11 ms·

Will California become America's first failed state?

53 points by sdave 17y ago

http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt i dont live in US, i wonder how a place like california got into such mess.

jacquesm 17y ago
A couple of days ago there was a statement here by someone claiming that California got 1/3 of the worlds venture capital, it looks like that could be spent better than on the 'next hot thing' on the web. Unbelievable, what a scene.
- ryanwaggoner 17y ago
  1. VC do invest in a lot of things beyond "the next hot thing on the web", including hardware, cleantech, enterprise software, etc. 2. VCs have a responsibility to get returns for their investors, not fix the government's fiscal problems. 3. Those "next hot things" have at one time or another included companies like Google, Yahoo, Facebook, and others, which have together contributed billions of dollars and tens of thousands of jobs to the state of CA. Not bad for some stupid web 2.0 fad, huh?
  - jacquesm 17y ago
    As evidenced by the state described in the article... No, it's not bad, but apparently the wealth is not spread in a way that precludes conditions the likes of which should not be seen in third world countries, let alone the first. Of course these problems are not there for the VCs to fix, it's just that California was mentioned rather loudly as 'the place to be'. For start-ups maybe.
    - ryanwaggoner 17y ago
      You've clearly never been to a third-world country or California if you think that our problems are anywhere close to third-world status.
      - jacquesm 17y ago
        Wrong on both counts, so now what ? A nice example from California, a little bit north of LA (where I've lived for three months at the expense of one of my customers) there is an area with lots of really really fancy houses. They must be worth upwards of several million $ a piece. The driveways are absolutely immaculate, the road they empty out on is worse than some of the roads in Northern Canada. I've seen the exact same thing in countries that literally qualify as third world. I refer you to this map: http://en.wikipedia.org/wiki/Third_world_country http://en.wikipedia.org/wiki/Third_world_country In case you don't know what is meant by the term, but Colombia and Panama definitely qualify. By 'modern' standards some parts of Romania and eastern Poland do too, but I've been to plenty of other places that would count, either by that map or because of the local conditions. And I'm not talking package holidays here but stays of at least several months. I'm using these roads as an example because at the time it struck me as indicative of what might be wrong there. If your country is 'the richest in the world' by some measurements then that wealth should be translated to an increased higher standard of living for the poorest, and an increase in infrastructural spending that will benefit everyone, not just the rich. If you can't manage that, in other words if your poor are still not provided health care, proper housing and education and if you have an underclass that basically has very few choices of making parity with those born into richer families (and hey, isn't that what that famous American dream is all about) as well as an enormous criminal problem then maybe we should propose redrawing that wikipedia map along more objective criteria. And quite possibly, we'll find that California has much more in common with third world countries than with the first, no matter how rich the rich, and no matter how much the GDP. Northern Canada is a good comparison because it probably has the lowest GDP per surface unit of any country in the world, but they also have one of the best health care systems, and their work on roads is nothing short of amazing, especially if you take in to account the effect of the climate on the roads there. If everybody in California (including corporations) would be paying taxes relative compared to other 'first world' countries then such things would be taken for granted. Until it is solved through taxation everybody, VCs included (who really are only in the game to turn a ton of money in to even more money) has a responsibility to look after their neighbours.
    - miked 17y ago
      Money in CA is allocated more in ways that benefit politically powerful groups, rather than what is most efficient for the public as a whole. The public sector unions are the very worst. It's incredible how long it takes them to repair a road or build an overpass. They literally worked on the overpass at CA-237 and I-880 for 7 years. Unreal.
  - jhancock 17y ago
    "VCs have a responsibility to get returns for their investors, not fix the government's fiscal problems." I realize this isn't what you were getting at, but its a good place to make the remark. Its every American's responsibility to pay a certain amount of time and effort into ensuring government is run well. If your dance card is too full with making money and no time left over to watch over your government, it catches up with you. I'm not singling out VCs here. It is a general problem for an economy to be structured so most do not have time or inclination to pay attention to governance maintenance. There is a second problem which generally only applies to wealthy and/or well organized groups which is the inclination to "corrupt" governance in their favor. Both these problems have reached critical effect.
