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IANAE (I am not an economist), but here's an observation from a born-and-bred Californian: whenever the economy is bad, the state budget takes it on the chin. C

by sabat 16y ago

IANAE (I am not an economist), but here's an observation from a born-and-bred Californian: whenever the economy is bad, the state budget takes it on the chin. California is big -- bigger than a lot of people realize. I mean this in terms of geography and population. So it seems to me that national problems are magnified here in our microcosm. Once the economy picks up, the state problems ease. Tangential anecdote: I was at a JBoss conference a few years ago, talking with a guy from the company who'd never been to California before. I mentioned that I had just driven back here -- I'd been snowboarding over the weekend. He gives me a dubious look, and says, "You don't have snow in California."

j_baker 16y ago
Here's what strikes me as funny: California's budget crunch is $25 billion. Texas (a paragon of small government) is facing a deficit of... $25 billion. The fact that both states have similar deficits would seem to back your argument that this has more to do with the economy than budgetary policy. http://www.dallasnews.com/sharedcontent/dws/news/politics/state/stories/110410dntextxxgr.20cde75.html http://www.dallasnews.com/sharedcontent/dws/news/politics/st... http://articles.sfgate.com/2010-11-11/news/24826042_1_budget-deficit-deficit-estimate-deficit-balloons http://articles.sfgate.com/2010-11-11/news/24826042_1_budget...
- gruseom 16y ago
  But California's economy is 50% larger than Texas', according to http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP. Since economists mostly talk about debt to GDP ratio, doesn't that make Texas considerably worse off?
  - nhebb 16y ago
    Texas has a two-year budget cycle, and the $25 billion deficit figure that's been batted around the internet is speculative since the official numbers won't be known until January.
    - motherwell 16y ago
      What is the margin of error? For example, if Texas debt is between 10 and 30 billion, then we can't comment. But if it is between 20 and 30, then I think we can reasonably say that Texas debt to GDP is worse.
    - gwern 16y ago
      Are there any reasons to think that the speculative number will be off by more than a billion or two? If the real deficit is actually 23 or 27 billion, I don't think that really affects the comparison too much. ('Oh, Texas's deficit is actually $24.23 billion and not $24.24 billion? Well, obviously that invalidates all the comparisons to California! Let's discuss something else.')
      - nhebb 16y ago
        People seem to be getting a bit heated on this topic. I was just trying to point out that the number was an estimate, and that it was for a two year period. If we take a low-high range of $23 - 27B, then that is $11.5 - 13.5B/year, which is significantly different than the $25B that is being implied for a one year budget. Personally, I think all the California vs. Texas debates are a childish extension of blue state vs. red state political bickering. Nobody in the US is better off if either state has financial problems.
- ataggart 16y ago
  The debt (read: accumulated past deficits) isn't the only, or even main, issue; rather it's the future liabilities that are killers. For example, California has unfunded pension liabilities of over $500 billion [1]. To put that number in perspective, it's almost seven times greater than all the outstanding voter-approved state general obligation bonds in California. [1] http://www.stanford.edu/group/siepr/cgi- http://www.stanford.edu/group/siepr/cgi- bin/siepr/?q=/system/files/shared/GoingforBroke_pb.pdf
  - jerf 16y ago
    This is the core of the problem. My problem with this article is that you can apply the same arguments and paint a picture where the US itself has a rosy economic future. But the problem isn't even merely today, November 29th, 2010, it's the scope of the future obligations we've taken on. It's not that the US or California has necessarily that exceptional of a debt load right this second, it's that the money we might be using to service it is already nominally allocated to other "untouchable" projects. That's the big change; entitlements (and pensions as a subset of those worth calling out specially). To do an article about how glorious the California future is and to criticize not just the arguments but the motivations of those saying there are problems, but for neither the word nor the concept of entitlements to show up is just constructing a straw man and cherry-picking the budget numbers. For that matter reading the article straight you might be mystified about why California has very recently resorted to the very legally-dubious IOU-money-but-not-quite-money scheme. If it was even half as rosy as this guy is arguing that shouldn't have been even close to necessary, but in the real world, it was.
- Semiapies 16y ago
  "paragon of small government" You must be thinking of a different Texas than I live in. :P Even if the $25B deficit pans out in the end, and aside from the other differences between the states (including the counter-intuitive one that Texas has been less hard-hit during this downturn), you still end up with a situation where states face major budgetary crises at every downturn because revenue only balances spending near the height of economic booms. That's a budgetary policy problem even when it's not unique to California. And for California, it's turning out rather badly.
  - deleted 16y ago
    [deleted]

