What's Wrong with California

What's wrong with California? I've collected a few articles that highlight the reasons why California is in such serious trouble. A couple of friends have already moved away, I'm thinking of moving myself. If you don't understand what is going on with California, the articles below will reveal the hellhole I call home.

City Journal says,

When I recently appeared on Glenn Beck’s TV show to discuss California’s dreadful fiscal situation, I mentioned that in Orange County, where I had been a columnist for the Orange County Register, the average pay and benefits package for firefighters was $175,000 per year. After the show, I heard from viewers who couldn’t believe the figure, but it’s true. Firefighters, like all public-safety officials in California, also receive a gold-plated retirement plan: a defined-benefit annual pension that offers 90 percent or more of the worker’s final year’s pay, guaranteed for the rest of his life (and the life of his spouse).

Government employees use various scams to boost their already generous benefits, which include fully paid health care and cost-of-living adjustments. The Sacramento Bee coined the term “chief’s disease,” for example, to refer to the 82 percent (in 2002) of chief’s-level employees at the California Highway Patrol who discovered a disabling injury about one year before retiring. That provides an extra year off work, with pay, and shields 50 percent of their final retirement pay from taxes. Most of these disabilities stem from back pain, knee pain, irritable bowel syndrome, and the like—not from taking bullets from bad guys. The disability numbers soared after CHP disbanded its fraud unit.

From the Sac Bee

Just days before Gov. Arnold Schwarzenegger and legislators finalized a water package, including an $11.1 billion bond issue, state Treasurer Bill Lockyer warned them not to do it.

California is already deeply in debt, Lockyer warned, has huge budget deficits and can't afford another big bond issue.

"The days of blithely heaping more and more debt burden on the general fund are over – at least they should be," Lockyer said.

The earmark-laden bond issue, the package's single most controversial element, raises an interesting question: Just how deeply in debt are our state and local governments?

The answer: No one knows for certain, since debt is scattered through myriad agencies in many forms, but well over a half-trillion dollars is a fair estimate.

Lockyer's warning pertained to the state's "general obligation debt," which currently stands at $59 billion, and there are an additional $50-plus billion in general obligation bonds that have not yet been sold. The biggest chunks of debt, however, are the unfunded obligations for pensions and health care of retired public employees.

The latest annual pension report from the state controller covers 2006, when the unfunded liability was $64 billion. But since then, state and local pension funds have lost at least $150 billion on investments, so a reasonable estimate of today's unfunded liability is $200-plus billion. A state commission, meanwhile, says the state-local liability for retiree health care is about $100 billion.

No one keeps complete data on local government general obligation debt, but it appears to be roughly the same as the state's, perhaps $50 billion, plus several billion dollars in debt incurred by local redevelopment agencies.

There are tens of billions in specialized state debt, such as veteran home loan bonds, "securitization" of tobacco lawsuit proceeds, and budget deficit bonds.

The interest that must be paid on all that state and local debt is probably an additional $100 billion, so we're already talking about well over $500 billion.

Forbes weighs in,

Right now California's economy is moribund, and the prospects for a quick turnaround are not good. Unable to pay its bills, the state is issuing IOUs; its once strong credit rating has collapsed. The state that once boasted the seventh-largest gross domestic product in the world is looking less like a celebrated global innovator and more like a fiscal basket case along the lines of Argentina or Latvia.

It took some amazing incompetence to toss this best-endowed of places down into the dustbin of history. Yet conventional wisdom views the crisis largely as a legacy of Proposition 13, which in effect capped only taxes.

This lets too many malefactors off the hook. I covered the Proposition 13 campaign for the Washington Post and examined its aftermath up close. It passed because California was running huge surpluses at the time, even as soaring property taxes were driving people from their homes.