patio11 17y ago
i wonder how a place like california got into such mess. They were ground zero for a pair of US bubbles. This caused the state's revenues to skyrocket. Believing revenues would always skyrocket, groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits. It is politically impossible to reduce those benefits once enacted, yet they automatically snowball in costs every year. Its like the miracle of compound interest, except in reverse, and with the full principal being due every year. The bubbles have burst and California no longer sees the potential for staggering revenue growth every year, but will see double-digit increases in benefits outlays for the politically powerful groups. Bonus points: every time California has a short-term lack of funds they negotiate with their beneficiary groups to trade a lack of increase this year (note: not a cut, just less increase than they would have otherwise gotten) in favor of a new entitlement due in N years, whose NPV is astoundingly higher than the savings due to the lack-of-increase.
- callmeed 17y ago
  "groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits ..." By "groups", you mean "politicians, government employees, and unions" right? - California teachers and school employees are the highest paid in the nation. 35% above the national average. - State employees make about 35% more than private-sector employees - An enormous pension problem for government employees. A public-safety worker can retire at age 55 with 90% of his/her salary. The result: $65B in upcoming, unfunded pension liability. My father-in-law is a retired probation officer. He does consulting for his county and pulls a pension check–basically working part-time and pulling 1.5 salaries. - The state spends 70% more (per capita) than the national average on social services, primarily because of it's welfare programs. Funny story: I worked at a CA community college for a few years while still in college. Just special programming projects and IT stuff. When I quit to pursue my first startup, I got a letter letting me know I had $2,000 in a PERS retirement account. As much as I enjoyed cashing it out for our startup, it just shows how reckless CA is with spending and obligations to these groups. Don't think all this is because of a lack of income either. State personal income tax is really high. Part of the reason we left 2 years ago.
ryanwaggoner 17y ago
Is there some particular reason you didn't put the URL in the URL field? For anyone else annoyed: http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt http://www.guardian.co.uk/world/2009/oct/04/california-faili...
- dkokelley 17y ago
  I resubmitted in the correct format: http://news.ycombinator.com/item?id=859776 http://news.ycombinator.com/item?id=859776 Should anybody prefer to use it.
  - cpach 17y ago
    It's better to let the HN admins take care of such matters. They have fixed the original submission now.
- sdave 17y ago
  pardon for the inconvenience caused due to copy-pasting the link.
bbg 17y ago
The Economist in July of this year made an interesting contrast between the fiscal policies of California and Texas. http://www.economist.com/displayStory.cfm?story_id=13990207 http://www.economist.com/displayStory.cfm?story_id=13990207
- ahlatimer 17y ago
  I think one of the biggest strengths for fiscal security the Texas government has to offer is our inability to take on debt. By decree of the Texas state constitution, the budget must be balanced each and every year. That's something that article misses out on. Of course, there are some really stupid things that Texas does in relation to its spending. Namely, budgets are set two years in advance. It might have made sense when Texas was first formed, but it hardly makes sense now.
joe_the_user 17y ago
Hmm, Remember, California has the size and diversity of many medium-sized nations... so generalizations often don't work. The scene at the forum wasn't really connected to the recession or California but US health care and US urban poor in general. I'm surprised how little I notice the recession, much less the "collapse" of California. Of course, I'm in the Bay Area and I think that LA and especially the central valley were harder hit. But that is how the US generally has been economically - strong urban area but with hinter-lands that are poorer than one would imagine.
- TomOfTTB 17y ago
  Actually Los Angeles County's unemployment rate was only .6 percent higher than Santa Clara County (12.6% vs 12%). San Francisco does a little better at 10.1% but it's still above the national average (see here: http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&idim=county:CN060370&q=Los+Angeles+County+Unemployment+Rate#met=unemployment_rate&idim=county:CN060370:PS060900:CN060850 http://www.google.com/publicdata?ds=usunemployment&met=u...) In reality California's unemployment rate gets dragged up by the smaller counties in the extreme north and south. For example, Imperial County (which borders Mexico) has a 28.7% unemployment rate while Shasta County (about 40 miles or so south of Oregon) has a 15.2%
cunninglinguist 17y ago
