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MMT says that about governments that issue the currency their debt is denominated in. California doesn't issue currency, and most states are constitutionally fo

MMT says that about governments that issue the currency their debt is denominated in. California doesn't issue currency, and most states are constitutionally forbidden from running a budget deficit. California has a particular problem due to Prop 13, which forces it to rely more heavily on income tax, which is much more income elastic than property tax. Any year with a recession hits their budget much worse than most other states. Conversely, they do a lot better during booms, but since voters hate states having rainy day funds and prefer getting the excess refunded, that doesn't help, either.

ggm 5y ago
Ah. deficit funding forbidden, is the bit (non US resident) I didn't know. So they have to bank locally sourced "wealth" to spread out when times are harder? then I guess they have to live inside the rules. Where I live, the states accrue a lot of public sector debt, and nobody cares. Qld is carrying $105b of debt, rising to $125b by 2025. This is outside of federal public sector debt, theres a huge royalty income, and state tax raising powers as well as a GST/VAT national settlement, so its pretty well understood income exists to cover the debt.
- inferiorhuman 5y ago
  Lean's not as odd as it might seem. California is still very much a gold rush state that's addicted to the boom-bust cycle. For newbies I like to recommend Peter Schrag's book Paradise Lost. In it he analyzes California's problems through the lens of Prop 13 and the big cultural shift California saw in the late 70s. In broad strokes there are a bunch of things to weigh: - California's got an incredibly powerful initiative process (e.g. Prop 13, both Prop 8s) - Prop 13 capped one of the main sources of tax income (property tax) and made it significantly more difficult to raise taxes at both the state and local level by requiring a 2/3 majority. - California is no stranger to issuing debt (and unlike Texas we're not antagonizing the banks that underwite the bonds), and I believe bonds only require a simple majority at the ballot box. Look at Washington state if you want to see absolute fucking lunacy with bonds. - California is not immune to recession - To avoid raising taxes initiatives often promise things for free by carving things out of the general fund - As a strong proponent of public schools: California public schools are an absolute cluster fuck worthy of a few epics. Prop 98 forbids reducing the funding for K-12 schools even as revenue declines. So spending 25% of your budget on K-12 schools doesn't seem bad, but if revenue falls that dollar amount is not allowed to shrink. The two university systems are unfathomably top heavy – to everyone's detriment. Even if you could get 2/3 of all California voters to agree to raise taxes, it's going to be earmarked for something. And that's how you get death by a thousand cuts. Use fees, special tax districts (and all of their associated overhead), etc. It's how you get random taxes to pay for unrelated things. For instance, Schwarzenegger cut the vehicle registration fee (sounds reasonable, right?). To make up for that he doubled tuition at community colleges (note: at that point California public unis/colleges weren't allowed to charge tuition so it was simply called a "fee").
  - daniel-cussen 5y ago
    > very much a gold rush state that's addicted to the boom-bust cycle. More than addicted, which it is, it is, (and I love that about it), it's adapted to the boom-bust cycle. So people just aren't as impressed with eg billionaires there, different attitude, like it could be me who is the billionaire and you who is a minimum-wage earner. And it can flip in one generation, they're not big into "prominent families" in Silicon Valley, like you have to be a multibillionaire to be prominent, I suppose it's more of a country club thing where it comes into play if that. Plus, it's a badge of honor to have arrived with nothing and turn nothing into billions, in Chile no, new money is not the same (though that's changing). But in Silicon Valley, the new money is the big money, old money is big money from one generation ago, never heard the expression there in fact. Like you can't sit out the boom/bust cycle, you gotta be in the boom every boom if you want to stay relevant.

ggm 5y ago

Ah. deficit funding forbidden, is the bit (non US resident) I didn't know. So they have to bank locally sourced "wealth" to spread out when times are harder? then I guess they have to live inside the rules. Where I live, the states accrue a lot of public sector debt, and nobody cares. Qld is carrying $105b of debt, rising to $125b by 2025. This is outside of federal public sector debt, theres a huge royalty income, and state tax raising powers as well as a GST/VAT national settlement, so its pretty well understood income exists to cover the debt.

inferiorhuman 5y ago
Lean's not as odd as it might seem. California is still very much a gold rush state that's addicted to the boom-bust cycle. For newbies I like to recommend Peter Schrag's book Paradise Lost. In it he analyzes California's problems through the lens of Prop 13 and the big cultural shift California saw in the late 70s. In broad strokes there are a bunch of things to weigh: - California's got an incredibly powerful initiative process (e.g. Prop 13, both Prop 8s) - Prop 13 capped one of the main sources of tax income (property tax) and made it significantly more difficult to raise taxes at both the state and local level by requiring a 2/3 majority. - California is no stranger to issuing debt (and unlike Texas we're not antagonizing the banks that underwite the bonds), and I believe bonds only require a simple majority at the ballot box. Look at Washington state if you want to see absolute fucking lunacy with bonds. - California is not immune to recession - To avoid raising taxes initiatives often promise things for free by carving things out of the general fund - As a strong proponent of public schools: California public schools are an absolute cluster fuck worthy of a few epics. Prop 98 forbids reducing the funding for K-12 schools even as revenue declines. So spending 25% of your budget on K-12 schools doesn't seem bad, but if revenue falls that dollar amount is not allowed to shrink. The two university systems are unfathomably top heavy – to everyone's detriment. Even if you could get 2/3 of all California voters to agree to raise taxes, it's going to be earmarked for something. And that's how you get death by a thousand cuts. Use fees, special tax districts (and all of their associated overhead), etc. It's how you get random taxes to pay for unrelated things. For instance, Schwarzenegger cut the vehicle registration fee (sounds reasonable, right?). To make up for that he doubled tuition at community colleges (note: at that point California public unis/colleges weren't allowed to charge tuition so it was simply called a "fee").
- daniel-cussen 5y ago
  > very much a gold rush state that's addicted to the boom-bust cycle. More than addicted, which it is, it is, (and I love that about it), it's adapted to the boom-bust cycle. So people just aren't as impressed with eg billionaires there, different attitude, like it could be me who is the billionaire and you who is a minimum-wage earner. And it can flip in one generation, they're not big into "prominent families" in Silicon Valley, like you have to be a multibillionaire to be prominent, I suppose it's more of a country club thing where it comes into play if that. Plus, it's a badge of honor to have arrived with nothing and turn nothing into billions, in Chile no, new money is not the same (though that's changing). But in Silicon Valley, the new money is the big money, old money is big money from one generation ago, never heard the expression there in fact. Like you can't sit out the boom/bust cycle, you gotta be in the boom every boom if you want to stay relevant.