jacked up parts of the US are (muni/state tax revenues and pensions) with respect to real estate (imploding) and the economy in general (unemployment). Thanks to your efforts and the efforts of others, I think I have a pretty good handle on the fundamentals that go us here. This is important to the observation I am going to present.
Many parts of the nation are economic train wrecks, so I won't beat that dead horse. However, if I relied entirely on what I see/hear living in DFW, things aren't so grim. I have stable work (I am a .NET programmer - much like your previous career). All my geek friends have work. My immediate and extended family in the area have work. The neighborhood I am staying in (75051) and the neighborhood I used to live in (75228) are not swamped with For Sale signs. Strip malls have some vacancy, but they are active in most areas and mostly leased. Arlington is crazy. The area south of the new Cowboys stadium (I opposed - but that is another subject) has a new huge upscale strip mall that is absolutely packed all the time. Traffic is the same as always, so I assume that is folks going to/from work. Irving and North Dallas also both seem like business as usual.
In short, it's kind of hard to tell we are in one of the worst recessions in living memory with a stormy horizon.
*Assuming* my anecdotal experience is representative of the area, this seems a huge disconnect from the kinds of stuff I read about and is kind of my central notion.
I think I ran across a chart that helps to explain this disconnect:
http://boombustblog.com/images/stories/macro/case_shille__change_april_0...
I got the image from this article by Reggie Middleton over at ZeroHedge:
http://www.zerohedge.com/article/latest-housing-numbers
According to this chart, Dallas didn't bubble. Doesn't this seem like a pretty extreme outlier (assuming the chart is inclusive and representative). Both the house I bought (115k) and my parents house are extremely affordable (you can check real estate by zip codes I provided). My house had an old growth live oak and old growth red oak in the front yard. The brick house was built in '54 is a 3 bed, 1.5 bath, attached garage, came with new appliances, hard wood floors, skylights, gas log fire place, and was in great shape. The neighborhood is working class, but I like it that way.
I shudder to think what this exact same house would have cost in any of the bubble markets.
So why didnt DFW bubble? I think I know why. I was too young to remember the gory details, but DFW got slammed during the SnL scandal, so maybe that kept "animal spirits" in check when easy credit/leverage rolled around (e.g. a living memory of the damage done by easy credit/speculation). It may also be influenced by the fact that Texas is probably more fiscally conservative than most other states, for example Texas has no state income tax and the Texas Constitution requires that the Legislature budget for no more than the amount of revenue that the Comptroller certifies will be available.
http://govinfo.library.unt.edu/npr/library/papers/bkgrd/texas.htm
http://texasimpact.org/node/373
The history behind the balanced budget seems to stem from the blow up in the late 80s, which was oil/real estate drive. You will have to dig, if you don't already know, to confirm this. But it seems that the current debacle is just the SnL scandal on a national scale, so it would be reasonable to look at how this played out in the worst hit SnL states/cities to see how they changed/coped. A sort of relevant history that might help grasp potential futures.
Anyway, to wrap things up, if you apply the same lens to DFW that you apply on a national stage, how do things look?
In closing, I think it might make an interesting post, or series of posts, to focus on the areas that *didn't* bubble in a number of possible ways.
Here are a few ideas of topics/themes for posts.
* Is DFW really better off than other municipalities?
o If so, are there others?
o If so, why is DFW seemingly better off than many other places?
o If so, what do these muni's all have in common?
* How does the job market in DFW compare to others?
* If a family is willing to relocate for work (e.g. walk away from the mortgage/forclosure or sell/move), what criteria (muni/state) are relevant and how does DFW compare to others (e.g. state income tax, local taxes, cost of living, cost of real estate, etc)?
o On this note I will point out I turned down many opportunities in the past to work in California, Washington state, and New York solely on the cost of living (real estate) and taxes. I think there are many aspects like this that folks haven't focused on because they simply took it as a given. For example, how many people would prefer work in areas that didn't have a state income tax when many just assume every state has income tax?
This doesn't have to be a DFW focus, but I am not sure if there are any other local economies/muni's out there that are weathering this storm well. I think it would be very interesting to see an index of sorts that ranks affordable areas of the country that aren't completely upside down with the downturn.