The problem that this article doesn't point out and nobody wants to talk about: California is burdened with the largest reservoir of undocumented/illegal workers in the country. Until these people are brought into the system, until we see some true immigration reform (either by naturalizing every worker or, conversely, by getting serious about border policy) the state is in an untenable position. Things will get worse before they get better. California and US immigration policy are a mammoth case of "walk on left side, okay; walk on right side, okay; walk in middle - squish! just like grape" which you Karate Kid fans might remember...
- kingkongrevenge 17y ago
  What about deporting all the illegals? That would be far the most fiscally effective solution.
  - foulmouthboy 17y ago
    Because the cost of doing that is free?
    - kingkongrevenge 17y ago
      It's a cent or two on the dollar to task the existing police and federal apparatus vs pay out the social benefits the typical illegal alien consumes.
      - potatolicious 17y ago
        [citation needed]
      - jhancock 17y ago
        Our gov isn't too great at estimating costs. The ongoing Iraq war was initially estimated at around $60 Billion or so. Current estimates have it at $3 trillion.
  - cunninglinguist 17y ago
chris123 17y ago
It's not just California, it's the whole country that's in a mess. How did it get there? In a word, greed. In a few more words, people failing to understand, tolerate, care for, and stand up for each other, especially people different from them. "Me, me, me" does not work. "We" works.
- chrischen 17y ago
  Well America is a very individualistic society. Unless we have a massive cultural overhaul, most people will keep thinking in terms of "me."
  - trafficlight 17y ago
    Of course we will. Everyone is afraid of being labeled a socialist. Or a communist or a facist since they are all used interchangably now.
  - chrischen 17y ago
    The very concept of the "American Dream" is individualistic. Individualism is ingrained in our culture. We are all taught to think for ourselves, and thinking for ourselves usually winds up being thinking about ourselves for most people.
- miked 17y ago
  In a word, greed. In a few more words, people failing to understand, tolerate, care for, and stand up for each other, especially people different from them. Greed wasn't just invented. Ditto for the rest. A scientific explanation requires that the dependent variable Y be a function of the independent variable X, if X is claimed to be causative. Another thing I dislike about statements like this is that the speaker always comes out smelling like a rose. That may not have been your intention, but there it is.
- jacoblyles 17y ago
  That's an incredibly simplistic worldview that is expressed here.
- 17y ago
ricaurte 17y ago
If California wasn't subsidizing the South, then they wouldn't have the fiscal problems they currently have. In 2005 alone, Californians paid $47 billion more to the Federal Government than they received in spending. Considering California's annual budget is $100 billion, Californians could lower their taxes by almost [Edit] 40% and avoid their budget problems if they stopped subsidizing the red states. - http://www.taxfoundation.org/research/show/22685.html http://www.taxfoundation.org/research/show/22685.html - http://www.bloomberg.com/apps/news?pid=20601087&sid=a5_Sl24RQ01U http://www.bloomberg.com/apps/news?pid=20601087&sid=a5_S... [Edit] A link to CA's budget: http://www.ebudget.ca.gov/pdf/Enacted/BudgetSummary/SummaryCharts.pdf http://www.ebudget.ca.gov/pdf/Enacted/BudgetSummary/SummaryC...
- jhancock 17y ago
  First off, the South wasn't always "red" states and you would do well to not permanently brand an entire state as such. Georgia's current governor is the first Republican to hold the spot in 130 years!! Now you point out this $47B overcharge. And what happens to the great California economy once the U.S. is developing economic cancers all over the rest of the country due to lack of funds? Who's left to buy the iPods? Like it or not, Cali is part of the U.S. All for one. Seriously, if your looking for root problems, not fanning the flames of bubble economies is a good start. I've never heard of a bubble that ended well. Paying attention to state governance to not allow the spending to get this out of hand would help as well.
  - natrius 17y ago
    California (and New York, Texas, Illinois, Florida, etc) would be fine without subsidizing other states. In fact, they would probably be better off. When places become difficult to live in, people tend to move to better places. We spend money trying to make unproductive places viable places to live when that money would be used more efficiently in states with better infrastructure, both human and physical. The more people who move away from subsidized places, the more money they will make on average, and the more iPods will be sold. Humans agglomerate because it makes us more productive. By subsidizing dying towns in the middle of nowhere (and Michigan), we're paying people to be less productive. I don't care where people choose to live, but I shouldn't have to pay for their choices. Even if it were in the self-interest of productive places to subsidize non-productive places, our current method of doing so isn't the best approach. There are greater gains in productivity to be had for less money in Mexico, which would create wealthier neighbors for us to sell things to. This is simply another case of the tendency of majorities (which in the US may only be electoral, not real majorities) in democracies to take what they can from the minorities.