Admittedly it was a crude instrument, but by limiting those property taxes Proposition 13 managed to save people's houses. To the surprise of many prognosticators, the state government did not go out of business. It has continued to expand faster than either its income or population. Between 2003 and 2007, spending grew 31%, compared with a 5% population increase. Today the overall tax burden as percent of state income, according to the Tax Foundation, has risen to the sixth-highest in the nation.

The media and political pundits refuse to see this gap between the state's budget and its ability to pay as an essential issue. It is. (This is not to say structural reform is not needed. I would support, for example, reforming some of the unintended ill-effects of Proposition 13 that weakened local government and left control of the budget to Sacramento.)

But the fundamental problem remains. California's economy--once wondrously diverse with aerospace, high-tech, agriculture and international trade--has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California's jobs engine has sputtered, and it may be heading toward 15% unemployment.

So if we are to assign blame, let's not start with the poor, old anti-tax activist Howard Jarvis (who helped pass Proposition 13 and passed away over 20 years ago), but with the bigger culprits behind California's fall. Here are five contenders:

continue reading

National Affairs writes,

It would be difficult to overstate the magnitude of California's troubles. In economic terms, the state is simply broke: issuing IOUs as payments for goods and services, begging the federal government to back state debt (a request the Obama administration denied), and watching its credit rating plummet. To address a $42 billion shortfall in February of this year, the legislature enacted a package that included the largest state tax increases in American history, leaving California with the highest sales and personal income-tax rates in the country (though Hawaii would supplant its lead in the latter category in May). When another $26 billion shortfall emerged by summer, lawmakers — chastened by the 2-1 rejection of further tax hikes in a May 19 special election — agreed on another package that featured more than $16 billion in spending reductions, including deep cuts to education, health, and social services.

That's not even the worst of it. For all of the high drama that has accompanied 2009's fiscal travails (a stunning populist backlash against high taxes, widespread public-employee protests over spending cuts), California's lawmakers let the crisis go to waste — failing to use the moment to improve the state's financial outlook. As the San Diego Union-Tribune's John Marelius noted:

[California projects] a deficit of between $7 billion and $8 billion for the next budget cycle. Plus, federal stimulus money, $5 billion of which was used to backfill education cuts this year, may not be available. And about the time the next governor takes office, $16 billion in temporary tax increases that were included in [the] February budget deal will expire.

As if that weren't apocalyptic enough, California's short-term ­financial difficulties pale in comparison to its long-term obligations. In the most recent fiscal year, the California Public Employees' Retirement System and the California State Teachers' Retirement System, the state's two largest pension plans, lost a combined total of nearly $100 ­billion — about a quarter of their value — in the market downturn. If legislators thought tackling a $60 billion deficit was trying, they are sure to love the challenge of making good on California's fixed pension obligations — which Governor Arnold Schwarzenegger has estimated are $300 billion in the red.

And fiscal troubles are just the tip of the iceberg. California's percentage of adults without at least a high-school education is the second-highest in the nation (and the fact that 72% of those without diplomas are immigrants only fuels the state's growing problem of social stratification). The Commonwealth Fund has ranked the quality of California's health care lowest of the 50 states. The state has the highest rate of criminal recidivism in the country. It has six of the ten worst cities in the country in air pollution. Los Angeles and San Francisco have some of the most congested roads in the nation, which costs the state's employers billions in lost productivity each year. The state is seriously discussing mandatory water rationing, and has in recent years experienced severe disruptions of its electricity supply. Unemployment is over 11%, and a recent survey of corporate CEOs ranked California the worst state in the country in which to do business. It is losing native-born ­citizens faster than any other state.

Finally, the New York Times offers another clue as to why California is imploding,

Still, what California does often takes on outsized significance because the state’s welfare rolls are outsized. In July, while looking for budget cuts, Mr. Schwarzenegger complained that California had 12 percent of the nation’s population but 30 percent of the people on welfare.