by sabat 16y ago

j_baker 16y ago

Here's what strikes me as funny: California's budget crunch is $25 billion. Texas (a paragon of small government) is facing a deficit of... $25 billion. The fact that both states have similar deficits would seem to back your argument that this has more to do with the economy than budgetary policy. http://www.dallasnews.com/sharedcontent/dws/news/politics/state/stories/110410dntextxxgr.20cde75.html http://www.dallasnews.com/sharedcontent/dws/news/politics/st... http://articles.sfgate.com/2010-11-11/news/24826042_1_budget-deficit-deficit-estimate-deficit-balloons http://articles.sfgate.com/2010-11-11/news/24826042_1_budget...

gruseom 16y ago
But California's economy is 50% larger than Texas', according to http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP http://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP. Since economists mostly talk about debt to GDP ratio, doesn't that make Texas considerably worse off?
- nhebb 16y ago
  Texas has a two-year budget cycle, and the $25 billion deficit figure that's been batted around the internet is speculative since the official numbers won't be known until January.
  - motherwell 16y ago
    What is the margin of error? For example, if Texas debt is between 10 and 30 billion, then we can't comment. But if it is between 20 and 30, then I think we can reasonably say that Texas debt to GDP is worse.
  - gwern 16y ago
    Are there any reasons to think that the speculative number will be off by more than a billion or two? If the real deficit is actually 23 or 27 billion, I don't think that really affects the comparison too much. ('Oh, Texas's deficit is actually $24.23 billion and not $24.24 billion? Well, obviously that invalidates all the comparisons to California! Let's discuss something else.')
    - nhebb 16y ago
      People seem to be getting a bit heated on this topic. I was just trying to point out that the number was an estimate, and that it was for a two year period. If we take a low-high range of $23 - 27B, then that is $11.5 - 13.5B/year, which is significantly different than the $25B that is being implied for a one year budget. Personally, I think all the California vs. Texas debates are a childish extension of blue state vs. red state political bickering. Nobody in the US is better off if either state has financial problems.
ataggart 16y ago
The debt (read: accumulated past deficits) isn't the only, or even main, issue; rather it's the future liabilities that are killers. For example, California has unfunded pension liabilities of over $500 billion [1]. To put that number in perspective, it's almost seven times greater than all the outstanding voter-approved state general obligation bonds in California. [1] http://www.stanford.edu/group/siepr/cgi- http://www.stanford.edu/group/siepr/cgi- bin/siepr/?q=/system/files/shared/GoingforBroke_pb.pdf
- jerf 16y ago
  This is the core of the problem. My problem with this article is that you can apply the same arguments and paint a picture where the US itself has a rosy economic future. But the problem isn't even merely today, November 29th, 2010, it's the scope of the future obligations we've taken on. It's not that the US or California has necessarily that exceptional of a debt load right this second, it's that the money we might be using to service it is already nominally allocated to other "untouchable" projects. That's the big change; entitlements (and pensions as a subset of those worth calling out specially). To do an article about how glorious the California future is and to criticize not just the arguments but the motivations of those saying there are problems, but for neither the word nor the concept of entitlements to show up is just constructing a straw man and cherry-picking the budget numbers. For that matter reading the article straight you might be mystified about why California has very recently resorted to the very legally-dubious IOU-money-but-not-quite-money scheme. If it was even half as rosy as this guy is arguing that shouldn't have been even close to necessary, but in the real world, it was.
Semiapies 16y ago
"paragon of small government" You must be thinking of a different Texas than I live in. :P Even if the $25B deficit pans out in the end, and aside from the other differences between the states (including the counter-intuitive one that Texas has been less hard-hit during this downturn), you still end up with a situation where states face major budgetary crises at every downturn because revenue only balances spending near the height of economic booms. That's a budgetary policy problem even when it's not unique to California. And for California, it's turning out rather badly.
- deleted 16y ago
  [deleted]