xcombinator 17y ago
I live in Spain, like California: 1) We are frontier with way less developed countries. Africa-Europe frontier. 2)We have good climate all over the year. 3)We got in debt for buying houses. Tens of years of loan debt were given to the government in the form of taxes. E.g, you got 35 year loan and paid right now 16% taxes. 4) The government got used to spending the money, thinking ill will last forever. 5) People stopped paying loans. They had the same money that before, taxes grew because debt grew. Today we have millions of unsold houses. 6) Government spends way more that come in. They don't want to stop spending so they, as an state, go in debt too. 7) Government is in trouble. We are near 20% unemployment rate, gov is constantly trying to lower the official rate making statistical tricks, like not considering unemployed those that don't work but go to a employment class. 8)To be continued...
- yxhuvud 17y ago
  Given that Spain don't really have the ability to print money any more due to being a member of the Euro, what do you think will happen?
  - borism 17y ago
    Spain's public debt is not so bad compared to it's other neighbors - France, Portugal and Morocco all have almost twice as much. Spain's problem is mainly with the private debt... Anyway, as you mentioned Eurozone, PIGS countries (Portugal-Ireland-Greece-Spain) are obviously a major burden with their problems. But what will happen will depend on what actions will be taken. Personally I'm quite pessimistic about Europe. Here's a detailed analysis of the situation from Roubini Global Economics Monitor http://www.rgemonitor.com/euro-monitor/255424/do_brics_and_germans_eat_pigs http://www.rgemonitor.com/euro-monitor/255424/do_brics_and_g...
    - leonroy 17y ago
      Thanks, that was a great article, well worth a read (especially for those inside Europe).
- adnam 17y ago
kevbin 17y ago
The article overstates CA's response to its problems. The slashing and "vast numbers" aren't enough to right the ship and are pretty minimal compared to private industry, or even other state governments. The response of state employees and their unions to furloughs (walkouts, infighting, demands for still higher taxes) demonstrate seriousness hasn't set in. Booms and busts define the state, long before the housing or internet bubbles, there was the gold rush, the oil boom, the space race, the PC revolution, you name it. There's always another boom to cover the last bust—this time, too. That boom and bust mentality extends to radical political solutions that become problematic in themselves, like the initiative process, super-majority rules, and prop. 13. The state pretty much is the guy described in the Lisp thread: http://news.ycombinator.com/item?id=859669 http://news.ycombinator.com/item?id=859669 Maybe it's in our interest to be the world's hypomanic dreamscape? If so, the feds and everyone else can bail us out, like they do the rest of the nation's problem children (banks, farmers, automakers, savings and loans, tire makers, steel producers, railroads…), leave us to our booms and busts, enjoy the gravy when times are good and let us live in their basement strumming our guitar when we screw the pooch. But, Uncle Sam's not much better off. He's just running on a slower pace. Long enough in his basement and he'll start to see how alike we really are—right around the time he gets foreclosed on. Our federal system has a seriously great architectural basis, but it's an 18th and 19th century design burdened with two centuries of gnarly patches and tweaks hacked together in two-year bursts by groups of 535 glad-handers and administered by a nameless, faceless, unrepresentative bureaucracy. As the nation scaled-up, the exquisite balance of republic and democracy struck by the founders turned into an opaque, incomprehensible, unfair, inefficient, ineffective cancer. Some major refactoring needs to be done. CA, having the same issues, will serve as a proving-ground for reforming the whole country. If it doesn't work out, well there's always another boom after the bust.
korch 17y ago
As a transplant to California for 2 years now, grimly apocalyptic articles like this make me question staying. Thanks kevbin for framing California's Boom & Bust problem as actually defining the state through history. Perhaps being able to structurally and culturally handle endless Boom & Bust cycles make California a stronger state! You've got to love counter-intuition...
Scott_MacGregor 17y ago
California will ultimately pull out of this situation. The question is how long will it take, and how much pain will people have to endure before things get better. As Entrepreneurs we hold part of the key to better times through the development of our businesses. The other side of the equation is for the most part out of our hands. Things such as the state passing a worldwide gross receipts tax and other similar actions that in the past have served to cool businesses interest in the state must bear some of the blame for this current problem. I sincerely hope that this problem is short lived, and that Governor Schwarzenegger and the California legislature solve this problem ASAP for the benefit of all of us.
zoba 17y ago
Do the British use the word "hiring" instead of renting? "The people are poor, many of them out of work, often hiring a bunch of DVDs as a cheap way of passing the time."
- dgbeale 17y ago
  Yes