As elsewhere, California’s welfare rolls plummeted after the 1996 national overhaul of welfare, from 921,000 families in 1995 to 466,000 families in 2008, but they did not fall as much as in most states. In the recession, rolls have climbed and are projected to reach 557,000 families in 2010, or about 1.3 million individuals.

Parents with special hardships or the youngest babies have always been exempt from work requirements in California, but now two large groups making up one-third or more of all applicants can also opt out: single parents with a child age 1 to 2, or those with two children under 6.

Ms. Zendejas, 20, is the mother of two boys under 6. She has worked part time as a supermarket cashier, but under the old work-to-welfare rules she was supposed to spend an additional 15 hours in vocational training or searching for a more stable job, an effort that she found too hard to juggle, resulting in a financial penalty.

Now she needs to do none of that to get her check, and the penalty of more than $120 a month is ending, too. “It’s a relief,” she said.

The shit is hitting the fan. It won't be long now until the final confrontation between the various leeches who are sucking Californians dry and the taxpayers who have clearly reached their limits. After a record tax increase and already with the nation's highest sales taxes and second highest income taxes, the budget deficit will again be in the tens of billions. Stay tuned.

It's the Details Stupid! Wisdom of a Second Stimulus

It's the details that are important! Government spending can only be good NET DEFICIT if the spending produces long term benefits that will outweigh the costs. In other words, it has to be a good value or else the spending will be a hindrance.

It's like someone at age 18 with a host of choices. Going into debt $80,000 or more can be worthwhile if they are able to get something, like an education, that allows them to more than make up for what they've spent. But if they blow $80,000 on girls and drugs, there'll be a temporary lift, but after the money is spent, their future will be even more bleak being $80,000 in debt.

Obama's problem is that he doesn't seem interested in the details. He let Congress waste the first stimulus instead of crafting his own stimulus plan. That's why there is no support for a second stimulus. The 18 year old has shown himself to be irresponsible by blowing the first installment of his loan. Why bother loaning him more money? There are consequences to waste and ineffective legislation!

New Scandal Over Global Warming Data

Uh oh, leaked e-mails from a prominent global warming research group, the Climatic Research Unit of the University of East Anglia in eastern England, reveal that data might have been falsified, cherry-picked, or made up. Other documents and e-mails reveal that the climate model the CRU uses to predict and make their case for future global warming is so riddled with errors and bad code that it is virtually worthless. The CRU's data and model were major contributors in the UN's Intergovernmental Panel on Climate Change's 2007 report. The UN's report is what the United States EPA relies on most heavily to argue that carbon dioxide emissions endanger public health and thus need to be regulated. It all looks like a house of cards that is about to fall. Here is the link to the CBS News article quoted below.

A few days after leaked e-mail messages appeared on the Internet, the U.S. Congress may probe whether prominent scientists who are advocates of global warming theories misrepresented the truth about climate change.

Sen. James Inhofe, an Oklahoma Republican, said on Monday the leaked correspondence suggested researchers "cooked the science to make this thing look as if the science was settled, when all the time of course we knew it was not," according to a transcript of a radio interview posted on his Web site. Aides for Rep. Darrell Issa, a California Republican, are also looking into the disclosure.

The leaked documents (see our previous coverage) come from the Climatic Research Unit of the University of East Anglia in eastern England. In global warming circles, the CRU wields outsize influence: it claims the world's largest temperature data set, and its work and mathematical models were incorporated into the United Nations Intergovernmental Panel on Climate Change's 2007 report. That report, in turn, is what the Environmental Protection Agency acknowledged it "relies on most heavily" when concluding that carbon dioxide emissions endanger public health and should be regulated.

Last week's leaked e-mails range from innocuous to embarrassing and, critics believe, scandalous. They show that some of the field's most prominent scientists were so wedded to theories of man-made global warming that they ridiculed dissenters who asked for copies of their data ("have to respond to more crap criticisms from the idiots"), cheered the deaths of skeptical journalists, and plotted how to keep researchers who reached different conclusions from publishing in peer-reviewed journals.