A lot of this is probably available on the internet, however your blog is likely read by many who are looking for work and may have skills that will translate into work if they are willing to move. A little good news, or even just not so bad news would also be welcome. A solid series of posts on this subject would likely be actively shared with many looking for work, even if those posts just aggregated the information and acted as a gateway to other resources, although I think there is a fair amount of work required to put together even a fraction of the ideas presented.
Thank you for having a reality check to the OP. One thing which would greatly help CA is returning to a part time legislature, rather than full time politicians who are nothing but political whores.
Good points all, Satan. Expanding on Point #2, the pension liability for State workers has risen 2,000 % since the turn of the Century. During the same period, CA revenues increased only 24 %. Even now, there are 5,000 + members of the CalPers $ 100,000 + per year Club.....and growing !!
The unions and corrupt Legislature looted the State and the taxpayers.
Just like the UAW and GM death march.
CA has one way out now. Default and start over.
Do you live in California? If not, then it's not your problem now, is it? We're the one's being sponged off of, so we'll deal with it. If you do live in California, then we should talk, because it's time Californians work things out among themselves.
BTW, I agree with your points about the dysfunctionality of California, it's awful. But it's OUR awful and we should get to deal with it on our own, not with some buttinsky from FlyOver country interfering.
This should be a family matter. If you aren't family, then stay out.
America out of California!
Free Cali!
I could not agree more. I'll be reminding you of that when CA comes hat in hand this year asking for a bailout in the form of federal backing of their bonds. At that point, is certainly fucking IS my problem...and I don't want it. I live in Texas for a lot of reasons....one of them is "It ain't California"
And I don't live in Texas for a lot of reasons.......one of them is that its full of fucking Texans
+2. Of course, everything's bigger in Texas, especially the assholes.
You saying they got bigger balls too?
The state that secedes first's got the biggest balls, IMO.
The one that's got the lead bead on it is Vermont, which, according to all the pro "business" folks here, is also one of the most business un-friendly states. Hm... how to square that one? Hint: Vermonters don't like big powers, big corporations. The only real independents are in Vermont.
And who doesn't love their syrup?
Think about how much more exciting bowl games would be if we were different countries. USC vs. Texas in the Rose? It'd be like Lake Placid 1980. Awesome entertainment via athletic jingoism.
Could not agree more with the above comments. Just moved from Texas to California for family reasons and the business environment is much more friendly in Texas, its not even comparison.
Then quit, get a new job and move back home. We've already got millions of illegal immigrants surging across our southern border, we don't need any more unhappy immigrants from places like Texas. Full disclosure: I lived in Dallas for three years; like being a Jew in Berlin in '42. What an awful, ugly place.
Hot chicks, though.
I lived in Dallas for a year and a half. It was the friendliest place I have ever been. Everybody was friendly.
Everyone seems friendly when you load up on the Xanax before you head out on the morning commute.
Or maybe blow. From what I saw, there's more coke in Highland Park than Colombia.
Hey! Its all about feeling good and more importantly looking good.
I do not think I would be wrong if I was to state that there are more breast enhancements per 1000 in both CA & TX than any other state in the (supposed) Union. NJ is probably running right behind those two.
Lets not get started on the hair
All boobs are good boobs, but some boobs are better than others.
Fucking harsh! I love it. Hot chicks live everywhere.
I did the same in 2008. Moved back to Texas in a hurry in 2009.
+1000
MadHFT, I expected more of you. California's obscene financial situation is no one's fault but its own. Trying to blame Arnold or Washington is pure scapegoating. California would still be equally fucked with any other governor or any other federal administration, liberal or conservative.
WTF were you doing at a conference in Berkeley, anyway? I thought you were a capitalist!
Obviously you did not read his top 10 predictions for 2010. (http://www.zerohedge.com/article/mad-hedge-fund-trader%E2%80%99s-top-ten-surprises-2010)
Please be cautious in your criticism. They weren't actually his 'Top 10 predictions'...
From his first paragraph:
The goal is to list events which investors and the markets believe are either highly unlikely or impossible, but which have a higher probability of occurring than they think.
When you're right, you're right. I did, however, join in the fun with 'predictions' of my own: http://www.zerohedge.com/article/mad-hedge-fund-trader%E2%80%99s-top-ten-surprises-2010#comment-183054
I know.
This one was an instant classic:
Have we learned nothing from watching Red Dawn?