53 points by sdave 17y ago

http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt i dont live in US, i wonder how a place like california got into such mess.

jacquesm 17y ago

A couple of days ago there was a statement here by someone claiming that California got 1/3 of the worlds venture capital, it looks like that could be spent better than on the 'next hot thing' on the web. Unbelievable, what a scene.

ryanwaggoner 17y ago
1. VC do invest in a lot of things beyond "the next hot thing on the web", including hardware, cleantech, enterprise software, etc. 2. VCs have a responsibility to get returns for their investors, not fix the government's fiscal problems. 3. Those "next hot things" have at one time or another included companies like Google, Yahoo, Facebook, and others, which have together contributed billions of dollars and tens of thousands of jobs to the state of CA. Not bad for some stupid web 2.0 fad, huh?
- jacquesm 17y ago
  As evidenced by the state described in the article... No, it's not bad, but apparently the wealth is not spread in a way that precludes conditions the likes of which should not be seen in third world countries, let alone the first. Of course these problems are not there for the VCs to fix, it's just that California was mentioned rather loudly as 'the place to be'. For start-ups maybe.
  - ryanwaggoner 17y ago
    You've clearly never been to a third-world country or California if you think that our problems are anywhere close to third-world status.
    - jacquesm 17y ago
      Wrong on both counts, so now what ? A nice example from California, a little bit north of LA (where I've lived for three months at the expense of one of my customers) there is an area with lots of really really fancy houses. They must be worth upwards of several million $ a piece. The driveways are absolutely immaculate, the road they empty out on is worse than some of the roads in Northern Canada. I've seen the exact same thing in countries that literally qualify as third world. I refer you to this map: http://en.wikipedia.org/wiki/Third_world_country http://en.wikipedia.org/wiki/Third_world_country In case you don't know what is meant by the term, but Colombia and Panama definitely qualify. By 'modern' standards some parts of Romania and eastern Poland do too, but I've been to plenty of other places that would count, either by that map or because of the local conditions. And I'm not talking package holidays here but stays of at least several months. I'm using these roads as an example because at the time it struck me as indicative of what might be wrong there. If your country is 'the richest in the world' by some measurements then that wealth should be translated to an increased higher standard of living for the poorest, and an increase in infrastructural spending that will benefit everyone, not just the rich. If you can't manage that, in other words if your poor are still not provided health care, proper housing and education and if you have an underclass that basically has very few choices of making parity with those born into richer families (and hey, isn't that what that famous American dream is all about) as well as an enormous criminal problem then maybe we should propose redrawing that wikipedia map along more objective criteria. And quite possibly, we'll find that California has much more in common with third world countries than with the first, no matter how rich the rich, and no matter how much the GDP. Northern Canada is a good comparison because it probably has the lowest GDP per surface unit of any country in the world, but they also have one of the best health care systems, and their work on roads is nothing short of amazing, especially if you take in to account the effect of the climate on the roads there. If everybody in California (including corporations) would be paying taxes relative compared to other 'first world' countries then such things would be taken for granted. Until it is solved through taxation everybody, VCs included (who really are only in the game to turn a ton of money in to even more money) has a responsibility to look after their neighbours.
  - miked 17y ago
    Money in CA is allocated more in ways that benefit politically powerful groups, rather than what is most efficient for the public as a whole. The public sector unions are the very worst. It's incredible how long it takes them to repair a road or build an overpass. They literally worked on the overpass at CA-237 and I-880 for 7 years. Unreal.
- jhancock 17y ago
  "VCs have a responsibility to get returns for their investors, not fix the government's fiscal problems." I realize this isn't what you were getting at, but its a good place to make the remark. Its every American's responsibility to pay a certain amount of time and effort into ensuring government is run well. If your dance card is too full with making money and no time left over to watch over your government, it catches up with you. I'm not singling out VCs here. It is a general problem for an economy to be structured so most do not have time or inclination to pay attention to governance maintenance. There is a second problem which generally only applies to wealthy and/or well organized groups which is the inclination to "corrupt" governance in their favor. Both these problems have reached critical effect.