One e-mail message, apparently from CRU director Phil Jones, references the U.K.'s Freedom of Information Act when asking another researcher to delete correspondence that might be disclosed in response to public records law: "Can you delete any emails you may have had with Keith re AR4? Keith will do likewise." Another, also apparently from Jones: global warming skeptics "have been after the CRU station data for years. If they ever hear there is a Freedom of Information Act now in the UK, I think I'll delete the file rather than send to anyone." (Jones was a contributing author to the chapter of the U.N.'s IPCC report titled "Detection of Climate Change and Attribution of Causes.")

In addition to e-mail messages, the roughly 3,600 leaked documents posted on sites including Wikileaks.org and EastAngliaEmails.com include computer code and a description of how an unfortunate programmer named "Harry" -- possibly the CRU's Ian "Harry" Harris -- was tasked with resuscitating and updating a key temperature database that proved to be problematic. Some excerpts from what appear to be his notes, emphasis added:

I am seriously worried that our flagship gridded data product is produced by Delaunay triangulation - apparently linear as well. As far as I can see, this renders the station counts totally meaningless. It also means that we cannot say exactly how the gridded data is arrived at from a statistical perspective - since we're using an off-the-shelf product that isn't documented sufficiently to say that. Why this wasn't coded up in Fortran I don't know - time pressures perhaps? Was too much effort expended on homogenisation, that there wasn't enough time to write a gridding procedure? Of course, it's too late for me to fix it too. Meh.

I am very sorry to report that the rest of the databases seem to be in nearly as poor a state as Australia was. There are hundreds if not thousands of pairs of dummy stations, one with no WMO and one with, usually overlapping and with the same station name and very similar coordinates. I know it could be old and new stations, but why such large overlaps if that's the case? Aarrggghhh! There truly is no end in sight... So, we can have a proper result, but only by including a load of garbage!

One thing that's unsettling is that many of the assigned WMo codes for Canadian stations do not return any hits with a web search. Usually the country's met office, or at least the Weather Underground, show up – but for these stations, nothing at all. Makes me wonder if these are long-discontinued, or were even invented somewhere other than Canada!

Knowing how long it takes to debug this suite - the experiment endeth here. The option (like all the anomdtb options) is totally undocumented so we'll never know what we lost. 22. Right, time to stop pussyfooting around the niceties of Tim's labyrinthine software suites - let's have a go at producing CRU TS 3.0! since failing to do that will be the definitive failure of the entire project.

Ulp! I am seriously close to giving up, again. The history of this is so complex that I can't get far enough into it before by head hurts and I have to stop. Each parameter has a tortuous history of manual and semi-automated interventions that I simply cannot just go back to early versions and run the update prog. I could be throwing away all kinds of corrections - to lat/lons, to WMOs (yes!), and more. So what the hell can I do about all these duplicate stations?...

As the leaked messages, and especially the HARRY_READ_ME.txt file, found their way around technical circles, two things happened: first, programmers unaffiliated with East Anglia started taking a close look at the quality of the CRU's code, and second, they began to feel sympathetic for anyone who had to spend three years (including working weekends) trying to make sense of code that appeared to be undocumented and buggy, while representing the core of CRU's climate model.

One programmer highlighted the error of relying on computer code that, if it generates an error message, continues as if nothing untoward ever occurred. Another debugged the code by pointing out why the output of a calculation that should always generate a positive number was incorrectly generating a negative one. A third concluded: "I feel for this guy. He's obviously spent years trying to get data from undocumented and completely messy sources."

Programmer-written comments inserted into CRU's Fortran code have drawn fire as well. The file briffa_sep98_d.pro says: "Apply a VERY ARTIFICAL correction for decline!!" and "APPLY ARTIFICIAL CORRECTION." Another, quantify_tsdcal.pro, says: "Low pass filtering at century and longer time scales never gets rid of the trend - so eventually I start to scale down the 120-yr low pass time series to mimic the effect of removing/adding longer time scales!"

More on cherry picking from this site.

And more evidence of fraud/cherry picking here.

Fake Job Creation Numbers

More on the wastefulness of the $787 first stimulus. And we're told we need another? No thank you.

http://online.wsj.com/article/SB10001424052748704204304574544063776158046.html?mod=loomia&loomia_si=t0:a16:g2:r2:c0.122208:b28961300

At least funny bones are being stimulated by the Obama Administration's $787 billion economic stimulus bill.

To wit, how many Americans does it take to make nine pairs of work boots? According to the White House's recovery.gov site, an $890 shoe order for the Army Corps of Engineers, courtesy of the stimulus package, created nine new jobs at Moore's Shoes & Services in Campbellsville, Kentucky.

The job-for-a-boot plan may not be American productivity at its best. But such stories go a ways toward explaining how the Administration has come up with 640,329 jobs "created/saved" by the American Recovery Act as of October 30.

Jonathan Karl of ABC News deserves credit among Beltway reporters for committing journalism and actually fact-checking White House claims. Head Start in Augusta, Georgia claimed 317 jobs were created by a $790,000 grant. In reality, as Mr. Karl reported this week, the money went toward a one-off pay hike for 317 employees.

Other media outlets and government watchdog groups have also found numerous errors in the stimulus filings. Jobs have been overstated or counted multiple times. One Alabama housing authority claimed that a $540,071 grant would create 7,280 jobs. The Birmingham News reports that only 14 were created. In some cases, Recovery Act funds went to nonexistent Congressional districts, such as the 26th in Louisiana or the 12th in Virginia. Up to $6.4 billion went to imaginary places in America, according to the Franklin Center for Government and Public Integrity.

Asked by the New Orleans Times-Picayune why so many recipients would misstate their districts, Ed Pound, the director of communications for the Obama Administration's recovery.gov, said, "Who knows, man, who really knows."

Internet Piracy: A Response to Pirates' Justifications

I can't believe either the irrational crap coming out of these people trying to defend pirating. Do any of you understand economics? Logic? You see, there are certain things called goods. People want goods, the very act of trying to get a good means you want it, and that means it has some value.

So we're supposed to believe you will take time to download stuff you do not enjoy and you do not want? That's ridiculous and no intelligent person will even bother making that defense. Do you go around taking grass from parks and front yards? Do you take sand from the beach? No, you won't bother to voluntarily spend time to collect stuff that is worthless to you, the very fact that you do spend time downloading music, movies, or software means that they have value, and means you are getting something for nothing. In the real world, that's usually only possible with theft.

If it's worth nothing to you, then it won't hurt you if it is taken away and you don't ever spend time on it. If there were a pile of sand in your room, would you care if I took it away? No, maybe you'd even pay me to take it away. If these games and stuff are truly worthless, that you aren't getting any benefit, then it shouldn't matter if I prevent you from accessing these things beyond the free demos and trailers given to you buy the owners. You can prevent me from accessing toxic waste, that's worthless to me and I don't care that I can't have toxic waste or play round in it. You can also come and take away what I put in the trash bin anytime you want and I don't care. I'd actually thank you for taking it away, again, it is worthless to me. But it's funny to hear you people complain so loudly about having your "worthless" music and software taken away from you. Why you'd think it was WORTH SOMETHING to you the way you argue and try to make LAME excuses that are so easily dismissed that the very intelligence of those making them has to be questioned. THIS is the best you can come up with? We all know you pirates are getting something valuable and not paying. That's wrong, and that's destructive for the economy and for society. We cannot have a class of people (artists, bookwriters, software developers, etc.) who are not allowed to make money for their labor. That would be slavery and no one allows that anymore. If they should be allowed to make money from providing you a VALUEABLE good or service, then it's up to them to decide the price. Yes, too high a price and you won't buy. Too bad for them huh? The seller absolutely has a right to set a price or to reject a price for the goods/services he is selling. I could go on and on destroying every argument you pirates make, but I think the point has been made. Enough of your BS, you can't justify pirating and so the decent people of society WILL stop you.