patio11 17y ago

i wonder how a place like california got into such mess. They were ground zero for a pair of US bubbles. This caused the state's revenues to skyrocket. Believing revenues would always skyrocket, groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits. It is politically impossible to reduce those benefits once enacted, yet they automatically snowball in costs every year. Its like the miracle of compound interest, except in reverse, and with the full principal being due every year. The bubbles have burst and California no longer sees the potential for staggering revenue growth every year, but will see double-digit increases in benefits outlays for the politically powerful groups. Bonus points: every time California has a short-term lack of funds they negotiate with their beneficiary groups to trade a lack of increase this year (note: not a cut, just less increase than they would have otherwise gotten) in favor of a new entitlement due in N years, whose NPV is astoundingly higher than the savings due to the lack-of-increase.

callmeed 17y ago
"groups which have essentially captured the state and municipality budgeting processes voted themselves large increases in benefits ..." By "groups", you mean "politicians, government employees, and unions" right? - California teachers and school employees are the highest paid in the nation. 35% above the national average. - State employees make about 35% more than private-sector employees - An enormous pension problem for government employees. A public-safety worker can retire at age 55 with 90% of his/her salary. The result: $65B in upcoming, unfunded pension liability. My father-in-law is a retired probation officer. He does consulting for his county and pulls a pension check–basically working part-time and pulling 1.5 salaries. - The state spends 70% more (per capita) than the national average on social services, primarily because of it's welfare programs. Funny story: I worked at a CA community college for a few years while still in college. Just special programming projects and IT stuff. When I quit to pursue my first startup, I got a letter letting me know I had $2,000 in a PERS retirement account. As much as I enjoyed cashing it out for our startup, it just shows how reckless CA is with spending and obligations to these groups. Don't think all this is because of a lack of income either. State personal income tax is really high. Part of the reason we left 2 years ago.

ryanwaggoner 17y ago

Is there some particular reason you didn't put the URL in the URL field? For anyone else annoyed: http://www.guardian.co.uk/world/2009/oct/04/california-failing-state-debt http://www.guardian.co.uk/world/2009/oct/04/california-faili...

dkokelley 17y ago
I resubmitted in the correct format: http://news.ycombinator.com/item?id=859776 http://news.ycombinator.com/item?id=859776 Should anybody prefer to use it.
- cpach 17y ago
  It's better to let the HN admins take care of such matters. They have fixed the original submission now.
sdave 17y ago
pardon for the inconvenience caused due to copy-pasting the link.

bbg 17y ago

The Economist in July of this year made an interesting contrast between the fiscal policies of California and Texas. http://www.economist.com/displayStory.cfm?story_id=13990207 http://www.economist.com/displayStory.cfm?story_id=13990207

ahlatimer 17y ago
I think one of the biggest strengths for fiscal security the Texas government has to offer is our inability to take on debt. By decree of the Texas state constitution, the budget must be balanced each and every year. That's something that article misses out on. Of course, there are some really stupid things that Texas does in relation to its spending. Namely, budgets are set two years in advance. It might have made sense when Texas was first formed, but it hardly makes sense now.

joe_the_user 17y ago

Hmm, Remember, California has the size and diversity of many medium-sized nations... so generalizations often don't work. The scene at the forum wasn't really connected to the recession or California but US health care and US urban poor in general. I'm surprised how little I notice the recession, much less the "collapse" of California. Of course, I'm in the Bay Area and I think that LA and especially the central valley were harder hit. But that is how the US generally has been economically - strong urban area but with hinter-lands that are poorer than one would imagine.

TomOfTTB 17y ago
Actually Los Angeles County's unemployment rate was only .6 percent higher than Santa Clara County (12.6% vs 12%). San Francisco does a little better at 10.1% but it's still above the national average (see here: http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&idim=county:CN060370&q=Los+Angeles+County+Unemployment+Rate#met=unemployment_rate&idim=county:CN060370:PS060900:CN060850 http://www.google.com/publicdata?ds=usunemployment&met=u...) In reality California's unemployment rate gets dragged up by the smaller counties in the extreme north and south. For example, Imperial County (which borders Mexico) has a 28.7% unemployment rate while Shasta County (about 40 miles or so south of Oregon) has a 15.2%

cunninglinguist 17y ago

The problem that this article doesn't point out and nobody wants to talk about: California is burdened with the largest reservoir of undocumented/illegal workers in the country. Until these people are brought into the system, until we see some true immigration reform (either by naturalizing every worker or, conversely, by getting serious about border policy) the state is in an untenable position. Things will get worse before they get better. California and US immigration policy are a mammoth case of "walk on left side, okay; walk on right side, okay; walk in middle - squish! just like grape" which you Karate Kid fans might remember...