Pirating can't be stopped, really? What if a mandatory 5 year jail term in federal prison PER item pirated with NO chance of parole or early release? Are you still sure? How about mandatory software that comes with every computer and every OS that tracks and reports to a government agency what you are doing on your computer so encryption can't hide your piracy? Add that to the mandatory jail term in federal prison, do you still want to tell me piracy can't be stopped? Piracy can be stopped with very draconian and invasive procedures, it's best for society if some other means could be found to make pirates stop without resorting to those measures. The first step is to stop enabling pirates. Take away their BS arguments and make it clear that they have no justification whatsoever for what they are doing. Just like the thief can't claim poverty or that someone else stole from him, as justification to steal. We have to establish in EVERYONE's minds that pirating is wrong. Some people won't do an act that they consider wrong even if they can do it and get away with it. That's a start, but it needs to happen or the draconian stuff will be the only solution left.

Using Social Forces to Raise Taxes

The focus of my post was to point out that we should consider using all the fields of social science to deal with broad based social issues such as greed and morality.

To continue as an example, tax rates could be raised much easier if social praise and reinforcement were given to those who paid the most taxes. Costless praise and other forms of recognition such as a "national taxpayers day" where high tax payers received kudos for their generosity and a brief statement by politicians acknowledging that the nation's operations rests on their shoulders (true or not) would lessen the opposition to higher taxes. Social rewards are a type of currency that can be used in exchange for monetary currency. That's why in previous large scale wars like WWII, every nation involved used praise and shame to raise enormous amounts of money and quell discontentment over the low level of consumer goods provided to society. Almost everyone bought War Bonds even though they knew the low interest and unfavorable terms were likely to produce an economic loss for the buyer. Yet the social rewards outweighed the economic gain. There is a case where "greed" and "self-interest" in economic terms were overcome by costless (economic) social forces at work. The same forces can be heralded again to produce positive outcomes.

Wall Street Greed, Economics, and Society

Economics is only one of the fields of social science. It seems greed and self-interest in our society, are being examined solely within the realm of economics, completely ignoring that there are many other social forces at work.

Social norms and mores are incredibly powerful and greatly influence behavior within societies at all times. Group dynamics and acceptable norms can override economic self-interest.

There is almost no mention of moral relativism and the degradation of using social pressure to enforce norms. As John Bogle noted in his books, "Enough", and "Fight for the Soul of Capitalism", it used to be that managers had a sense of duty towards the owners. Likewise, people didn't take advantage of government programs unless they had to, many felt ashamed to take charity and would do their best to avoid the welfare label. It seems the shame of managers enriching themselves and dependence upon public charity has eroded to the point where social pressure no longer exists. Could they be related? Could the new social message of, you are entitled to get these benefits if you are qualified to, if you can legally, regardless if you need it or deserve it? What I see today is a focus on legality, not morality. If it's legal, it's right, there's no shame in doing something that is legal but morally despicable because morality is no longer agreed upon. That could be good or bad, but the weakness and lack of a cohesive moral code means that social forces are weaker too, and that could explain much of the breakdown in ethics we are seeing today.

Who's values, who's morality? That's a refrain often repeated, and it might be good overall to question certain social mores and all societies change their codes of conduct over time. We could be in one of the times of great change. Nevertheless, that also weakens the ability for society to restrict behavior. If it can't be said that some behavior is "wrong", then the only question that remains is, "is it legal?". This is increasingly the question I see being asked today. Right and wrong are simply not factors considered when making decisions. We should not use economics alone to analyze broad social behaviors, all of the fields of social science should be employed in such an analysis.