kingkongrevenge 17y ago
What about deporting all the illegals? That would be far the most fiscally effective solution.
- foulmouthboy 17y ago
  Because the cost of doing that is free?
  - kingkongrevenge 17y ago
    It's a cent or two on the dollar to task the existing police and federal apparatus vs pay out the social benefits the typical illegal alien consumes.
    - potatolicious 17y ago
      [citation needed]
    - jhancock 17y ago
      Our gov isn't too great at estimating costs. The ongoing Iraq war was initially estimated at around $60 Billion or so. Current estimates have it at $3 trillion.
- cunninglinguist 17y ago

chris123 17y ago

It's not just California, it's the whole country that's in a mess. How did it get there? In a word, greed. In a few more words, people failing to understand, tolerate, care for, and stand up for each other, especially people different from them. "Me, me, me" does not work. "We" works.

chrischen 17y ago
Well America is a very individualistic society. Unless we have a massive cultural overhaul, most people will keep thinking in terms of "me."
- trafficlight 17y ago
  Of course we will. Everyone is afraid of being labeled a socialist. Or a communist or a facist since they are all used interchangably now.
- chrischen 17y ago
  The very concept of the "American Dream" is individualistic. Individualism is ingrained in our culture. We are all taught to think for ourselves, and thinking for ourselves usually winds up being thinking about ourselves for most people.
miked 17y ago
In a word, greed. In a few more words, people failing to understand, tolerate, care for, and stand up for each other, especially people different from them. Greed wasn't just invented. Ditto for the rest. A scientific explanation requires that the dependent variable Y be a function of the independent variable X, if X is claimed to be causative. Another thing I dislike about statements like this is that the speaker always comes out smelling like a rose. That may not have been your intention, but there it is.
jacoblyles 17y ago
That's an incredibly simplistic worldview that is expressed here.
17y ago

ricaurte 17y ago

If California wasn't subsidizing the South, then they wouldn't have the fiscal problems they currently have. In 2005 alone, Californians paid $47 billion more to the Federal Government than they received in spending. Considering California's annual budget is $100 billion, Californians could lower their taxes by almost [Edit] 40% and avoid their budget problems if they stopped subsidizing the red states. - http://www.taxfoundation.org/research/show/22685.html http://www.taxfoundation.org/research/show/22685.html - http://www.bloomberg.com/apps/news?pid=20601087&sid=a5_Sl24RQ01U http://www.bloomberg.com/apps/news?pid=20601087&sid=a5_S... [Edit] A link to CA's budget: http://www.ebudget.ca.gov/pdf/Enacted/BudgetSummary/SummaryCharts.pdf http://www.ebudget.ca.gov/pdf/Enacted/BudgetSummary/SummaryC...

jhancock 17y ago
First off, the South wasn't always "red" states and you would do well to not permanently brand an entire state as such. Georgia's current governor is the first Republican to hold the spot in 130 years!! Now you point out this $47B overcharge. And what happens to the great California economy once the U.S. is developing economic cancers all over the rest of the country due to lack of funds? Who's left to buy the iPods? Like it or not, Cali is part of the U.S. All for one. Seriously, if your looking for root problems, not fanning the flames of bubble economies is a good start. I've never heard of a bubble that ended well. Paying attention to state governance to not allow the spending to get this out of hand would help as well.
- natrius 17y ago
  California (and New York, Texas, Illinois, Florida, etc) would be fine without subsidizing other states. In fact, they would probably be better off. When places become difficult to live in, people tend to move to better places. We spend money trying to make unproductive places viable places to live when that money would be used more efficiently in states with better infrastructure, both human and physical. The more people who move away from subsidized places, the more money they will make on average, and the more iPods will be sold. Humans agglomerate because it makes us more productive. By subsidizing dying towns in the middle of nowhere (and Michigan), we're paying people to be less productive. I don't care where people choose to live, but I shouldn't have to pay for their choices. Even if it were in the self-interest of productive places to subsidize non-productive places, our current method of doing so isn't the best approach. There are greater gains in productivity to be had for less money in Mexico, which would create wealthier neighbors for us to sell things to. This is simply another case of the tendency of majorities (which in the US may only be electoral, not real majorities) in democracies to take what they can from the minorities.

xcombinator 17y ago

I live in Spain, like California: 1) We are frontier with way less developed countries. Africa-Europe frontier. 2)We have good climate all over the year. 3)We got in debt for buying houses. Tens of years of loan debt were given to the government in the form of taxes. E.g, you got 35 year loan and paid right now 16% taxes. 4) The government got used to spending the money, thinking ill will last forever. 5) People stopped paying loans. They had the same money that before, taxes grew because debt grew. Today we have millions of unsold houses. 6) Government spends way more that come in. They don't want to stop spending so they, as an state, go in debt too. 7) Government is in trouble. We are near 20% unemployment rate, gov is constantly trying to lower the official rate making statistical tricks, like not considering unemployed those that don't work but go to a employment class. 8)To be continued...

yxhuvud 17y ago
Given that Spain don't really have the ability to print money any more due to being a member of the Euro, what do you think will happen?
- borism 17y ago
  Spain's public debt is not so bad compared to it's other neighbors - France, Portugal and Morocco all have almost twice as much. Spain's problem is mainly with the private debt... Anyway, as you mentioned Eurozone, PIGS countries (Portugal-Ireland-Greece-Spain) are obviously a major burden with their problems. But what will happen will depend on what actions will be taken. Personally I'm quite pessimistic about Europe. Here's a detailed analysis of the situation from Roubini Global Economics Monitor http://www.rgemonitor.com/euro-monitor/255424/do_brics_and_germans_eat_pigs http://www.rgemonitor.com/euro-monitor/255424/do_brics_and_g...
  - leonroy 17y ago
    Thanks, that was a great article, well worth a read (especially for those inside Europe).
adnam 17y ago

kevbin 17y ago

The article overstates CA's response to its problems. The slashing and "vast numbers" aren't enough to right the ship and are pretty minimal compared to private industry, or even other state governments. The response of state employees and their unions to furloughs (walkouts, infighting, demands for still higher taxes) demonstrate seriousness hasn't set in. Booms and busts define the state, long before the housing or internet bubbles, there was the gold rush, the oil boom, the space race, the PC revolution, you name it. There's always another boom to cover the last bust—this time, too. That boom and bust mentality extends to radical political solutions that become problematic in themselves, like the initiative process, super-majority rules, and prop. 13. The state pretty much is the guy described in the Lisp thread: http://news.ycombinator.com/item?id=859669 http://news.ycombinator.com/item?id=859669 Maybe it's in our interest to be the world's hypomanic dreamscape? If so, the feds and everyone else can bail us out, like they do the rest of the nation's problem children (banks, farmers, automakers, savings and loans, tire makers, steel producers, railroads…), leave us to our booms and busts, enjoy the gravy when times are good and let us live in their basement strumming our guitar when we screw the pooch. But, Uncle Sam's not much better off. He's just running on a slower pace. Long enough in his basement and he'll start to see how alike we really are—right around the time he gets foreclosed on. Our federal system has a seriously great architectural basis, but it's an 18th and 19th century design burdened with two centuries of gnarly patches and tweaks hacked together in two-year bursts by groups of 535 glad-handers and administered by a nameless, faceless, unrepresentative bureaucracy. As the nation scaled-up, the exquisite balance of republic and democracy struck by the founders turned into an opaque, incomprehensible, unfair, inefficient, ineffective cancer. Some major refactoring needs to be done. CA, having the same issues, will serve as a proving-ground for reforming the whole country. If it doesn't work out, well there's always another boom after the bust.

korch 17y ago

As a transplant to California for 2 years now, grimly apocalyptic articles like this make me question staying. Thanks kevbin for framing California's Boom & Bust problem as actually defining the state through history. Perhaps being able to structurally and culturally handle endless Boom & Bust cycles make California a stronger state! You've got to love counter-intuition...

Scott_MacGregor 17y ago

California will ultimately pull out of this situation. The question is how long will it take, and how much pain will people have to endure before things get better. As Entrepreneurs we hold part of the key to better times through the development of our businesses. The other side of the equation is for the most part out of our hands. Things such as the state passing a worldwide gross receipts tax and other similar actions that in the past have served to cool businesses interest in the state must bear some of the blame for this current problem. I sincerely hope that this problem is short lived, and that Governor Schwarzenegger and the California legislature solve this problem ASAP for the benefit of all of us.

zoba 17y ago

Do the British use the word "hiring" instead of renting? "The people are poor, many of them out of work, often hiring a bunch of DVDs as a cheap way of passing the time."

dgbeale 17y ago
Yes